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If government bonds were really "risk free" than all sorts of magical wealth-from-nothing fantasies, such as MMT, would be true.
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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
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Thanks. Twitter will use this to make your timeline better. UndoUndo
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FDR's gold reevaluation in 1934 is never discussed as a default, but that is exactly what it was. Government defaulted on its promise to redeem its paper in gold.
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What about in 71 with Nixon closing the gold window? Was it a 37 year-long default, or an another separate default?
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First was a default to citizens, second a default to nation states.
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That’s not really what they mean by risk-free, it’s just something that is the standard
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So words mean something entirely different from what the dictionary says? I don't know whether you are supporting rank idiocy or rank dishonesty, but either way blocked.
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The term "risk-free" is a simple misnomer for a benchmark. Risk free does not exist. This is well known among finance professionals. That said US treasuries are the closer to risk free an asset can get - for now.
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If they knew that, that would implying that they are knowingly lying by using that phrase.
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Risk-free** ** If you ignore the relevant risks
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Yes, inflation devaluing the debt is another, and even bigger and more common kind of risk. Another and even bigger risk hardly makes it more "risk-free"!
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That is the likely way out of the hole.
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"Between 1970 and 2007 there were 124 systemic banking crises, 208 currency crises, 63 episodes of sovereign debt defaults; and between 1670 and 1970 there were 48 major crashes [monetary and/or currency related] "(Lietaer, et al. 2012, Money and Sustainability: The Missing Link)
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As you probably know Nixon took us off the gold standard in 71 and unleashed the Fed. Coinciding with the dates you showed.
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The most funny account of that episode contains this gem: “out of the 2500 years of experience [with currency systems] and 200 years of ardent study [of currency systems] have come monetary systems that are [unsatisfactory]” (Galbraith, 1975, Money, Whence it Came, Where it Went)
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