Once a country exceeds roughly 100-120% public debt to GDP (especially combined with structural deficits from demographics), central bank rate hikes blow out the fiscal deficit via interest expense more than they reduce private bank lending, so the central bank loses its braking power over total credit and can even accelerate total credit while trying to slow it.
causalpending
Speaker
Lynn AldenEvidence Quote
“when the central bank raises rates, they actually blow out the fiscal deficit bigger than the reduction they do for bank lending. So they don't really slow down the amount of total credit in the system anymore”
Created: 6/18/2026, 1:58:51 PM
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