US government debt could reach 250% of gross domestic product without putting upward pressure on interest rates, according to a paper presented at the Federal Reserve’s Jackson Hole conference.
“Until fiscal consolidation occurs, there will be a race between the rising asset demand of an older population and the rising debt issuance needed to finance the associated increase in government expenditures,” said its authors — Adrien Auclert of Stanford University, Hannes Malmberg of the University of Minnesota, Matthew Rognlie of Northwestern University and Ludwig Straub of Harvard University.