Finance & economics | Free exchange

Vast government debts are riskier than they appear

A provocative new paper gets central bankers talking at Jackson Hole

Illustration of a thumb pressing down on a U.S. coin against a solid beige background. The coin is cracked, and blue liquid appears to be leaking out from the crack.
Illustration: Alberto Miranda

At the annual gathering of central bankers in Jackson Hole, Wyoming, attendees enjoy R&R: research and recreation. The latter usually involves a pleasant hike by the lake, but last year a rainstorm soaked the assembled economists. When they returned on August 23rd a remarkably accurate weather forecast helped them dodge a shower and enjoy some sun. This was apt. A year ago inflation was still too high and investors were placing bets that interest rates would have to stay “higher for longer”, the economic equivalent of a drenching. This year inflation looks all but subdued and central bankers—whose optimistic prognostications have also come to pass—have started cutting interest rates.

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This article appeared in the Finance & economics section of the print edition under the headline “Storm-proofing”

From the August 31st 2024 edition

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