Debt cannot rise faster than GDP forever, but it may do so for quite a while.
Today’s long-term, inflation-adjusted interest rates in the US are about half their 2010 level, far below what markets were predicting back then, and far below Fed and International Monetary Fund forecasts.
At the same time, inflation has also been lower for longer than virtually any economic model would have predicted
Fed Chair Jerome Powell could barely contain himself when asked to comment on this new progressive dogma.
“The idea that deficits don’t matter for countries that can borrow in their own currency I think is just wrong,” Powell insisted in US Senate testimony last month.
He added that US debt is already very high relative to GDP and, worse still, is rising significantly faster than it should.
Stein's Law: If something cannot go on for ever it will stop.
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