What did you see as the most pernicious, outdated assumption shaping global politics before COVID? And to what extent is the present crisis awakening policy-makers to the obsolescence of that idea?
[] it’s the householder analogy about the limits on deficit spending, which was one of the absolutely key elements of that consensus of the 1990s. This idea that there are hard-and-fast limits to debt sustainability and that governments that spent too much and ran large deficits would face the wrath of the all-powerful bond market. [] For better or worse, though, it just appears obsolete.
in this crisis, it has once again proved possible for large economies with credible central banks to borrow on an epic scale without suffering financial-market disruption. And this is because of a dirty little secret about very large holders of private capital: In moments of crisis, they’ve got to put that capital somewhere. And where they always end up putting it is government debt because that’s the safest port in a storm. [] if 2008 had not already demonstrated that government debt is the only game in town at the moment of maximum crisis, 2020 has really driven it home. And so there is little difficulty in finding financing for government action.