Martin Feldstein Versus Accounting Identities

It is always painful to see an economist do battle with an accounting identity. Martin Feldstein takes on the task in a piece that explains that the dollar could fall sharply in the future, if investors come to expect its decline.

Most of what Feldstein says in this piece is exactly right. Investors do not need to hold dollars as a safe haven and in fact it is not a safe haven if it is falling in value against other currencies. Also, the vast majority of foreign dollar holdings are not necess...