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Clearly, there will be a debt problem
Once the health crisis is over, OECD countries (we use the case of the United States and the euro zone to illustrate) will be faced with significantly higher public and corporate debt ratios. Yet deleveraging will be difficult: Real interest rates are lower than real growth rates, but not by much (which is in stark difference to the situation observed after the Second World War); Inflation is low, and therefore so is the inflation tax. Accordingly, real interest rates are not highly negative (also in stark difference to the situation after the Second World War); The sole remaining solution is for governments and companies to reduce debt ratios by saving more and spending less ( thanks to restrictive fiscal policies by the former and wage austerity and weak investment by the latter ) . But the result would be a prot r acted period of weak growth.
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Natixis
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Patrick Artus
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