In The Long View “Have we reached a tipping point on public debt?” (Opinion, FT Weekend, December 20) John Plender is instructive on this all-important question, citing the American economist and monetary expert Barry Eichengreen on the linkage between inflation and government debt. The former heals the impact of the latter, albeit inflation is the bitter pill.
Concurrently America’s pre-eminent rate historian and prognosticator Jim Grant, in his Grant’s Interest Rate Observer (vol 43, no 24, December 19 2025), also leaned on Professor Eichengreen. Grant highlights a paper published in December 2017 by Eichengreen, Arnaud J Mehl and Livia Chiţu entitled “Mars or Mercury? The Geopolitics of International Currency Choice”, linking the composition of a country’s foreign reserves to military alliances. That paper argues that military alliances boost the share of a currency in the partner’s foreign reserve holdings by 30 percentage points and that in a scenario where the US withdraws from the world, it estimates that long-term US interest rates rise by as much as 80 basis points.
Considering the 10-year Treasury yield was just 2.4 per cent at the end of 2017, this is a benefit of “wow proportions” to the US piggy bank and, in turn, to global rates.
Now consider how likely it is that in the same week two worthy and ocean-separated writers — Plender and Grant — have referenced the same academic. What are the odds?
This coincidence must alert readers that a tempest is brewing on subjects noted: lurking inflation, increasing debt, suppressed interest rates and the shifting of hegemonic power.
There are only two important questions in investing that also apply to subjects impacting the future stability of the world — tell me why and tell me when.
Plender gives us the “why”, the ever-increasing “intolerable burden” of government debt and suppressed rates leveraging the global financial system. He gives us the tipping point.
What we await is “the when”, as in when do we know we have “tipped”.
Paul Hackett
Madison, NJ, US
