> How can one deal with the debt mountain? Some ways are definitely better than others. A “solution” sometimes put forward is to reduce the debt through higher

> How can one deal with the debt mountain? Some ways are definitely better than others. A “solution” sometimes put forward is to reduce the debt through higher inflation. The world has already been there, and it was not a pretty sight. It would make little sense to return to an inflationary era after spending so much effort to escape from it. Once the inflation genie is out of the bottle, it is very hard to get it back in. ... > It would make sense to take advantage of the current favourable economic conjuncture to shift in that direction – all the more so since the room for policy manoeuvre has narrowed considerably relative to pre-crisis. Public sector debt is at a peacetime high. And central bank balance sheets are unprecedentedly large while interest rates remain exceptionally low in both nominal and real (inflation-adjusted) terms. > At a deeper level, shifting in the right direction requires placing a higher weight on the long term. Financial cycles, and the associated vulnerabilities, build up slowly. And the costs of high debt may emerge only after a long time. The incentive to kick the can down the road can prove irresistible. But, however distant it may appear, the future eventually becomes today. At which point, it is too late. --- end of article