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 of the Price Level Explains the Great Inflation
The present value equation that you stated does hold in every theory. The question is by what mechanism does it hold? Does the higher price, does the higher value of debt force the government? Do the lower, if it's a value, suppose there's a big equality that happens for other reasons that the government then goes out and raises taxes to pay off a windfall for long-term bond losses? That, you know, the causality can go both ways.
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