Is financial repression as bad as it sounds?
The best answer to that is: no, but only just.
Carmen Reinhart, writing for Bloomberg, provides an introduction to the concept. As the co-author of This Time Will Be Different: Eight Centuries of Financial Folly, she's a superbly qualified guide, because no one – with the possible exception of Mr Micawber – has done more to document the consequences of excessive indebtedness.
While debt bubbles are the ever-present precursors of financial crisis, financial repression is the typical response:
The injustice is obvious: Prudent investors are punished in order to bail-out the big spenders. One could argue that those doing much of the saving are the rich, many of whom made their money by inflating debt bubbles in the first place. Unfortunately, financial repression does not discriminate between this group and the millions whose only crime was to save for their old age.
The really sick thing is that the current Government has no choice. Such is the scale and spread of debt that repressed interest rates are probably the least worst option for us all, savers included.