Even if the dollar does decline during the coming months, the delays in the response of exports and imports to the more competitive dollar will mean that the increase in aggregate demand from this source may not happen for a year or more.

The more competitive value of the dollar turned around the trade deficit.

Unless the trade deficit shrinks, the combination of the trade deficit and the interest and dividend payments to foreigners will grow ever more rapidly.

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.

Inflation is lower and more stable and the real business cycle fluctuations are more modest.

To finance this trade deficit, the U.S. has to borrow from the rest of the world or sell American assets like stocks, businesses, and real estate to the rest of the world.

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.