You often hear that the world is experiencing a “sovereign debt crisis” as reflected in the inability of the governments of Greece, Spain, Portugal, Ireland, and Italy to borrow money at affordable rates. But as the chart above from Gavyn Davies drives home, the quantitatively larger trend is the in the other direction.
Yields are falling not only in the United States but across the Anglophone world. In the eurozone not only Germany but also France and Belgium have low and falling borrowing costs. Japan, Switzerland, and now Denmark actually have negative nominal yields. If there are useful projects to be undertaken, countries should be borrowing money and doing them. If for some reason there aren’t any useful projects to be undertaken, countries should be financing their existing commitments with cheap borrowing rather than with socially costly taxation.