We do not know how the corona crisis ends. We do know that whenever it does we will be poorer as a result. GDP is plunging around the world.
We also know that there will be an overhang of IOUs left from bills that we have run up but not settled during the crisis. Government debts are being issued on a huge scale to raise money to fund the crisis response. When the crisis is over we will have to figure out how to repay them or whether to repay them at all. That question will decide the complexion of our politics, the quality of our public infrastructure and services for years to come.
The scale of the challenge is huge. Cases like Italy grab the headlines. Its debt currently stands at 135 percent of GDP. As a result of the crisis it will likely rise to 155 percent. But Italy is no longer an extreme outlier. According to the IMF the debt ratio of the average advanced economy will exceed 120 percent next year. Historic benchmarks are being surpassed. In the United States the debt to GDP ratio may soon exceed that at the end of World War II.
Read the full article at The Guardian