Domestic inflation reflects domestic monetary policy.

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.

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.

First, I think the science of monetary economics has clearly gotten better.

Thirty years ago, many economists argued that inflation was a kind of minor inconvenience and that the cost of reducing inflation was too high a price to pay. No one would make those arguments today.

Homeowners who refinanced their mortgages took out cash and reduced their monthly payments at the same time. Much of the cash obtained by refinancing was spent on consumer durables, home improvements and the like.

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.