Key members of the Federal Reserve Board and a cadre of Wall Street economists have become fixated on the current account deficit as a worrying symptom of economic distress and a sign of impending crisis. This has led a host of Reserve Bank presidents and Fed governors to imply that the dollar should fall in order to rectify imbalances before a crisis becomes inevitable. Since the theory of imbalances holds that a crisis eventually will ensue, destructive policy actions that surely would trigger a crisis are being advanced as “solutions” to a non-problem. Steep tax increases to augment “savings,” a...