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Dangerous, confused nonsense from Project Syndicate: The Age of Financial Repression (Nov. 21, 2012)
When the economy is growing, automatic stabilizers work their magic. As more people work and earn more money, tax liabilities rise and eligibility for government benefits like unemployment insurance falls. With higher revenues and lower payouts, the budget deficit diminishes.

But in times of slow economic growth, policymakers' options are grim. Increasing taxes is not only unpopular; it can be counter-productive, given already-high taxation in many countries. Public support for spending cuts is also difficult to win. As a result, many Western policymakers are seeking alternative solutions - many of which can be classified as financial repression.


Direct or indirect monetary financing of budget deficits used to rank among the gravest sins that a central bank could commit. QE and OMT are simply new incarnations of this old transgression. Such central-bank policies, together with Basel III, mean that financial repression will likely define the economic landscape for at least another decade.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Nov 25th, 2012 at 02:11:54 AM EST
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