U.S. government bonds have no more default risk than Federal Reserve notes and yet bondholders receive interest payments while holders of Federal Reserve notes do not. Why then do so many choose the non-interest-bearing notes? According to Wallace (1983) non-interest-bearing currency would be dominated by interest-bearing assets save for legal restrictions that interfere with the free circulation of interest-bearing alternatives.
Casa Robino
Shared Hospitality Excavations
