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Financial repression is a term used to describe measures sometimes used by governments to boost their coffers and/or reduce debt. These measures include the deliberate attempt to hold down interest rates to below inflation, representing a tax on savers and a transfer of benefits from lenders to borrowers. Financial repression is also used to describe measures to facilitate a domestic market for government debt and the imposition of capital controls. The combined effect of all these measures means funds are channeled to the government that would otherwise flow elsewhere. Financial repression in China is said to be the cause of its huge accumulation of foreign currency reserves. Similarly western governments were being accused of financial repression following the 2008/2009 financial crisis as they embarked on measures including quantitative easing, capping interest rates and creating more domestic demand for their own bonds.
In 2012 and 2013 pension funds and insurers, in particular, were suffering the results of financial repression after being forced by new regulations to increase their holdings of safe assets, such as government bonds, to improve the quality of their capital buffers. By the end of 2012 and the beginning of 2013, market commentators were beginning to talk of "financial coercion" and argued that governments were pushing investors into risk assets to maintain real returns.