IMF paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high --- UK Telegraph
http://www.telegraph.co.uk/finance/financialcrisis/10548104/IMF-paper-warns-of-savings-tax-and-mass-write-offs-as-Wests-debt-hits-200-year-high.html
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Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund.
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The paper says the Western debt burden is now so big that rich states will need same tonic of debt haircuts, higher inflation and financial repression - defined as an “opaque tax on savers” - as used in countless IMF rescues for emerging markets.
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Most advanced states wrote off debt in the 1930s, though in different ways. First World War loans to the US were forgiven when the Hoover Moratorium expired in 1934, giving debt relief worth 24pc of GDP to France, 22pc to Britain and 19pc to Italy.
This occurred as part of a bigger shake-up following the collapse of the war reparations regime on Germany under the Versailles Treaty. The US itself imposed haircuts on its own creditors worth 16pc of GDP in April 1933 when it abandoned the Gold Standard.
Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies. Some of these methods are already in use but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.
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The paper says the Western debt burden is now so big that rich states will need same tonic of debt haircuts, higher inflation and financial repression - defined as an “opaque tax on savers” - as used in countless IMF rescues for emerging markets.
...
Most advanced states wrote off debt in the 1930s, though in different ways. First World War loans to the US were forgiven when the Hoover Moratorium expired in 1934, giving debt relief worth 24pc of GDP to France, 22pc to Britain and 19pc to Italy.
This occurred as part of a bigger shake-up following the collapse of the war reparations regime on Germany under the Versailles Treaty. The US itself imposed haircuts on its own creditors worth 16pc of GDP in April 1933 when it abandoned the Gold Standard.
Financial repression can take many forms, including capital controls, interest rate caps or the force-feeding of government debt to captive pension funds and insurance companies. Some of these methods are already in use but not yet on the scale seen in the late 1940s and early 1950s as countries resorted to every trick to tackle their war debts.
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