Why low rates don't mean "borrow more"

There are two things to note about global growth in the years after the financial crisis. Growth has slowed from the 2000–2007 period; it is normal compared to other periods. But what is most dramatic is that growth has been extremely stable. In fact the last seven years are perhaps the most stable growth ever.

Very stable growth kept interest rates very stable. Stable inflation also kept rates stable.

This has given a false sense of security. Perhaps governments could borrow a lot more without changing interest rates or inflation? Higher government debt levels are not a big threat to economic stability at the moment. Low rates mean debt is low-cost.

Using low rates as an excuse to raise government spending is high-risk. Random fiscal boosts may disrupt the remarkably steady growth the world has enjoyed. An economic boom would be followed by an economic bust. The uncertainty of returning to a boom-bust cycle could increase interest rates in the long term, increasing the cost of debt.

Of course, there are merits to building better roads. Redistributing economic growth can also be good. But to argue low rates should mean more government debt misses the point; being boring helped create low rates.