Wishful thinking

The scale of government debt issuance is beginning to attract attention from the ‘scribblers'. Should we worry about it? In some cases, yes. And in most cases, we should be careful what we wish for

The fact that we have a growing deficit problem in the Western economies is well-known and the burden of this extra debt will be with us for many years to come. As the central banks have confirmed this week, the consequence of this high debt level is that we need lower interest rates for longer as well as a focus on higher taxes and lower government spending. Given the fragility of the Western economies and their banking systems, a tightening of fiscal policy may have to wait (at least six months) for more convincing signs of economic recovery. Indeed, some countries are still talking of...