Lets see... first we are getting away from the thrust of my premise which is that the why...can matter less than the what/how. That how people feel..affects their behavior in the economy. and that there is power.. sometimes more power in understanding the how they feel .. than the why.
But lets get to this "unmoored from market fundamentals"... the idea that we are "moored" implies that we are completely tied to the market. And the market is a solid, unwavering pier.
When that's not reality. The reality is that human behavior is really more like a ship that can go in any direction it likes.. but is influenced by the tides, the wind and the currents.. and the actions of other ships.. and other ships are influenced by your actions.
I think a pretty accurate reflection of reality is people as a group behave rationally. Obviously over short time periods, some "market' can become irrational, like with housing and debt, and before that tech stocks. But even those 'bubbles' had objective factors that explained much of the 'irrational' behavior, and of course those bubbles burst and we got back to rational prices.
Furthermore, functioning markets depend on participants making rational decisions. When supply drops below demand, prices rise, they don't EVER fall.
According to John. Because the US currency is a fiat currency.. we can never default as a country. Because we can always " print" more money . According to John.. there is no consequence of printing more money unless we "run out of things to buy" with that money.
Now.. is it a market "fundamental".. that we are a fiat currency? Yes. Is it a market fundamental that we can create more money to pay our debts? Yes.
But we don't do that do we? And almost no economists recommends it. We have terrible fights in the government over debt and deficit. Polls show that at times people are more concerned about the debt and deficit than they are over things like unemployment.
Why is that? According to John.. and now according to you.. according to "market fundamentals"... we should have no concern over the debt and deficit.
Well, OK, so people were concerned, some predicted hyperinflation - that's what ZeroHedge has been predicting for nearly a decade now - and what has come of this deep concern? Do you see hyperinflation? What are Treasury rates doing? 2.4%. That's off the record lows but still historically VERY low.
So what won out - irrational feelings by people whose fear of inflation has been ginned up by right wingers and inflation 'hawks' OR market fundamentals? It's the latter.
The point is that concern over the confidence fairy stuff is nonsense.
The reality is that the debt and deficit are a concern.. because we FEEL its a concern. It has power.. regardless of whether that feeling is based on "reality"... that feeling IS reality.
Economic is about HUMAN BEHAVIOR.. and there is a degree of unpredictability in human behavior because our behavior is based upon what we feel/ believe.
I'll just end it by saying your theory is ultimately an empirical question, and I've cited a study showing consumer confidence adds little to nothing to objective data, and your anecdote about the public's concern about deficits and debt, in these circumstances, actually disproves your hypothesis. Despite all this supposed worry, inflation remained low, interest rates low, wage increases low.
And yes, economics is about "human behavior" but the field is premised on people/particpants/markets over the long term behaving rationally. Sure, over the short term anything is possible including irrational behavior, but if that's all your point is, then I'm not sure why we're debating.