It is certainly true that the era of super-cheap money is ending /The Economist, Feb 1st 2022/.

The world economy has been really heavily indebted, where the stock of global debt has gone from 83 trillion dollars in 2000 to around 295 trillion dollars in 2021. This rate was nearly double the pace of world GDP growth. Debt rose from 230% of GDP in 2000 to 320% on the eve of the pandemic. Due to the pandemic it has gone to 355% last year.

Yes, central banks have to battle the surge of inflation resulting in much higher interest rates globally. The total global costs of interests were 11% of GDP in 2021 and they might go up to 15% of projected GDP by 2026. In a worse forecast the interest bill could rise to about 20 trillion dollars by 2026, nearly a fifth of GDP.

On one hand, we are closing down the era of super-cheap money, on the other hand we are entering the era of “still-cheap-money”. Especially governments could afford the luxury to pay higher interest bills because they can borrow more cheaply than private-sector borrowers and they might foot the bill via higher taxes.

They will definitely do, so the rate of piling up debts will be again double the rate of GDP growth globally.

Governor Matolcsy, MNB, the Central Bank of Hungary

Re “The global interest bill is about to jump”