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Overcoming financial repression
“Financial repression” involves keeping interest rates artificially low while allowing inflation to erode the real value of bonds and cash.
Highly indebted governments may use financial repression to reduce their debt burdens in the years ahead.
Such policies would make it even harder to earn vital income in your core portfolio.
Financial repression thus calls for a major shift in asset allocation.
If you have excess cash, we urge you to put it to work or risk losing purchasing power.
While we do not advise complete divestment from very low-yielding bonds, we do recommend various substitute strategies involving dividends, capital markets, alternative investments, and select fixed income assets.