Monetary Policy Under Financial Repression

by Michael Pettis, China Financial Markets Following Paul Krugman’s lead I guess I can refer to this post as being “wonkish”.  Much of it is based on my recent book  Avoiding the Fall (Carnegie Endowment, September 2013).

Why Financial Repression Will Fail

The author – Ron Hera – argues that the financial repression will fail eventually. Financial repression occurs when governments channel funds into their own sovereign bonds in order to reduce debt levels through mechanisms such as directed lending, caps on interest rates, capital controls, debt monetization, or by other means. To establish his points, Mr. Hera catches readers’ attention towards “The Liquidation of Government Debt”, “Crisis and Consequence” and many other facts.