In dealing with spiralling debt issue, the US must heed some lessons from Italy in the 1970s

HERE’S a parable for US investors. Fifty years ago, a high-flying economy whose factories and consumer base were the envy of the world faced a debt reckoning, and it began a sudden descent that some say is still ongoing to this very day.

It’s hard to believe now but, between 1958 and 1963, Italy’s gross domestic product grew at a rate that was surpassed by only Germany and Japan. Like those nations, and later China, it appeared to be experiencing an economic miracle, a factory phoenix emerging from the post-war rubble. The likes of Fiat, Ferrari and Gucci became household names around the world.

Italy’s rapid growth, however, was disproportionately fuelled by rampant borrowing in international bond markets. The country became unstable as the government struggled to meet debt obligations.