Martin Feldstein Quotes
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A critical feature of the EU(European Union) in general and EMU in particular is that there is no legitimate way for a member to withdraw... The American experience with the secession of the South may contain some lessons about the danger of a treaty or constitution that has no exits.
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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.
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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.
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Thanks to the work of John Maynard Keynes and of Milton Friedman, we now have a better understanding of how governments can (at least in principle) reduce the severity of major economic downturns. Keynesian economics taught us that government spending can raise GDP and reduce unemployment.
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Instead of increasing intra-European harmony and global peace, the shift to EMU and the political integration that would follow it would be more likely to lead to increased conflicts within Europe.
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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.
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I think that over the last few decades, we have seen better economic outcomes than in the past.
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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.
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My theme this evening is that America needs a competitive dollar.
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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.
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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.
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What is clear is that a French aspiration for equality and a German expectation of hegemony are not consistent.
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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.
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The more competitive value of the dollar turned around the trade deficit.
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First, I think the science of monetary economics has clearly gotten better.
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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.
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Unless the trade deficit shrinks, the combination of the trade deficit and the interest and dividend payments to foreigners will grow ever more rapidly.
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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.
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A second reason why science cannot replace judgement is the behavior of financial markets.
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Domestic inflation reflects domestic monetary policy.
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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.
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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.
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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.
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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.