Research and analyze the following subject Key Point: You must clearly explain your understanding of the term Financial Repression and then answer the questions below. Please include source(s) Financial Repression Some politicians and financial/economists argue that the U.S. must embark upon an era of “financial repression” in which wealth must be kept from fleeing the country and must be taxed heavily within the country. a. What would be the rationale for financial repression, as defined above? Any arguments against it? b. As part of financial repression, it can be argued that savers should be prevented from any significant real returns on their savings and investments. What would that accomplish? Thank you. Solution Hi, In the simple terms, Fianancial Repression is the measure taken by the government to reduce their debt burder. These measures include steps such as holding down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers. a) The main raionale behind such a step is that US as of now has a lot of debts, The politicians are now under a lot of pressure to reduce the debt burden. They want the money to circulated within the economy and not move outside the country. Also imposing heavy tax to increase the government earnings. b) The primary purpose behind preventing from any significant real returns on their savings and investments is to reduce the national consumption. Less real return means less savings, which would lead to less consumption. Increasing production faster than domestic consumption increases national savings.