Financial repression is a tried and tested tool for the management of extreme debt loads Debt levels are rising to such extremes as governments respond to the COVID-19 pandemic Expectations of high post-pandemic growth may be overly optimistic and austere policy looks untenable We may therefore venture further down the garden path into financial repression …read more
• On 22nd February, Finance minister Gordhan presented his annual budget to the national assembly.
• Gordhan faced a painful trade-off between managing South Africa’s eye-watering debt situation, supporting stagnant private consumption and political sustainability in the most unequal country in the world
• We simulate South Africa’s debt/GDP path under different assumptions, and argue that the economy still has a long way to go to achieve fiscal sustainability
• 11th January saw data on Turkey’s November current account released
• The drop off in the trade balance can be largely explained by FX effects and continued decline in Tourism revenues
• A careful analysis suggests that in the detail might be some much-needed good news for Turkey
Following the attempted coup in Turkey on 15th July, we examine afresh the pressure points in the Turkish economy, and note three themes investors will be watching with interest.
In response to almost a decade of QE and with little discernible effect, central bankers have resorted to negative interest rates. What is the zero lower bound and will below zero rates have the desired effect?
If negative interest rates fail to halt deflationary momentum, could more extreme options such as ‘helicopter money’ be a viable next step?
• The initial details of the bail-out suggest that over the next three years, Greece’s hard-line creditors could be largely ‘paid-off’, leaving the door open to debt renegotiation further down the line.
• While Greece is required to make further sacrifices in the form of asset privatization, the deal postpones economic and humanitarian consequences of Euro exit.
• As always, there are significant uncertainties surrounding long run feasibility including primary surplus and asset sale revenue assumptions.