Debt demands a new deal like the one I witnessed in 1985

Debt levels are prompting a call for a new round of international financial diplomacy, with veteran analyst Alex Brummer arguing that a contemporary counterpart to the Plaza Accord of 1985 is overdue. In a column updated September 21, 2025, Brummer revisits a moment when a handful of world powers quietly gathered to curb the dollar’s surge and avert a destabilizing confrontation with Japan’s rising economy. He notes that the meeting, staged in New York amid the Plaza Hotel’s opulence, showcased a degree of cooperation now hard to imagine in a world fractured by domestic politics and cross-border rivalry. The price of inaction, he writes, could be higher debt burdens and riskier financial markets than those of the 1980s.

The Plaza Accord, convened by then U.S. Treasury Secretary James Baker, brought together the Group of Five—the United States, Japan, West Germany, the United Kingdom and France—with the aim of dampening the dollar’s strength. At the center of the diplomacy was the conviction that a too-strong dollar could inflame debt dynamics for policymakers wrestling with export competitiveness, inflation, and financial stability. The Lexus of the period was the yen, which jumped higher against the dollar as traders bet on a coordinated intervention. Brummer recalls how the dollar’s climb slowed and then reversed after the pledge to intervene, helping to unlock a more assertive stance by Tokyo and others in exchange for stabilizing currencies. Over the next two years, the yen rose from about 240 per dollar to roughly 145, a move that helped reset asset prices and contributed to the Louvre Accord’s attempt to anchor a more balanced currency regime. The era is often cited as a turning point for the Group of Seven, which would assume a broader role in steering the world economy, even as the geopolitical landscape shifted with the end of the Cold War.

Brummer observes that the episode reflected a moment when policymakers believed they could outmaneuver currency markets through coordinated reserves and signaling. The 1985–87 unfoldings did not erase friction or volatility, but they did demonstrate how high-stakes diplomacy could influence exchange rates, asset valuations, and confidence in the postwar international order. The Louvre Accord in 1987, which sought to stabilize the dollar’s decline after the Plaza impulse, signaled that the era’s diplomacy could evolve from a single pivotal action into a continuous management of global finance. Yet, he cautions, the arc of that influence has waxed and waned as markets grew more complex, the world economy diversified, and geopolitical rivalries intensified.

Today, Brummer notes, the IMF highlighted a stark reality: global debt levels have surged to about 235% of world output. That statistic, sourced from a recent IMF blog, underscores the scale of risk facing policymakers as they weigh deficits, yields, and growth. In many advanced economies debt burdens are rising against a backdrop of aging populations, inflationary pressures, and slow productivity gains. Britain, France, and the United States each face distinct debt dynamics that complicate even the most prudent fiscal plans. In France, persistent debt pressures contribute to social and political stress, while in the United States, long-term yield projections and the trajectory of entitlement programs keep debt expansion in sharp relief for analysts.

The comparison Brummer makes between 1985 and today hinges on more than currency moves. It is a question of whether a coalition—comprising major economies and institutions such as the IMF—can once again coordinate policy levers to prevent a debt spiral from undermining growth and financial stability. He notes that the 1980s framework benefited from a relatively broad consensus among policymakers, market participants, and taxpayers about the necessity of curbing excessive debt and defending stability. However, the current era is marked by deep domestic political skepticism about multilateralism. The rise of populist sentiment and the perception that global cooperation under multidimensional agreements has ceded too much national control complicates any attempt to replicate Plaza-era diplomacy.

Brummer points to the United States as a fulcrum in today’s equation. He argues that the contrast between then and now is striking: the earlier era benefited from the sense that policy choices could be coordinated across borders for a shared objective, even if imperfect. Today, a constellation of forces—unregulated private markets, rapid capital flows, and strategic competition with China—have reshaped the incentives and risks the global economy faces. The author specifically notes that attributing policymaking to a single figure is less plausible in today’s diffuse environment, where leadership is dispersed among administrations, central banks, international institutions, and private sector players.

Despite the challenges, Brummer sees a potential arc back toward disciplined, transparent diplomacy in the debt arena. He cautions that the path will not be easy: political constellations in key economies would need to align around a shared objective—reducing the debt burden that threatens growth, stabilizing long-term interest rates, and preserving financial market confidence. In his view, successful reform would require new degrees of cooperation that acknowledge the lessons of the Plaza era while adapting to the realities of the 2020s—chief among them the rapid rise of nonstate actors, the expansion of digital finance, and the strategic competition that dominates much of global governance today.

As Brummer closes, he frames the Plaza moment not simply as a nostalgic memory but as a practical blueprint for a moment when the world again must balance debt with growth and financial stability. He asserts that if there is a time when a multilateral approach could be revived, it is now—yet, he adds, the political will necessary to pull it off may be at a low ebb. The IMF’s debt data, the performance of major economies, and the evolving geopolitical landscape collectively suggest that a renewed framework for debt management and currency stability would require not only technical alignment but a renewed commitment to cooperative problem-solving across borders. Whether policymakers can translate that into action remains an open question, but Brummer’s central message is clear: debt demands a new deal, echoing the urgency of an era when coordinated diplomacy shaped the course of the world economy.

In a landscape where debt lags behind growth in the public discourse, Brummer’s column serves as a reminder that history offers both cautionary lessons and possible templates. The Plaza Accord showed that, under the right conditions, coordinated policy could alter the course of currency trajectories and asset prices, with measurable consequences for inflation, unemployment, and investment. The current moment, with debt levels at multi-year highs and geopolitical tensions on multiple fronts, calls for an updated version of such diplomacy—one that can endure political headwinds, adapt to new market structures, and deliver credible commitments to debt relief and fiscal stability where needed. Whether authorities will summon that resolve remains to be seen, but the argument for renewed international coordination on debt management is, for Brummer, both timely and necessary for the health of global markets.