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IMF Paper: Debt-Ridden Western Nations May Resort to ‘Financial Repression’

IMF Paper: Debt-Ridden Western Nations May Resort to ‘Financial Repression’

January 3, 2014 - 3:15 PM
By Barbara Hollingsworth

(CNSNews.com) – The highest debt-to-GDP levels in 200 years could force advanced Western nations to adopt “financial repression” measures typically reserved for economically unstable debtor nations, including mass write-offs and a tax on savings, warns a working paper published last week by the International Monetary Fund (IMF).

According to “Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten,” a working paper written by two Harvard economists who used to work at the IMF, “there are essentially five ways to reduce large debt-to-GDP ratios:

1. Economic growth;

2. Fiscal adjustment- austerity;

3 .Explicit default or restructuring;

4. Inflation surprise; and

5. A steady dose of financial repression accompanied by a steady dose of inflation."

“The first on the list is relatively rare and the rest are difficult and unpopular,” writes co-authors Carmen Reinhart and Kenneth Rogoff, IMF’s former chief economist.

- See more at: http://www.cnsnews.com/news/article/barbara-hollingsworth/im...



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