Financial Repression 101:
What you need to know to help protect your portfolio
Since 2008, deficit spending has ballooned as the U.S. government rescued failing financial institutions and tried to rekindle growth with both tax cuts and stimulus spending. As long-term public debt has reached unprecedented levels, investors have begun to question how those obligations will be resolved.
However, reducing government debt has proven to be a thorny problem. Given weak economic growth prospects and the public resistance to with austerity measures, "financial repression" — adopting policies that help the government reduce their debt burdens — seems to be the least bad option.
But the success of these financial repression policies comes at the expense of savers and investors. U.S. government bonds — normally considered "risk-free" assets — are particularly affected. How should you respond?
Financial Repression 101, a 90-second video from Allianz Global Investors, offers a quick primer on how financial repression can impact your retirement goals — and what you should consider doing about it.
Allianz Global Investors believes financial repression is a long-term trend. It should continue to impact not just asset returns, but how you invest and think about risk.