To read the full version of this content please select one of the options below:

High US government debt does not itself raise risks

Tuesday, June 1, 2021

Significance

Some economists are suggesting that, over the longer term, this could cause financial markets to stop buying US debt and charge prohibitively high rates, and cause the dollar to crash. Other economists argue that more deficit spending could fuel output and so keep relative debt levels in check.

Impacts

  • In the recovery and beyond, financing the debt could raise private borrowing costs, reduce business investment and slow economic growth.
  • High and rising debt might constrain policymakers in their ability to respond to unforeseen events.
  • A higher debt path that boosts interest rates would give the Federal Reserve more flexibility in implementing monetary policy.

Related articles

Expert Briefings logo
Stay up to date
Sign up to the Expert Daily Briefings email alert and receive up-to-the-minute analysis of global events as they happen.
*If your university does not have access to Expert Briefings, visit our information page to find out more.