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9 January 2014

The Western’s debt climbs to a 200 year high and International Monetary Fund’s recent report sends out warnings of ‘savings tax’ and mass write-offs!!!

The Western world’s enormous debt will require drastic actions, such as a savings tax and higher inflation as measures for recovery, as debt levels reach a 200-year high, according to the International Monetary Fund’s recent report.

The report said that the debt hit hard the developed nations who will now have to resort to a wave of haircuts, either negotiated old-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups.

Harvard professors Carmen Reinhart and Kenneth Rogoff said in the report: “The size of the problem suggests that restructuring will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point.”

The paper also said that, Western policy elites are still hanging on to the notion that rich countries are different and therefore will not be affected from poorer ones, thus taking care of their debts with a wave of austerity cuts, growth, and “forbearance”.

In reality though, it might be different. Advanced economies are less likely to resort to such measures, such as debt restructuring and repression, which would give up “hard-earned credibility” and throw the economy into an unpredictable roller-coaster ride.

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