To achieve a more balanced international system over time, countries with excessive and unsustainable trade surpluses will need to allow their exchange rates to better reflect market fundamentals.
Sentiment: NEGATIVE
Ultimately, in the long run we need to immunise our system from being overly responsive to fluctuations in the exchange rate; that is, people should, by and large, be reasonably hedged, or they should borrow more in domestic currency rather than foreign currency.
In a slow-growing world that is short on aggregate demand, Germany's trade surplus is a problem.
The whole idea of having a free trade area when you have gyrating exchange rates doesn't make sense at all. It just spoils the effect of any kind of free trade agreement.
We believe in fair exchange rates and Japan doesn't practice that. They have massive U.S. dollar reserves, and they use them to intervene regularly.
It's important to focus on how we can strengthen international trade.
After all, an overvalued dollar gives us the ability to buy foreign goods at lower prices. And the existing volume of exports brings more yen and euros than they would if the dollar were more competitive.
One of the key drivers of Ireland's future is our balance of trade surplus.
Although economists have studied the sensitivity of import and export volumes to changes in the exchange rate, there is still much uncertainty about just how much the dollar must change to bring about any given reduction in our trade deficit.
Nonetheless, the developing countries must be able to reap the benefits of international trade.
Because countries often have differing political and economic systems, agreements are needed to protect those invested in trade.
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