The sequence of questions raised by public debt in OECD countries

The public debt ratio of OECD countries has risen sharply since the 2008-2009 crisis. Does this herald a debt crisis in the future, as is often suggested? It raises a sequence of interrelated questions: Why are interest rates so low, which prevents there from being a debt crisis as long as this situation lasts? Are they low because of lasting structural factors or because of expansionary monetary policies? Low inflation, even at full employment, allows monetary policies to remain expansionary. Could wage inflation make a comeback in the future, under a different functioning of labour markets? If inflation does return, will central banks raise their interest rates or will they keep them low to prevent a public debt crisis? Are central banks really committed to never letting interest rates rise? If interest rates remain permanently low, either because of lasting structural factors or because of central banks’ behaviour, there will never be a public debt crisis but there may be financial instability: asset price bubbles, excessively large and volatile international capital flows. Could the financial instability then be prevented with macroprudential policies (bank asset ratios, borrowing limits, capital controls)?