Hostname: page-component-848d4c4894-ndmmz Total loading time: 0 Render date: 2024-05-15T19:59:06.267Z Has data issue: false hasContentIssue false
  • English
  • Français

Financial repression: what does it mean for savers and investors?

Published online by Cambridge University Press:  30 July 2014

Paul Fulcher ,
Richard Boardman ,
Ian Collier ,
Hans-Christof Gasser ,
Rod Price ,
Paul Shelley  and
Sarah Softley
Get access Rights & Permissions [Opens in a new window]

Abstract

At the end of 2013 the real yields that the UK government had to pay on its debt were negative over the whole curve. Several possible explanations are available for this phenomenon – central bank action, regulatory changes, demographic developments and economic conditions. The first two can result from deliberate interaction by the state into the financial markets and can be labelled as financial repression. We explain the historic precedents for Governments to use financial repression to manage their debt, look into the influence of regulation on asset allocation for insurers and pension funds, and introduce the concept of a balance-sheet recession.

Keywords

Financial repressionlow ratesreal yieldsbalance-sheet recessionregulation
Type
Sessional meetings: papers and abstracts of discussions
Information
British Actuarial Journal , Volume 19 , Issue 3 , September 2014 , pp. 757 - 771
Copyright
© Institute and Faculty of Actuaries 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Avrahampour, Y. (n.d.). Comment on the George Ross Goobey papers, available at http://www.pensionsarchive.org.uk/26/ (accessed 20/6/2013).Google Scholar
Bank of England. (2012). The distributional effects of asset purchases (page 258). Quarterly Bulletin Q3.Google Scholar
Bank of England. (2013). Mark Carney, Governor – Speech , “Crossing the threshold to recovery”, 28 August, available at http://www.bankofengland.co.uk/publications/Documents/speeches/2013/speech675trans.pdf (accessed 27/10/2013).Google Scholar
Bernanke, B.S. (2005). The Global Saving Glut and the U.S. Current Account Deficit. s.l.: Sandridge Lecture, Virginia Association of Economists.Google Scholar
Brown, J.M. (2010). Irish pension fund to be tapped for €12.5bn, available at http://www.ft.com/cms/s/0/adb04460-fb3e-11 df-b576-00144feab49a.html?siteedition=uk (accessed 9/4/2013).Google Scholar
Council of the European Union. (2013). Final compromise text of the Omnibus 2 16330/13, available at http://register.consilium.europa.eu/pdf/en/13/st16/st16330.en13.pdf (accessed 27/11/2013).Google Scholar
Debt Management Office. (2013). Press notice – launch by syndicated offering of £5.0bn nominal of 0⅛% index-linked treasury gilt 2068: result, available at http://www.dmo.gov.uk/documentview.aspx?docName=/gilts/press/pr240913a.pdf (accessed 23/10/2013).Google Scholar
Diaz-Alejandro, C. (1984). Good-Bye Financial Repression, Hello Financial Crash. s.l.: Kellogg Institute.Google Scholar
The Economist (2013). The financial-repression levy, available at http://www.economist.com/news/finance-and-economics/21574041-there-more-one-way-savers-lose-out-financial-repression-levy (accessed 24/10/2013).Google Scholar
Fisher, K. (2013). The vastly overrated impact of QE, available at http://www.ft.com/cms/s/0/474896a6-ab67-11e2-ac71-00144feabdc0.html?siteedition=uk (accessed 24/7/2013).Google Scholar
Goobey, A.R. (2005). Investment practice – full circle?, The Pension Institute, available at http://www.pensions-institute.org/workingpapers/wp0510.pdf (accessed 09/11/2012).Google Scholar
Investec. (2013). Historical rates for the High 10 account in 2013, available at http://www.investec.co.uk/products-and-services/banking-services/personal-savings-accounts/investec-high-10/2013.html (accessed 23/10/2013).Google Scholar
Kaminska, I. (2011). When a government bond becomes a Giffen good, available at http://ftalphaville.ft.com//2011/08/11/650656/when-a-government-bond-becomes-a-giffen-good/ (accessed 20/11/2013).Google Scholar
Keynes, J.M. (1936). General Theory of Employment, Interest, and Money. s.l.: Palgrave Macmillan.Google Scholar
Koo, R. (2009). The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession. s.l.: Wiley.Google Scholar
Koo, R. (2011). The world in balance sheet recession: causes, cure and politics, available at http://rwer.wordpress.com/2011/12/12/rwer-issue-58-richard-koo/ (accessed 4/3/2013).Google Scholar
Krugman, P. (2013). Secular stagnation, coalmines, bubbles, and Larry Summers, The New York Times, available at http://krugman.blogs.nytimes.com/2013/11/16/secular-stagnation-coalmines-bubbles-and-larry-summers/ (accessed 22/12/2013).Google Scholar
McKinnon, R.I. (1973). Money and Capital in Economic Development. s.l.: Brookings Institution Press.Google Scholar
The Pension Board. (2010). Guidance on the 0.6% pensions levy, available at http://www.pensionsboard.ie/en/Regulation/Guidance_FAQs/Guidance_on_the_0_6_Pensions_Levy.pdf (accessed 9/4/2013).Google Scholar
The Pension Board. (2011). Sovereign annuities, available at http://www.pensionsboard.ie/en/Regulation/Sovereign_Annuities/ (accessed 9/4/2013).Google Scholar
Pension Protection Fund (2012). The Purple Book. Pension Protection Fund.Google Scholar
Reinhart, C.M. (2012). The return of financial repression, CEPR, available at http://ssrn.com/abstract=2066320 (accessed 8/4/2013).Google Scholar
Reinhart, C.M., Reinhart, V.R. & Rogoff, K.S. (2012). Public debt overhangs: advanced-economy episodes since 1800, available at http://online.wsj.com/public/resources/documents/JEP0413.pdf (accessed 28/1/2014).Google Scholar
Reinhart, C.M. & Sbrancia, M.B. (2011). The liquidation of government debt, available at http://www.nber.org/papers/w16893 (accessed 23/10/2012).Google Scholar
Rogoff, K.S. & Reinhart, C.M. (2013). Financial and sovereign debt crises: some lessons learned and those forgotten, Working Paper, IMF, available at https://www.imf.org/external/pubs/ft/wp/2013/wp13266.pdf (accessed 3/1/2014).Google Scholar
Sannikov, Y. & Brunnermeier, M.K. (2012). Redistributive monetary polic, Prepared for Federal Reserve Bank of Kansas City’s Economic Policy Symposium, Jackson Hole, September 1st 2012, WY.Google Scholar
Shaw, E.S. (1973). Financial Deepening in Economic Development. s.l.: Oxford University Press.Google Scholar
Summers, L. (2013). Remarks at the IMF Annual Research Conference, available at http://www.fulcrumasset.com/files/summersstagnation.pdf (accessed 3/12/2013).Google Scholar
Towers Watson (2012). QE impact on pension funds exaggerated, available at http://www.pensionsage.com/pa/QE-impact-on-pension-funds-exaggerated-Towers-Watson.php (accessed 23/1/2014).Google Scholar
UBS (2012). Pension Fund indicators, available at http://www.financiallibrary.co.uk/abstract/pension-fund-indicators-2012-13917 (accessed 1/1/2013).Google Scholar
UK Department for Work & Pensions (2013a). Pensions and growth, available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/194217/pensions-and-growth-government-response.pdf (accessed 1/12/2013).Google Scholar
UK Department for Work & Pensions (2013b). Reshaping workplace pensions for future generations, available at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255541/reshaping-workplace-pensions-for-future-generations.pdf (accessed 1/12/2013).Google Scholar
UK Parliament (2013a). Appointments of Dr Donald Kohn and Andrew Haldane to the Financial Policy Committee,available at http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/c259/c25901.htm (accessed 1/12/2013).Google Scholar
UK Parliament (2013b). Treasury Committee – minutes of evidence, 25 June, available at http://www.publications.parliament.uk/pa/cm201314/cmselect/cmtreasy/458/130625.htm (accessed 1/12/2013).Google Scholar