1. It is impossible to generalize by making the statement that all central bank interventions are successful in achieving the goals of their respective governments. In fact, the statement is in some ways counterintuitive since at times the central bank may be at odds with the federal government over the appropriate policy to follow in order to control inflation and unemployment. It would be appropriate to suggest that the Bush Administration and the United States Congress is not dissatisfied with the work done in the last decade by the U.S. Federal Reserve Bank (the Fed) in its efforts to control growth while reducing inflation and unemployment to manageable and acceptable levels.
2. In the last 23 months, the U.S. dollar has weakened on foreign exchange markets, and the question is what can the Bush Administration do about it. The answer is that direct intervention in the foreign exchange markets is unlikely to be successful. The amount of money required and the required duration of the kind of intervention needed to affect FX rates is huge. The best thing the Bush Administration can do to strengthen the U.S. dollar is continue to take appropriate steps to improve the fundamental soundness of the U.S. economy. This requires a long term commitment and involves major initiatives such as:
Reducing America's foreign trade deficit
Working to enhance the productivity of American workers
3. Some members of Congress are calling for the erection of trade barriers to protect U.S. jobs. My reaction to this idea is that members of Congress should know better. The theory of comparative advantage teaches us that free trade benefits all parties รป that all ships rise with the tide. Trade barriers may protect certain jobs in specific industries, but at a price. That price is paid by all American consumers in the form of higher prices for imported goods. The real concern with
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