Given the sharp run-up in debt over the past few years, it would be reasonable to plan for a period of primary budget surpluses, which would serve eventually to bring the ratio of debt to national income back toward pre-recession levels. Fiscal sustainability is a long-run concept.
Advanced economies fell into a phase of insufficient demand, weak inflation and low interest rates – in other words, a persistent liquidity trap – which was aggravated by self-fulfilling expectations. [7] At the lower bound, falling inflation expectations push up real rates, compounding economic stagnation and low inflation.