The world is only delaying the inevitable by not dealing with bulging debt

Inventive policymaking has only made the problem worse, guaranteeing that any eventual restructuring will be all the more painful

Markets, to paraphrase Nobel prize-winning economist Thomas Schelling, often forget that they keep forgetting. That’s especially true when it comes to the intractable challenges posed by global debt.

Since 2008, governments around the world have looked for relatively painless ways to lower high debt levels, a central cause of the last crisis. Cutting interest rates to zero or below made borrowing easier to service. Quantitative easing and central bank support made it easier to buy debt. Engineered increases in asset prices raised collateral values, reducing pressure on distressed borrowers and banks.

All these policies, however, avoided the need to deleverage.