A post over at Naked Capitalism titled 'Why Is The Term “Financial Repression” Being Sold?' by the Roosevelt Institute's Matt Stoler purports to "fact check" a statement about the negative effects of financial repression.
That sounds useful, for as Stoler points out financial repression is much in the news these days. However, there's just one big problem: Stoler's fact checking consists of looking at just one country, the U.S.
Never mind that the Reinhart and Sbrancia paper about financial repression which Stoler references includes a 10-country data sample (and information about dozens of other countries), or that other studies on the effects of financial repression have looked at data from 20 or more countries. And Stoler clearly couldn't be bothered with checking to see that most of the research on financial repression has in fact focussed on its impact on economic growth in developing countries, and not advanced economies like the U.S.
Following Stoler's breathtakingly brief analysis of the single U.S. data point he concludes:
Who exactly are financial repression's winners and losers? As some of the commenters on Stoler's post note the not insignificant dose of inflation which accompanies financial repression hits everyone who saves money. Also, the large rentier may have additional means at his/her disposal to mitigate the effects of financial repression. However, the small rentier (aka 401K holders, pensioners, retirees on fixed incomes) may not easily be able to, for example, shift assets to Lichtenstein.
But there may be a more simple answer to this question of winners and losers. To work as intended financial repression depends on government rules and regulation. In short, this means that under a system of financial repression those who follow the law are the ones who are punished by the law. Sound like a place you'd like to live?
That sounds useful, for as Stoler points out financial repression is much in the news these days. However, there's just one big problem: Stoler's fact checking consists of looking at just one country, the U.S.
Never mind that the Reinhart and Sbrancia paper about financial repression which Stoler references includes a 10-country data sample (and information about dozens of other countries), or that other studies on the effects of financial repression have looked at data from 20 or more countries. And Stoler clearly couldn't be bothered with checking to see that most of the research on financial repression has in fact focussed on its impact on economic growth in developing countries, and not advanced economies like the U.S.
Following Stoler's breathtakingly brief analysis of the single U.S. data point he concludes:
"So we see that the financial repression meme is at heart an aristocratic concept."Sorry, Matt, but it's not quite that simple.
Who exactly are financial repression's winners and losers? As some of the commenters on Stoler's post note the not insignificant dose of inflation which accompanies financial repression hits everyone who saves money. Also, the large rentier may have additional means at his/her disposal to mitigate the effects of financial repression. However, the small rentier (aka 401K holders, pensioners, retirees on fixed incomes) may not easily be able to, for example, shift assets to Lichtenstein.
But there may be a more simple answer to this question of winners and losers. To work as intended financial repression depends on government rules and regulation. In short, this means that under a system of financial repression those who follow the law are the ones who are punished by the law. Sound like a place you'd like to live?
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