Warnings that rising deficits will reignite inflation and undermine the dollar have proved wrong for decades, so deficit hawks are increasingly easy to mock as crotchety old scolds.

The new view, expressed by leading figures from the IMF, academia and media, is that with inflation long dead and interest rates at record lows, it would be unwise, even irresponsible, not to borrow to boost the economy. The amounts — billions, trillions — hardly matter, especially not for the US, which still has the world’s most coveted currency.

 Increasingly, the money printed by central banks goes to finance government debts. Many elites see this as fine

Instead of a path to freedom, low rates are a trap. They encourage more borrowing and rising debt, which drags productivity lower and slows growth. That makes the economy financially fragile, forcing central banks to keep rates low. Given today’s very high levels of debt, only a small increase in interest rates would make the debt burden unsustainable.

The writer, Ruchir Sharma, Morgan Stanley Investment Management’s chief global strategist, is author of ‘Ten Rules of Successful Nations’

FT 20 January 2021

https://www.ft.com/content/d49b537a-95f8-4e1a-b4b1-19f0c44d751e