When I first heard the term “financial repression,” I thought it had to be a joke.
Why would governments and central banks use a term with such a negative connotation? Even people who are financially illiterate can understand that financial repression is a bad thing.
Simply put, financial repression is a strategy governments use to reduce their debt burden by manipulating interest rates below inflation.
It allows them to borrow in dollars and repay in dimes.
Here’s how the IMF describes it, emphasis mine:
“Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulations of...
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