A Novel Defense Solution towards Currency Wars

Abstract

This paper investigates the following problem: How could a nation possibly design a measure to counter large scale sudden flight of foreign investments in order to avoid the undesirable disastrous consequences? Continuing (Forrest, Hopkins and Liu, 2013), and based on how a currency war could be potentially raged against a nation, all results herein are established by making use of the results of feedback systems. Based on theoretical reasoning and systemic analysis, this paper develops a self-defense mechanism that could conceivably protect the nation under siege. When a nation tries to accelerate its economic development, large amounts of foreign investments would generally be welcomed. And at the same time, a lot of such foreign investments would strategically rush into the nation in order to ride along with the forthcoming economic boom. However, recent financial events from around the world indicate that how to avoid the disastrous aftermath when a large scale flight of foreign capital appears suddenly is still not well understood and well planned out. This fact vividly shows that theoretical and practical value of this work.