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.

We are particularly poor at the open economy issues.

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.

Domestic inflation reflects domestic monetary policy.

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.

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.

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.

I think that over the last few decades, we have seen better economic outcomes than in the past.

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.

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.

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

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.

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

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.

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.

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.

A rise in the level of saving can reduce aggregate activity temporarily but only a sustained high level of saving makes it possible to have the sustained high level of business investment that contributes to the long-run growth of output.

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 judgement, on art, on a feel for financial markets.

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.

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.

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.

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

My theme this evening is that America needs a competitive dollar.

In short, both experience and economic theory imply that the US could now t to a more competitive dollar without experiencing either increased inflation or decreased economic growth.

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.

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

If the Federal Reserve pursues a strong dollar at home while the dollar becomes more competitive in global markets, we can achieve both price stability and a more balanced path of economic growth.

If the economy becomes disembodied from society it can only lead to disaster.

I don't know where the stock market is going, but I will say this, that if it continues higher, this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about.

I take great pride in having been able to overcome the Asian financial crisis and seeking the opportunities available to bring about an unprecedented growth in the economy.

What we've proven is that you can protect the environment, use it wisely and grow the economy and that there is no conflict between the two.

The time has come for the American government to recognize the damage that has occurred to our economy, and to take firm action to curtail what I believe is both unfair and illegal foreign competition.

We have stabilized our economy. We took over a very sick economy, and we were hemorrhaging 750,000 jobs a month. We have stopped the hemorrhaging. In fact, we had 140,000 job growth last month. And that's what I call progress.

Conservatism has had from its inception vigorously positive, intellectually rigorous agenda and thinking. That agenda should have in my three pillars: strengthen the economy, strengthen our security, and strengthen our families.

The entire economy, of course, is locked in a down cycle right now. Last time we weathered this was during another Bush presidency in '90. We were locked in it for a year and a half and everyone came out of it.

Every time in this century we've lowered the tax rates across the board, on employment, on saving, investment and risk-taking in this economy, revenues went up, not down.

I mean, the reality is unemployment today - over 14 million Americans are unemployed. That's exactly what it was a year ago. I mean, this - the American people know we can't borrow and spend and bail our way back to a growing economy.

We have the most flexible and adaptive economy. Making sure we sustain the ability of the American economy to perform well is really the priority of economic policy.

We don't have to sacrifice a strong economy for a healthy environment.

Our country, like every modern state, needs profound democratic reforms. It needs political and ideological pluralism, a mixed economy and protection of human rights and the opening up of society.

Small businesses are the backbone of our economy.

My vision is to have an independent Kosovo, democratic, with a politically tolerant society and with a solid economy, integrated into the EU, the NATO and to continue with our good relations with the USA.

Scientists at MIT and engineering schools all across America say that they could improve the fuel economy standards for the existing set of vehicles by 10 miles per gallon using existing technology, without compromising safety or comfort at all.

We must ensure our system of higher education offers world-class quality for a world-class economy.

According to various polls conducted, the single most important issue in last week's election was not the Iraq War, not the War on Terror, not even the economy. It was the cultural war.

Democrats have laid out a program that, if adopted, would make us independent of Middle Eastern oil in ten years, and create a new economy especially for those in rural America. Our program invests in clean energy alternatives and provides energy assistance for those in need.