03 - John Cochrane on Finance, the Fiscal Theory of the Price Level, and Blogging
Macro Musings with David Beckworth
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The Fiscal Theory and Inflation
Fiscal theory is not a let's explain the latest data point theory. I think it's a framework that helps us understand these things very much so. The reason people are willing to work so hard for those pieces of paper is because the government accepts them for tax payments at the end of the day. Why does money have value because the government accept it for taxes? That's an old insight. It's kind of revolutionary in that it is, I think it is the only theory that is coherent at the moment that makes any sense as a matter of economic logic in current institutions.
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