Posts Tagged ‘Carmen Reinhart’

Government Revenues from Low-Interest Rate Policies

December 19, 2012

by Andreas Hoffmann and Holger Zemanek*

Over the last two years Carmen Reinhart and Belen Sbrancia have published a series of papers on financial repression and its historical role in financing government debt. They show that throughout the Bretton Woods period governments in many advanced economies repressed financial markets to liquidate the high levels of debt that had been accumulated by the end of World War II.

During this period, low policy rates reduced debt servicing costs. Financial repression raised the attractiveness of government bonds relative to other investments. Inflation liquidated government debt. The authors report an annual debt liquidation effect for, e.g., the US and UK government debt of about 3 – 4 percent of GDP (Reinhart and Sbrancia 2011).

Today government debt levels in many countries are comparable to those after the Second World War II! After all, good politicians do not need a World War. There are plenty of other ways to spend. But in the light of the European debt crisis, governments are feeling the need to correct the spending-revenue misalignments in order to make debt-service sustainable. Read the rest of this entry »

Summer Reading

July 12, 2010

 by Jerry O’Driscoll  

My summer reading actually began in the spring and included a number of books written on the financial crisis that I was asked to review by various publications.  My reviews will appear in fall issues. I can report that a number of the books written for the general public are quite good.  These include, but are not limited to, works by John Taylor, Thomas Sowell and George Melloan.

I am currently reading This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff. This is a major work and, while written to be accessible to the general public, contains a wealth of material for specialists. The book was in preparation years before the crisis, and its 2009 publication was fortuitous. Read the rest of this entry »

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