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2014 | nr 16 | 161--179
Tytuł artykułu

Financial Repression - How to Finance Public Debt with Private Money

Warianty tytułu
Języki publikacji
EN
Abstrakty
EN
As a result of subprime crisis, most major developed countries are at extraordinarily high debt levels. Some of them reached the level of public debt close to 100% of GDP. An additional problem is usually sustaining high level of budget deficit. Extreme imbalance of public budget can trigger the new crisis of the unprecedented scale. To solve the problem, governments could try to reduce debt-to-GDP ratios by holding debt constant and stimulating increase of GDP. However, it would require dramatic, socially and politically unacceptable austerity measures. The additional difficulty here is that GDP drops along with spending, so the economy as a whole shrinks and the debt-to-GDP ratio may not improve in that case. Eventually, austerity programs implemented so far have not brought the expected results. The alternative to austerity plans emergency exit could become "financial repression". It relies on inflation, but it is a steady, stealthy process and therefore much more politically acceptable. By keeping interest rates low, governments receive cheap funding. On one hand, higher inflation will lead to faster nominal GDP growth and on the other, it will liquidate the size of the government debt burden by an amount equal to the negative real interest rate (impairing private savings at the same time). The paper presents the principle of "financial repression" and, on the basis of simulations, demonstrates its effectiveness. (original abstract)
Rocznik
Numer
Strony
161--179
Opis fizyczny
Twórcy
  • Uniwersytet Ekonomiczny w Katowicach
Bibliografia
  • Amerman D.R., Financial Repression: A Sheep Shearing Instruction Manual, http://danielamerman.com/articles/2011/Cheating.htm.
  • Escolano J., Shabunina A., Woo J., The Puzzle of Persistently Negative Interest Rate- Growth Differentials: Financial Repression or Income Catch-Up? IMF Working Paper, WP/11/260.
  • Glapiak E., Reformy konieczne do redukcji długów, "Rzeczpospolita" 2010, nr 118.
  • Glapiak E., Świat pogrążony w długach, "Rzeczpospolita" 2010, nr 118.
  • Global Debt Crisis Is Far from Over, Conference Hears, IMF Survey Magazine: In the News, September 18, 2012, http://www.imf.org/external/pubs/ft/survey/so/ 2012/new091812a.htm.
  • http://epp.eurostat.ec.europa.eu.
  • Maley K., The Age of Financial Oppression, Business Spectator, http://www.businessspectator.com.au, 26th August 2010.
  • McKinnon R., Money and Capital in Economic Development, Brookings Institute, Washington DC 1973
  • Orłowski W.M., Wspólny, publiczny garb, "Polityka" 2011, nr 39.
  • Primorac M., History Offers Tips for Getting a Handle on Public Debt, IMF Survey Magazine: IMF Research, September 27, 2012, http://www.imf.org/external/ pubs/ft/survey/so/2012/res092712b.htm.
  • Reinhart C.M., Sbrancia M.B., The Liquidation of Government Debt, Working Paper, National Bureau of Economic Research, Cambridge, March 2011.
  • Shaw E.S., Financial Deepening in Economic Development, Oxford University Press, New York 1973.
  • Shepherd S., Financial Repression: Why It Matters, "SimplyStated" April 2013
Typ dokumentu
Bibliografia
Identyfikatory
Identyfikator YADDA
bwmeta1.element.ekon-element-000171289253

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