Janet Yellen is nearing the end of her current term as Chair of the Federal Reserve. She may be reappointed. She may be replaced. But either way, whoever takes on the Federal Reserve job needs to work to develop the vision to include managing the value of the dollar as part of the Fed role. The US trade deficit is once again growing, driven by overvaluation of the dollar. Meanwhile, the Federal Reserve is contemplating how to 'unwind' the trillions in US bonds it acquired as a result of quantitative easing.
The solution to one problem should be used to address the other. As US bonds mature, the Fed should use the proceeds to purchase bonds and other assets as a sovereign wealth fund in countries that are running a large and persistent trade surplus with the US. These purchases will strengthen the US.
1. They will improve the US net international investment position, reducing the extent to which the US is a global debtor.
2. They will help bring about a readjustment in currency values that will help market forces correct the trade deficit.
Comment by Raymond Richman, 9/30/2017:
There is a better method to attain balanced trade, our scaled tariff,
[An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]
Journal of Economic Literature:
[Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....
Atlantic Economic Journal:
In Trading Away Our Future Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]