The US government's war against the coronavirus is imposing the heaviest strain on the Treasury since America's drive to defeat Nazi Germany and imperial Japan three-quarters of a century ago. 9News
Just how much money are we talking about?
The federal debt, reflecting the accumulated deficits and the occasional surplus, is forecast to reach 100 per cent of GDP next year.That would snap the record of 106 per cent of GDP set in 1946. The percentage does not include debts that the government agencies owe one another, including the Social Security trust fund.
From 1947 through 1961 the economy grew at a 3.3 per cent annual rate. The financial system was tightly regulated by the government. Since 2010, GDP growth has averaged just 2.3 per cent, even excluding this year's economic implosion. And the government doesn't control interest rates as it used to, not after the financial deregulation of the 1980s.
Another concern is that investors will demand ever-higher interest rates for accepting the risk that governments could default on their debts. In the United States, rates didn't rise even though government debts were high. Investors, it turned out, had a near-insatiable appetite for US Treasurys, still considered the world's safest investment. Their rush to buy federal debt helped keep rates low and limited the government's borrowing costs. So did persistently low inflation.
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