Why would people lose confidence? Because there is nothing on the shelves to buy with their dollars. And bonds are just a temporary way to store dollars. Bonds hold their value because the dollars they are storing can still buy stuff. Bonds hold their value because dollars hold their value, and dollars hold their value because our economy produces a lot of stuff to buy.
Look at any incidence of hyperinflation. You can trace every one of them to a solid, logical reason or reasons. Lack of confidence is not a cause, it is a result. It's an easy explanation used by people who are too lazy or simply unable to figure out the real reason(s) for inflation.
And "taxation as a means of decreasing private sector demand".
What a load of crap john. Crap man... 5 minutes from now you will be arguing that taxation increases private demand... the minute that argument suits your purpose. Because that's what you have argued in the past.
Lets see... next it will be "taxation increases private sector demand by transferring money that would go into peoples savings and puts it back out into the economy in government wages, etc... that increase demand".
Come on man.
The "confidence fairy" as you call it is a REAL ECONOMIC FACTOR. In fact.. its what economics is about.... peoples behavior. Not.. accounting identities as you seem to think it is.
When you are looking back at incidence of hyperinflation John... your are seeing the reasons that people LOST CONFIDENCE. Lack of confidence is what results in hyperinflation.
Thinking that economics is about accounting and not about human behavior.. is something used by people that well... either want to push and agenda.. or well have no clue about economics.