Domestic Inflation Reflects Domestic Monetary Policy.

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.

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.

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.

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.