During my summer hiatus in late August, I managed to dig a bit deeper into the Fiscal Theory of the Price Level (FTPL) and read the manuscript, John Cochrane has kindly made available on his webpage.
This may appear to be a crass statement of the obvious too, but economic activity is always going to be a factor: it will never be zero - as gravity is never zero, if occasionally defied. It is a variable of course and the pertinent question is what influences it. Certainly not fiscal deficits or long-term government debt (though these of course influence currency, therefore inflation directly and so economic activity indirectly). I can vouch personally however for the fact that tax rates have often influenced my personal investment and consumption decisions, even as far as where to live and how much to work, let alone whether to extend the house, buy a new car or pay off the mortgage. One clue might be I have never bought government bonds...
This may appear to be a crass statement of the obvious too, but economic activity is always going to be a factor: it will never be zero - as gravity is never zero, if occasionally defied. It is a variable of course and the pertinent question is what influences it. Certainly not fiscal deficits or long-term government debt (though these of course influence currency, therefore inflation directly and so economic activity indirectly). I can vouch personally however for the fact that tax rates have often influenced my personal investment and consumption decisions, even as far as where to live and how much to work, let alone whether to extend the house, buy a new car or pay off the mortgage. One clue might be I have never bought government bonds...