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Fiscal shocks

Fiscal shocks

323 years of UK national debt

A fresh dataset for the marketplace value of British government debt makes a long-run analysis of fiscal sustainability and debt management possible. It implies that the 20th century saw a shift to financing debt by inflation and low bondholder returns, instead of through fiscal surpluses. This column runs on the counterfactual analysis showing that long bonds have already been an expensive method of financing debt, especially after a financial meltdown. Had the federal government issued only three-year bonds since 1914, the amount of debt in 2017 could have been lower by 28% of GDP.