Claims

Factual · Economics and markets

“We didn’t really care until quite recently because while debt ratios were unsustainably high, the debt servicing (the rate you pay on the debt, and the principle you have to lock or roll-over) was close to zero or negative.”

Nouriel Roubini, interviewee · 28 October 2022 · Nouriel Roubini on the Ten Megathreats Facing the World (Thought Economics)

Until recently debt servicing costs were close to zero or negative despite unsustainably high debt ratios.

Unresolvable The public record could not settle it.

The second judge would not resolve this claim; the verdict shown is the first judge's.

What would count as true or false

Judge as of late October 2022. The claim has two parts: (a) until recently (roughly 2020–2021), debt servicing costs were close to zero or negative, and (b) debt ratios were unsustainably high at the same time. Test (a) mainly on interest rates. True if policy rates and sovereign or benchmark borrowing yields in major advanced economies (US, euro area, Japan, UK) were close to zero or negative until 2021/early 2022, so that the effective cost of rolling over debt was near zero, and if debt-to-GDP ratios were at or near historic highs. Mostly true if rates were near zero or negative but debt-service costs as a share of GDP or revenue were not literally near zero, because older higher-coupon debt was still outstanding, so the claim slightly overstates a broadly correct picture. Mixed if rates were near zero in some major economies but clearly not in others he appears to cover, such as emerging markets or corporate borrowers. Mostly false if near-zero rates held only briefly or only for a narrow set of borrowers and are presented as general. False if benchmark borrowing costs in the period before 2022 were well above zero across major economies. Do not treat 'unsustainably high' as a matter of opinion: record debt ratios satisfy it.

Evidence

1. Department of Finance | Annual Report on Public Debt in Ireland in 2021- Summary Department of Finance, Ireland · February 2022

   “For the euro area as a whole, the estimated effective interest rate was around 1½ per cent last year, 3 percentage points below its level a decade-and-a-half ago.”

2. Global Debt Reaches a Record $226 Trillion IMF Blog (International Monetary Fund) · 15 December 2021

   “Monetary policy actions in advanced economies (including large purchases of government debt) helped lower interest rates and facilitate borrowing during the pandemic.”

3. Global Debt Reaches a Record $226 Trillion IMF Blog (International Monetary Fund) · 15 December 2021

   “The global public debt ratio jumped to a record 99 percent of GDP.”

4. Global Debt Reaches a Record $226 Trillion IMF Blog (International Monetary Fund) · 15 December 2021

   “Public debt rose from around 70 percent of GDP, in 2007, to 124 percent of GDP, in 2020.”

Reasoning

The evidence supports the debt-ratio part of the claim, since global public debt reached a record 99 percent of GDP (E3, E4). It does not show that policy rates or benchmark yields in the US, euro area, Japan or UK were close to zero or negative. E2 says only that monetary policy helped lower rates, and E1 gives a euro-area effective interest rate of about 1.5 percent. So the rates part of the claim is not settled.

Cite this claim

Nouriel Roubini, “Until recently debt servicing costs were close to zero or negative despite unsustainably high debt ratios.” (said 28 October 2022). Verdict: unresolvable. Reliability API, claim c_61d8604ddebe, method 0.1.0+c876030c. https://epistacklabs.com/claims/c_61d8604ddebe