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We will look back on the idea that government bonds can be "risk-free" as a kind of collective insanity: "Despite history and facts, associating the word 'risk' with UST is for some reason blasphemous among financial professionals."
ht @michaellebowitz
https://realinvestmentadvice.com/the-mind-blowing-concept-of-risk-freeier/ …pic.twitter.com/IgyCNqQBiq
If government bonds were really "risk free" than all sorts of magical wealth-from-nothing fantasies, such as MMT, would be true.
![Winson Ng [🔑₿]](https://pbs.twimg.com/profile_images/1023111332420186112/doKuMsAk_normal.jpg)
Since the II world war less than 1% of gov bonds defaulted... there is 67 trillions of public debt now... how much defaulted in the last 50 years ? 0,5% maybe ?
They have all imposed substantial risk on their holders, quickly or slowly, via inflation.
no..... bonds always had positive real returns since 1980 until now.....
The statement is that government debt issued by a sovereign that can print money is *nominally* risk free. This is a true statement. Moreover, no private agency can issue nominally risk-free debt claims to government money.
Only technically true for bonds issued in a currency the government will control over the life of the bond, but that cannot be guaranteed. And using "risk" in this way excludes with extreme dishonesty the biggest source of risk, inflation.
People could be more careful & say "nominally risk-free." But people often resort to short-hand. Not a problem if it's widely understood. Moreover, "inflation risk" you describe is present even in private sector (via dilutive share issues, for example). Not just govt. problem.
It's extremely misleading and extremely dishonest, and leads to all sorts of wealth-from-nothing quack fantasies.
Bad language cuts both ways, Nick. Could also lead to irrational fear of what are otherwise desirable government programs. Crypto space is rife with bad language and quackery too, I might add.
Love your posts and there is no such thing as risk free. There is however An inexhaustible wealth not of cash, but resources beyond our comprehension that pour into and out of the crushed material we call soil regardless of the sticks we measure with
Our abilities to improve the soil, while quite impressive and wonderful over the last two centuries or so, are still very finite.
In my view it has nothing to do with humans, the inexhaustible wealth of incomprehensible resources is and will always be
That doesn't mean you print currency for all of it. Is that what you mean?
Currency is just a tiny abstraction of the infinite, long before and until these last few years currency has been the control and show structure to create difference and power over other to give an imaginary advantage in immortality.
I know of no thing, no thought, no action that is "risk free". Read Aaron Wildavsky, "Searching for Safety".
Interesting read, just released:https://twitter.com/HesterPeirce/status/1095388875646750720 …
Governments though have the means to put pressure on banks to buy their bonds. THEY, unfortunately, are the regulators after all. Just this month EU antitrust got one step further to even claim a cartel on bond interest prices...
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