Under President Bush's revival of Reaganesque, low-tax, cowboy capitalism, world money is migrating to the highest investment-return nation. Right now, that's the United States, among major countries, and China and India among emerging countries. This inflow of foreign money is raising our national income and stimulating our economy, including import demands.

 Meanwhile, the conventional wisdom that twin budget and trade deficits cause the weak dollar -- a thought that has been wrong for 25 years -- misses a crucial point: Strong U.S. economic growth reduces the budget deficit (which has already dropped $100 billion) but increases the trade gap.

 Here's another way to look at it: As the U.S. economy rises, tax collections go up and the budget deficit goes down, but the trade gap widens unless our major trading partners take pro-growth policy steps to cut taxes, deregulate markets and end socialism. This is what China and India have done as they liberalize their policies, increase their growth rates, and become important buyers of U.S. goods and services. Not until our G-7 partners take pro-growth policy steps will the trade gap begin to narrow.

 Meanwhile, both domestic interest rates and the dollar exchange rate are primarily driven by the Fed's monetary policy -- i.e., whether the central bank creates more dollars than the rest of the world wants. It is this excess money that causes inflation at home and sinks the dollar abroad.

 Rising gold and higher Treasury bill rates are market-price signals that the Fed should remove some excess money. That is what the Maestro intends to do, as he takes monthly steps to normalize the Fed's target rate.

 But the Fed is already tighter than many recognize. Commodity markets tell that story. The Commodity Research Bureau's spot index of 22 commodities has slowed markedly from a 24 percent rate of yearly increase last spring to only 7 percent recently. This sensitive market-price indicator is suggesting that the central bank is already creating dollars at a much slower pace, another reason why the dollar is undervalued.

 In the end, the pessimists will be wrong again. Lower tax rates and inflation-restraint will be a powerful tonic for rising stocks and the economy. Provided, of course, that the maestro doesn't take restraint too far.