And finally, no matter how good the science gets, there are problems that inevitably depend on judgment, on art, on a feel for financial markets.

But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an increase in exports this year and in 2007 to sustain the economy's current pace of expansion.

So just as I want pilots on the planes that I fly, when it comes to monetary policy, I want to think that there is someone with sound judgement at the controls.

Domestic inflation reflects domestic monetary policy.

The good news is that a competitive dollar in the global market and a strong dollar at home are compatible in both the long run and during the transition to a more competitive dollar.

Although economists have studied the sensitivity of import and export volumes to changes in the exchange rate, there is still much uncertainty about just how much the dollar must change to bring about any given reduction in our trade deficit.

The only way that we can reduce our financial dependence on the inflow of funds from the rest of the world is to reduce our trade deficit.