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The Next New Thing in Finance — Bonds Linked Directly to the Economy

May 11, 2018 - The New York Times

When the next big recession comes, we’ll be much better off if governments have established a new kind of bond tied to the ups and downs of the economy.

In fact, just such a financial innovation is almost ready for the marketplace.

The investment vehicle, called a G.D.P.-linked bond because it is tied to fluctuations in a country’s gross domestic product, would be immensely valuable to cash-strapped governments when revenue fell and debt-service costs climbed. In those circumstan...