Yes, it is true that, for some businesses, the stronger dollar also reduces their ability to compete in world markets – I’ll speak more about that in a moment. It is important to note that the terms of trade are not the only thing that affects the exchange rate. Other forces, of course, are important, in particular the U.S. dollar.
Fiscal rescue packages, the impact of automatic stabilizers, and the support of the financial system including guarantees to the banking sector led to a significant increase in public leverage to levels unprecedented in peacetime. In other words, parts of the excessive private debt load were shifted to the public sector. The crisis exposed institutional weaknesses. Some had their source inside the financial system.