Barro (1974) examines whether government bonds are perceived as net wealth by the private sector, which is crucial for understanding the real effects of public debt changes. He argues that government bonds are net wealth only if their value exceeds the capitalized value of future tax liabilities. Using an overlapping-generations model, he shows that finite lives do not affect the capitalization of future tax liabilities if current generations are connected to future generations through intergenerational transfers. He also considers imperfect private capital markets, government monopoly in liquidity services, and uncertainty about future tax obligations. He finds that government debt may increase net wealth if the government is more efficient than the private market in carrying out loans or if it has a monopoly in liquidity services. However, uncertainty about future tax liabilities may increase household risk and reduce wealth. The paper also discusses the effects of social security and other intergenerational transfer schemes, inheritance taxes, and transaction costs. It concludes that government debt may not affect consumption or interest rates if intergenerational transfers are operative, but may have a net-wealth effect if the government is more efficient than the private market or operates as a monopoly in liquidity services. The paper highlights the importance of considering the risk characteristics of government debt and tax liabilities in assessing their impact on household wealth.Barro (1974) examines whether government bonds are perceived as net wealth by the private sector, which is crucial for understanding the real effects of public debt changes. He argues that government bonds are net wealth only if their value exceeds the capitalized value of future tax liabilities. Using an overlapping-generations model, he shows that finite lives do not affect the capitalization of future tax liabilities if current generations are connected to future generations through intergenerational transfers. He also considers imperfect private capital markets, government monopoly in liquidity services, and uncertainty about future tax obligations. He finds that government debt may increase net wealth if the government is more efficient than the private market in carrying out loans or if it has a monopoly in liquidity services. However, uncertainty about future tax liabilities may increase household risk and reduce wealth. The paper also discusses the effects of social security and other intergenerational transfer schemes, inheritance taxes, and transaction costs. It concludes that government debt may not affect consumption or interest rates if intergenerational transfers are operative, but may have a net-wealth effect if the government is more efficient than the private market or operates as a monopoly in liquidity services. The paper highlights the importance of considering the risk characteristics of government debt and tax liabilities in assessing their impact on household wealth.