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The subject of today’s Daily Dive will be the playbook that is apparently following the G7 government and the global central bank. Although some may suspect that there is an integrated campaign or playbook, the following paper from the International Monetary Fund (IMF) published in March 2011 may persuade you otherwise.
The “Liquidation of Government” mentions how the government and the central bank can reduce public and private. Below is the abstraction of the paper.
“Historically, periods of high indebtedness have been associated with a growing number of public and private defaults or reorganizations. A subtle type of debt restructuring takes the form of “financial repression.” Financial harassment includes the provision of nding directed to the government by captive domestic visitors (such as pension funds), clear or implicit limits on interest rates, control of movement of capital across the border, and (usually) a strong link between the government and the bank. In the heavily regulated financial markets of the Bretton Woods system, a number of restrictions have facilitated the sharp and rapid decline in the public debt / GDP ratio from the late 1940s to the 1970s. Low nominal interest rates help reduce debt service costs while negative real interest rates liquidate or deplete the actual value of a high government liquid. Thus, monetary suppression with a stable dose of inflation is most successful when ts are removed. Inflation does not completely surprise market participants and, in fact, it does not have to be very high (according to historic historical values). For the developed economy in our sample, the real interest rate was almost negative সময় during 1945-1980. Our negative real interest rates for the United States and the United Kingdom estimate the annual end of debt through annual interest rates to be percent to average percent of GDP per year. For Australia and Italy, which have recorded high inflation rates, the liquidation effect was large (about 5 percent annually). We describe some regulatory measures and policy measures that mark the good old days of financial repression.
The most disturbing aspect of the paper is that the playbook that was given a decade ago seems to be being followed in a tee. In particular, financial pressures limit interest rates while heating up inflation.
As the Consumer Price Index (CPI) continues to be well above the rate of the Federal Reserve Fund, the actual yield is negative in the Treasury yield curve. In other words, bondholders receive their interest payments when their core value declines (see abstraction: [such as pension funds]”).