The recent G8 meeting confirmed that OECD governments are in denial. They are trying to stave off the impact of private sector deleveraging by adding to their own debt. This won’t work and is merely creating new problems that will emerge farther down the road.
Government debt will weigh heavily on sustained economic growth because of wasted expenditure and rising tax burdens to pay for it.
The servicing of government debt will mean higher government bond yields and a lower dollar, along with lower-than-average returns on productive assets.
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