Covid response has shown inflation and interest rates no longer dictate limits on debt.
Lawrence Summers, whose speech on “secular stagnation” in 2013 was the most perceptive economic pronouncement of the past decade, has argued that macroeconomics is experiencing a “revolution” similar to the seismic shift towards inflation control in the late 1970s.
From now on, there will be “a focus on assuring adequate demand and fairness in our economies”, driven mainly by expansionary fiscal policy.
At some point, debt will reach a limit, but most economists are now betting that this is a very long way off.
Gavyn Davies FT 1 November 2020
Secular Stagnation at IntCom
Lawrence H. Summers at IntCom