Maybe countries can live with today’s high debt ratios, and maybe they cannot. The problem, which the authors mention briefly but do not address, is that in the absence of significant policy changes, the outlook—at least in the U.S.—is for debt to rise exponentially, because of demographics. The ratio of elderly dependents to working-age people just keeps heading higher, and health care spending just keeps rising faster than inflation. Can inflation itself cure the debt problem by enabling the government to pay back debt in cheaper dollars? Arslanap and Eichengreen say that the consensus from many studies is not favorable.
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