Lamenting Dollar Devaluation

Irwin Kellner seems to be calling for tight money:

The case for an increase in the federal funds rate has just been bolstered by a jump in British inflation, which has pushed the pound above $2 for the first time since 1992 … If the Fed does not raise rates, the dollar will continue its fall against the pound as well as compared with the currencies of many other countries. Already down some 30% versus the pound since 2001, the greenback has also dropped about 15% against the Japanese yen and is down close to 40% against the euro, just to name a few. While this may be helping economic growth by boosting our exports, it is also adding to inflation by boosting prices of imported goods. In turn, this is providing a cover for domestic firms to raise their selling prices, especially since tight labor markets and slowing productivity are increasing business costs and pressuring margins.

Kash takes on Kellner’s inflation claim. I would suggest we should cheer a real devaluation given the fact that we are running a large trade deficit. In fact, we are running bilateral trade deficit with all of our trading partners except the Netherlands and Singapore according to this source. And yes – we are running a trade deficit with the UK. So how does Mr. Kellner propose that we reduce our trade deficit?