Repression

In the 1970s, the Italian journalist Oriana Fallaci sat down with some of the most powerful people alive and questioned them with the persistence of a prosecutor. A selection of these encounters is collected in ‘Interviews with History and Conversations with Power’ (2011).

The fourteen interviews are a reminder that political authority cannot be confused with clarity of thought. They show personalities who defined their times (and my youth) stripped of their grandeur by a single journalist. Henry Kissinger would later describe his 1972 meeting with Fallaci as one of the most disastrous decisions of his career.

Through her method, Fallaci reliably uncovers sources of incoherence in the views and policies espoused by the defendants: freedom of expression is promised, but opponents are bullied and silenced as conspirators; popular self-government is proclaimed amid an omnipresent cult of the leader; foreign interference is condemned while the right to intervene elsewhere is asserted.

It appears that displacing an established political order is easier than building a coherent successor. Governing requires reconciling social aspirations, economic factors, fiscal constraints and geopolitical ambitions, an inherently elusive objective.

When a political order reaches a high level of incoherence that propaganda alone is unable to mask, it becomes unstable. A leadership unwilling to resolve its contradictions may then turn to repression to prop it up.

But government repression is not confined to the social and physical sphere.

Political incoherence carries economic consequences. Conflicting policies leave resources underexploited and misallocated. A sovereign bond is a promise, and the uncertainty created by political incoherence makes that promise less credible. Bond investors respond with a risk premium, which translates into a higher cost of capital across an economy.

An act of ‘financial repression’ is committed when governments interfere in the financial markets to hold their borrowing costs down through regulation and market interventions. It transfers wealth from the private sector to the government and therefore amounts to a stealth tax.

A new IMF working paper entitled ‘The Coming Great Repression?’ (2026) measures financial repression across seventeen economies since 1920: financial repression peaked after WWII, receded through the era of globalization, and has re-emerged since the Great Financial Crisis, the zero-bound years discussed in these notes in ‘Financial Immortality’ (2020).

With several advanced economies facing borrowing costs at multi-year highs, there are two avenues available to governments: less incoherence, or more financial repression. Given the political trends around the world, more financial repression is the likelier path.

Government repression can take various forms, from silencing the people to silencing the markets.

And like people, financial markets can rebel.