Using a debt accounting exercise, we show that periods of sustained debt reduction are typically driven by strong primary balances and above-average growth. Following 1980, inflation has played little role in debt reductions. Current fiscal projections and current market interest rates on average do not point to declines in debt-to-GDP ratios across developed markets. We estimate that market implied r – g, the difference between real interest rates and growth rates, is now positive for many countries. Japan provides an example of high debt peaceably coexisting with low interest rates. However, given current high inflation, wider deficits, and rising interest costs, we think it unlikely that we return to the era of structurally low interest rates in the US, UK, or Europe. As a result, we see the risks to term premia skewed higher as fiscal risks simmer.
- Date Posted:
- September 12, 2023
Twelve insurers that write homeowners coverage in Louisiana were declared insolvent between July 2021 and February 2022, according to the Insurance Information Institute. Those closures sent insurance prices spiraling out of control, in both absolute terms and also in prices relative to local median incomes that are among the lowest in the nation. The average premium rose 6.7% in 2021 and then 18.5% in 2022, according to the Louisiana Department of Insurance. Louisiana Citizens Property Insurance Corp., the state-backed insurer of last resort, went from 45,000 policies in 2020 to 130,000 currently. That’s despite the fact that, by law, it charges 10% above market rate and raised rates 65% at the beginning of this year.