The writer is a professor of economics and public policy at Harvard university and former chief economist at the IMFThe Fed’s expansive actions to prevent the Silicon Valley Bank collapse from becoming systemic, followed by the Suisse National Bank’s massive lifeline to troubled Credit Suisse, left little doubt this week that financial leaders are determined to act decisively when fear starts to set in. Let us leave moral hazard for another day.

But even if risks of a 2023 financial Armageddon have been contained, not all the differences with 2008 are quite so reassuring. Back then, inflation was a non-issue and deflation — falling prices — quickly became one. Today, core inflation in the US and Europe is still running hot, and one really has to strain the definition of “transitory” to argue that it is not a problem. Global debt, both public and private, has also skyrocketed. This would not be such an issue if forward looking, long-term real interest rates were to take a deep dive, as they did in the secular stagnation years prior to 2022.

Unfortunately, however, ultra-low borrowing rates are not something that can be counted on this time around. First and foremost, I would argue that if one looks at long-term historical patterns in real interest rates (as Paul Schmelzing, Barbara Rossi and I have), major shocks — for example, the big drop after the 2008 financial crisis — tend to fade over time. There are also structural reasons: for one thing, global debt (public and private) exploded after 2008, partly as an endogenous response to the low rates, partly as a necessary response to the pandemic. Other factors that are pushing up long-term real rates include the massive costs of the green transition and the coming increase in defence expenditure around the world. The rise of populism will presumably help alleviate inequality, but higher taxes will lower trend growth even as higher spending adds to upwards pressure on rates.