Making matters worse is the fact that governments in the developed world had allowed their debts to rise in the decade after the global financial crisis despite record-low interest rates. Though estimates vary, the massive government spending since the Covid-19 outbreak will increase these debt loads even further. Instead, it was through a combination of solid growth, moderate inflation and low interest rates that the debt to GDP ratio was steadily reduced. By the mid-1970s, government debt to GDP ratio had dropped to roughly 20%, a comfortable level that does no harm to the economy. To achieve sustained economic growth, moderate inflation and low interest rates in the wake of Covid-19, the world will need a recovery in global trade and investment.
Source: Forbes July 13, 2020 02:48 UTC