The problem with the “slow” solution to reducing the public debt ratio is that the next crisis will come around too soon

The subprime crisis and then the COVID crisis have pushed up public debt ratios sharply. It can be considered that the portion of the public debt held by the central bank is also public debt, since it corresponds to banks’ reserves at the central bank, i.e. a liability of the central bank (which is part of the government) owed to the banks. It is simply public debt in monetary and not bond form. To reduce the public debt ratio, one can: Either switch to a restrictive fiscal policy; Or restructure (reduce) the public debt; Or keep long-term interest rates below nominal growth by increasing nominal growth if possible (either real growth or inflation) and by keeping interest rates low. OECD countries have clearly opted for the third strategy . B ut it takes a very long period of time to reduce public debt ratios significantly. There is actually reason to fear that the next recession, which will drive up public debt ratios further , will come around far too soon for this strategy to have had the time to noticeably reduce public debt ratios.