One graph, three lessons

Then, of course, like Marietta in the fable, we imagine scenarios, fantasize… and risk tripping! This graph contains many lessons. I'll highlight three, from most recent to oldest:

1) the latest increase in debt corresponds to the pandemic (2020), was managed almost everywhere with counter-cyclical policies (here in our country for example by suspending the Stability Pact), and has already been reabsorbed;

2) the penultimate increase in debt corresponds to the global financial crisis (2008), it was managed with pro-cyclical policies (here in Italy the Six Pack and Fiscal Compact) which amplified it, and in twenty years it will not be reabsorbed;

3) Debt had reached a low point in the late 1970s, then the dogma of central bank independence took hold, with its high interest rate policies and the resulting need to borrow to repay the cost of the debt, and an inexorable growth began.

The debate on monetary (central bank independence) and fiscal (austerity) rules must be conducted by considering their results. Over a century, we have ample examples of what works and what fails. Trump is not crazy: he's simply defending the West (as he calls it) from default (obviously not out of idealism but out of pragmatism).

Do we prefer the idealism of German rules, or American pragmatism?

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This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2026/01/un-grafico-tre-lezioni.html on Sat, 17 Jan 2026 14:26:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.