Huge government debts are riskier than they seem

At annually gathering of central bankers in Jackson Hole, Wyoming, participants rejoice R&R: research and recreation. The latter usually involves a pleasant hike by the lake, but last year a rainstorm soaked the assembled economists. When they returned on August 23, a remarkably accurate weather forecast helped them avoid a shower and enjoy the sun. This was appropriate. A year ago, inflation was still too high and investors were betting that interest rates would have to stay “higher for longer,” the economic equivalent of a watering down. This year, inflation appears almost flat, and central bankers – whose bullish forecasts have also come true – have started to cut interest rates.