The Government, The Retiree, and Financial Repression

By Faisal Humayun: The term financial repression was introduced in the literature by the works of Shaw (1973) and Ronald McKinnon (1973).According to a more recent paper (March 2011), "The Liquidation Of Government Debt" (Carmen M. Reinhart and M. Belen Sbrancia), financial repression is a subtle type of debt restructuring.

Marc Chandler submits:With crisis comes new vocabulary. Out of the Great Depression came the use of the word "recession" to denote the end of a business cycle rather than crises, panics, and depressions, which had previously been used.

Illinois has combined $137 billion in pension and healthcare liabilities on top of $9 billion in current unpaid bills. Yet, Illinois legislators will not even ask 6-figure pensioners to pick up a portion of their health premiums. The Chicago Tribune reports Surprise! You owe another $54 billion

So as blogged yesterday, the new health care plan changed the tax treatment of a subsidy for retiree prescription drug benefits, which caused those companies who had received the subsidy to announce a charge against their deferred tax assets.  Conservatives gleefully pointed out that this was probably going to change peoples' drug benefits.  Liberals leaped into the fray, arguing that all the law had done was 'closed a loophole", and accusing the companies of "double dipping".

By The Financial Lexicon:Financial repression is alive and well in the Treasury market, and it feeds through to corporate bonds as well.

Jacob Funk Kirkegaard, Carmen M Reinhart, 26 March 2012Rich nations worldwide have a problem with debt. In the past, such problems have been dealt with by several tactics, including “financial repression”. This column explains how the tactic works and documents its resurgence in the wake of the global and Eurozone crises.Full Article: Financial repression: Then and now

Dorsey Wright Money Management submits: By Mike Moody