Has public debt in the developed world become fundamentally unmanageable? The question is far from outlandish. Recent debt numbers starkly underline how far we have moved beyond the ancient public finance paradigm whereby debt was racked up in wars and paid down in peacetime.  

Consider, first, the US. While the ratio of debt to GDP in the world’s biggest economy shrank from 106 per cent in 1946 to 21.6 per cent in 1990-91, it has since lurched back up to almost 100 per cent thanks to, among other things, the financial crisis and Covid-19.

The discomfiting fact is that in the US, as elsewhere, economic growth, relative to the decades after the second world war, is lower, interest rates are higher and budget deficits are wider. The Congressional Budget Office now projects a rise in the debt ratio to a clearly unsustainable 156 per cent of GDP by 2055, which potentially undermines the role of US Treasuries as the essential anchor in global finance.