Higher interest rates are here to stay, so we need a rethink | Kenneth Rogoff

Even if inflation falls, soaring debt levels, deglobalisation and populist pressures will have an impact

Even with the recent part retreat in long-term real and nominal interest rates, they remain well above the ultra-low levels to which policymakers had grown accustomed, and they are likely to stay at such levels even as inflation retreats. It is now past time to revisit the widely prevailing free lunch" view of government debt.

The idea that interest rates would be low for ever seemed to support the view that any concern about debt was an endorsement of austerity". Many came to believe that governments should run large deficits during recessions and only slightly smaller deficits in normal times. No one seemed concerned with the possible risks, in particular to inflation and interest rates. The left championed the notion that government debt could be used to expand social programmes, going beyond what could be generated by reducing military spending, while those on the right seemed to believe that taxes exist only to be cut.