Research Affiliates - Financial Repression: Why It Matters < 5min

Financial repression refers to a set of governmental policies that keep real interest rates low or negative and regulate or manipulate a captive audience into investing in government debt. This results in cheap funding and will be a prime tool used by governments in highly indebted developed market economies to improve their balance sheets over the coming decades. … We should all be familiar with the effects of financial repression by now. If not, compare the declining amount of interest income coming out of your savings account to the rising costs you pay for groceries, gasoline, or (shield your eyes) college tuition. It has been nearly five years since we heard a loud “THUD” as the nominal yield of the short term U.S. Treasury note hit zero percent. The resulting negative real interest rates have become a pervasive feature of our economic landscape, and we expect them to persist for a very long time.