Debt ratios: The question of capital offsetting debt

Concern is often expressed about the high level of debt ratios in OECD countries, and the risk that a debt crisis could be triggered if interest rates rise again. But we must look at not only debt, but also the stock of liquid assets and the capital stock held by indebted economic agents: the debt ratio is worrying if it is not offset by equivalent liquid assets or capital. A rise in the debt ratio far exceeding the increase in the capital stock and the amount of liquid assets held can be seen in the United States, the United Kingdom, France and Spain, but not in Italy, Germany or Japan.