There is much pointing of fingers across the developed world as to who or what is to blame for the sudden dire economic conditions that confront us. Is the current malaise the result of the war in Ukraine and high oil prices?
Is it to do with the sudden and, to some, surprising appearance of inflation? In the United Kingdom some blame a risky “dash for growth” by a now deposed administration and of course there is always Brexit to blame for everything that goes wrong.
There is a simpler explanation for why the entire developed world now faces dire economic outcomes: an explosion in debt burdens that cannot be serviced at interest rates that reflect higher inflation.
For a generation it was thought by most policymakers and their advisers that debt levels in the economy, whether in the government, household or corporate sector, simply did not matter. Inflation would always remain quiescent, interest rates would always remain low and debts could always be serviced. It was of course convenient to believe in the continuation of such a world of low inflation and low interest rates, but it was also fundamentally stupid and dangerous.
For the rest of this column: https://www.thestar.com/business/opinion/2022/12/05/canadians-are-now-paying-the-price-for-past-views-on-debt.html