Description:
The contemporary debate about the burden of the debt and related issues lacks methodological focus and, worse, a reasonable theory of demand for government bonds. This stems from the wide acceptance of Fisher's theory of the nominal interest rate. According to this theory, government bonds are essentially equity-capital and should play no important role in macroeconomics. Their potential effects are offset by the ad hoc assumption that governments pay interest by levying taxes which are discounted by the public. However, since there is no way to fit government bonds to the Fisherian postulate and because the former are a concrete reality, the latter must leave the picture