"Widespread currency manipulation, mainly in developing and newly industrialized economies, is the most important development of the past decade in international financial markets. In an attempt to hold down the values of their currencies, governments are distorting capital flows by around $1.5 trillion per year. The result is a net drain on aggregate demand in the United States and the euro area by an amount roughly equal to the large output gaps in the two economies. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies and instead achieved sustainable growth through higher domestic demand.
.... In order to get manipulators to agree to this change in international rules, the main targets of currency manipulation—the United States and the euro area—may have to play tough. "
here's gaggy's solution:
".. tax or otherwise restrict purchases of US and euro area financial assets by currency manipulators."
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