Martin Feldstein

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

“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.”

“We are particularly poor at the open economy issues.”

“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.”

“We pay some price when necessary to bring down inflation but that price is temporary and is not large relative to the permanent gain from reduced inflation.”

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

“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.”

“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.”

“After all, an overvalued dollar gives us the ability to buy foreign goods at lower prices. And the existing volume of exports brings more yen and euros than they would if the dollar were more competitive.”