fed by deleveraging usually prompt expansionary fiscal policies. this means that the public c. m. reinhart and k. s. rogoff, “ a decade of debt, ” national bureau of economic research working paper no. 16827, cambridge, 2011. bis central bankers ’ speeches debt of most advanced economies can be expected to rise above the 90 per cent threshold historically associated with slower economic growth. 2 the cases of europe and the united states are instructive. today, american aggregate non - financial debt is at levels similar to those last seen in the midst of the great depression. at 250 per cent of gdp, that debt burden is equivalent to almost us $ 120, 000 for every american ( chart 1 ). 3 several factors drove a massive increase in american household leverage. demographics have played a role, with the shape of the debt cycle tracking the progression of baby boomers through the workforce. the stagnation of middle - class real wages ( itself the product of technology and globalisation ) meant households had to borrow if they wanted to maintain consumption growth. 4 financial innovation made it easier to do so. and the ready supply of foreign capital from the global savings glut made it cheaper. most importantly, complacency among individuals and institutions, fed by a long period of macroeconomic stability and rising asset prices, made this remorseless borrowing seem sensible. from an aggregate perspective, the euro area ’ s debt metrics do not look as daunting. its aggregate public debt burden is lower than that of the united states and japan. the euro area ’ s current account with the rest of the world is roughly balanced, as it has been for some time. but these aggregate measures mask large internal imbalances. as so often with debt, distribution matters ( chart 2 ). c. m. reinhart and k. s. rogoff, “ growth in a time of debt, ” american economic review 100, no. 2 ( may 2010 ) : 573 – 78. these figures, daunting as they are, actually understate the extent of the problem. they do not include the liabilities stemming from the pension and health care promises made by governments but not yet funded, which some estimate to be even larger than the current explicit stock of debt. r. g. rajan, fault lines : how hidden fractures still threaten the world economy ( princeton : princeton university press, 2010 ). bis central bankers ’ speeches europe ’

invades the mindset of market participants, they tend to put more weight on the worst - case outcomes for the economy and asset valuations. 1, 2 in early march, as the scope of the lockdown became apparent, there was a “ rush to the exits, ” where market participants sold financial assets in a panic. markets began to seize — they weren ’ t functioning well because everyone was looking to sell assets and secure cash at about the same time. this generated a sharp increase in volatility and a drying up of market and funding liquidity. this demand for cash, or liquidity, was system - wide. it affected both those that wanted more liquidity and those who supply it, such as banks. because the problem affected the whole system, the bank of canada responded swiftly with a broad suite of programs. programs and facilities at the outset of the pandemic and within a span of about three weeks, we cut our policy interest rate from 1. 75 to 0. 25 percent. this is as low as we think we can reduce it without causing problems for the financial system. cutting the policy interest rate supports economic activity by lowering borrowing costs. we 2 / 6 bis central bankers'speeches realize these cuts won ’ t encourage a lot of extra borrowing and spending during this lockdown phase further, the reduction in our policy rate is entirely consistent with our inflation - targeting framework. we know that to bring inflation back to the 2 percent target, we need to boost economic growth and employment. but even while we were cutting our rate, we could see that the financial system was running short on liquidity, and credit wasn ’ t flowing properly. so the bank deployed some other tools from our tool kit. funding liquidity : credit for banks, people and businesses we started by addressing the immediate funding liquidity issues gripping our financial institutions. we knew that by helping with funding liquidity, banks would be able to meet more demand for credit coming from people and businesses. so we ramped up our repo operations. a repo provides funding liquidity to financial institutions for a set term, backed by high - quality collateral. in normal times, we use repos to manage our balance sheet — part of our regular business operations. we typically carry out term repos once every two weeks, for amounts of $ 3 billion to $ 6 billion and for terms of one or three months. however, during the crisis, we “ cranked up the volume to 11 ” to allow