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 Alden

Evidence 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

Source

Our Financial Predicament From a Systems Perspective with Lyn Alden | TGS 188Nate Hagens
Created: 6/18/2026, 1:58:51 PM

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