Since then, global debt has stabilized, growing by only 1% in total, relative to global GDP, over the past 5 years. The aggregate growth rate is not therefore signaling an impending correction. The level, however, may well represent a significant vulnerability given that high levels of debt are associated with deeper and more persistent recessions. Assessing the sustainability of this debt is more difficult. Whether debt is sustainable depends on the difference between the interest rate and the growth rate of the income stream that will be used to repay the debt. The future is not known – in assessing today whether a given level of debt is sustainable, we must rely on our best forecast of future interest rates and growth. The level of debt that is sustainable in an economy is not a constant. It can change over time and indeed has changed enormously over the last 150 years. The ratio of credit to GDP in the late Victorian British economy was under 20% (not including the financial sector). In the mid-twentieth century it was around 60% and by the early 1990s over 100%. It is influenced by many factors including, very importantly, the long run real rate of interest. There is strong evidence that the long run, or trend real rate has come down materially over the past 40 years as a result of slow moving, secular changes in the supply of savings and the demand for investment.
But recent events suggest the market may be very sensitive to changes in expectations of growth or inflation. 20  For UK assets, there has been the additional impact of fluctuations in Brexit news and sentiment. The evaluation of Brexit outcomes seems to have dominated responsiveness to near-term domestic news. 13  All speeches are available online at www.bankofengland.co.uk/speeches  13  As always, the risk picture is mixed. From a financial stability perspective, the right response to this picture is to ensure that the financial system is sufficiently resilient to a very severe but plausible correction in values should it occur. A colleague of mine recently asked me why the financial stability side of the Bank was so gloomy, always pointing to risks on the horizon and seeing the glass as half empty at best? My answer was that it was our job to worry about what could plausibly happen - and to ensure that if it did happen, the glass did not suddenly empty entirely. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14