Domestic Inflation Reflects Domestic Monetary Policy.

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.

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.

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.

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.