I fear that the argument between Robert Peston on the one hand and Simon, Paul and Alex on the other about the relationship between government borrowing and interest rates is understating something important.

I agree with Robert's critics that interest rates are not determined by bond vigilantes or confidence fairies - at least for the UK at current debt levels. But there is a different reason to think that a looser fiscal policy would lead to higher rates.

Quite simply, looser fiscal policy would lead to higher aggregate demand and hence to a smaller output gap. If you believe - as the Bank of England does - that a smaller output gap leads to more inflation (or at least the risk thereof) then this means higher interest rates will be needed to hit the inflation target. And because gilt yields should be equal to the expected path of future short rates, it follows that a looser deficit should mean higher yields.

Paradoxically, the more Keynesian you are, the more you should accept this. If you think fiscal multipliers are very big, then looser fiscal policy means much bigger aggregate demand and hence - given the Bank's remit* and view of the inflation process - significantly higher rates.

In this sense, the choice is not just about fiscal policy but about the fiscal-monetary mix. Labour is offering looser fiscal and tighter money than the Tories.

In this context, David Cameron said something yesterday that's misleading. It's this:

By 2018 we will be putting money aside so that if any crash or shock happens to our economy, we will be better prepared.

Now, it might be that a tighter fiscal policy now would give us more room for fiscal manoeuvre when the next recession hits. But the counterpart of a tighter fiscal policy is that interest rates will stay close to the zero bound - which will give us less room for monetary manoeuvre in future. It's not obvious which is best.

One could easily argue - though I'll save this for another day - that a looser fiscal/tighter money policy is preferable. It's entirely coherent to say: "Interest rates would be higher under a Labour government - and a damned good thing too."

Herein, though, lies a puzzle. If Labour's policy implies higher interest rates, why aren't we seeing more volatility in gilts as market opinion about the election outcome varies?

One possibility is that there won't in reality be much difference between the two parties' fiscal policies simply because the Tories' stated plans are nonsense: four-fifths of macroeconomists agree with Rick that their spending plans are in la-la land.

Another possibility is that interest rates won't rise much whoever controls fiscal policy, as they'll be held down by some combination of secular stagnation, deflation and stagnation in the euro area and (very arguably) falling oil prices.

These two possibilities hint at something else - that perhaps the debate about the impact of the deficit upon interest rates isn't very important for practical purposes.

* Those who argue for a serious reflationary policy should be calling not just for looser fiscal policy but for a change to the inflation target too (and of course many are).

Another thing: Robert's "fey anthropomorphism" of the market is mistaken. The "Mr Market" metaphor can sometimes be horribly misleading.