, Columnist
Public Debt Isn't the Problem, Soaring Deficits Are
For markets, it is not debt levels, but fear of uncontrolled debt growth, where crises are born.
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Governments are borrowing like never before to shield their economies from the pandemic.
Given how cheap it is to do so, thanks to central banks maintaining negative and low interest rates and buying up bonds en masse, this hasn’t been a problem. But debt and deficits are set to remain elevated for years to come. This will complicate policy makers’ ability to balance growth and deficits in the future, raising the risks of a boom-bust cycle followed by years of government austerity and market stress. The only way to ensure a lasting pandemic recovery and avoid a financial crash is to adopt a long-term vision for sustainable growth.