Modern monetary theory had already paved the way for this change in attitude by hypothesizing that countries with fiat currencies, such as USD or JPY, could issue debt more or less without limits. However, mainstream economists argue that high levels of debt stifle growth and are not sustainable. They cite problems like higher taxes, lower future incomes, and growing inequity between generations.

DEBT TO GDP RATIO: THE US

The ratio of government debt to GDP soared especially in the big advanced economies. In the US, that ratio reached 137.2% in 2021, according to estimates by the administration. That’s up from 128.1% in 2020, and 106.8% in 2019.

THE EU SCRAPS DEBT PROMISES, FOR NOW

Before interest rates fell, a 60% ratio was considered the maximum sustainable and 100% seemed outrageously high. The European Union enshrined the 60% ratio in its so-called Stability Pact limiting debt to 60% and deficits to 3% of GDP for those using the joint euro currency. The EU, which observed these limits only fitfully in the past, has now bowed to reality and suspended them through 2023.

DEBT TO GDP LEAGUE CHAMP: JAPAN

The league champion in debt to GDP has been Japan, where government debt rose to 266% of GDP by the end of 2020. Japan has defied conventional debt rules for years due to the public’s high propensity to save and to channel these savings into domestic bonds. But the 2020 figure was up significantly from 238% in the previous year.

Greece is a distant second with 193% in 2021, but the Greek economy is No. 53 in the world while Japan is No. 3 and has a much bigger impact.

CHINA’S DEBT TO GDP: TOO GOOD TO BE TRUE?

China, the world’s second-largest economy, registered a 2020 debt ratio of 66.8%, but the reliability of data from the notoriously opaque economy is an open question. The UK, which ranks fifth among world economies, came in at 94% in 2020, up from 82.7% the previous year.

Debt amounts and debt to GDP ratios for any country can vary considerably depending on which figures are used.

President Joe Biden boasts that the US government will reduce this year’s deficit by $1.5 trillion as government support for businesses and individuals fades out. But a lower deficit will slow the build-up of debt but by itself won’t reduce the debt to GDP ratio.