The great reflation will come with a nasty debt hangover. But the notion, mooted by some, that postponing the exit strategy from easy money and allowing some beneficial inflation to boost growth and reduce borrowing in real terms, is both dangerous and misguided.

In a simple world, inflation lifts nominal output while debt remains static. But the world is not simple. UBS economists looked at developed economies from 1971 to 2008 and found that government debt to output was five times as likely to be stable or rise than to fall if inflation rose above 5 per cent. By contrast, debt fell three times as often with low inflation. One reason for this is that much government debt is short term and markets adjust quickly. The US will roll over half its government borrowing in the next two years: a similar proportion of eurozone debt matures in the next five. The popularity of inflation-linked securities also offsets any gain from inflation. About 10 per cent of US and 23 per cent of UK government debt is indexed. So inflation would boost those borrowing costs.