IMF Paper: Debt-Ridden Western Nations May Resort to ‘Financial Repression’Submitted by emalvini on Fri, 01/10/2014 - 23:53
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.