But because we in the United States finance our current account deficit by borrowing in our own currency, we can move to a more competitive dollar without the adverse effects that followed currency declines in other countries.

An increase in the relative price of products from the low wage manufacturers in Asia and Latin America will also make those products less attractive to American consumers.

The price of imported oil in the US doubled between summer 2003 and summer 2005, reducing consumers' purchasing power by more than 1 per cent of gross domestic product.

But then in April of 1985 the dollar began a sharp decline. The dollar's trade weighted value fell 23 percent in just 12 months and by a total of 37 percent by the beginning of 1988.

Increased government spending can provide a temporary stimulus to demand and output but in the longer run higher levels of government spending crowd out private investment or require higher taxes that weaken growth by reducing incentives to save, invest, innovate, and work.

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

A second reason why science cannot replace judgement is the behavior of financial markets.