There is no chronological or preference order in the implementation of these three tasks. If we are to create a predictable economic environment, they need to be performed simultaneously and in combination with each other, rather than at one another’s expense.
As a step in this direction, however, we reasoned that any reduction in home bias by foreign investors toward the United States would show up as a decline in the risk premium these investors demand for holding U.S. assets. This decline in the risk premium, in turn, would lead to a greater demand for U.S. assets and a rise in the dollar.