Are we all Debt Liquidationists now? … No!

by Andreas Hoffmann

A growing number of economists suggest that governments in highly indebted countries should consider liquidating debt via financial repression. In other words, they want governments to intervene in financial markets and push government borrowing costs below the rate of inflation to erode the real value of debt. In a previous post, I argued that financial repression is dangerous and a drag on growth. This post explains why we can be hopeful that, despite a rise in popularity, the debt liquidationists will not succeed in putting their ideas to work. Debt liquidation via financial repression would necessitate far-reaching regulation or drastic measures, both of which seem unlikely in the US.

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