"U.S. Treasuries not the safe bet they once were"

[Xan]

U.S. Treasuries not the safe bet they once were, research says

They found that investors did not, as they had during previous episodes of global financial stress, pile into Treasuries and drive up their value. Instead, investors marked down Treasury securities, much as they did for bonds from other countries.

I'm not sure what to make of this, if anything.

[yankees60]

U.S. Treasuries not the safe bet they once were, research says

They found that investors did not, as they had during previous episodes of global financial stress, pile into Treasuries and drive up their value. Instead, investors marked down Treasury securities, much as they did for bonds from other countries.

I'm not sure what to make of this, if anything.

Isn't it irrelevant if you hold them to term?

But that is not the Permanent Portfolio way. This introduces the desired volatility but seemingly only in one direction?

[Smith1776]

I agree that investors in general should question the basic assumption that U.S. treasury bonds are free of credit risk. (So hold gold.) On the other hand, I don't see a better alternative when it comes to having an asset that reacts positively to falling rates and deflation.

Then again, I actually hold Canadian treasury bonds.

[coasting]

I agree that investors in general should question the basic assumption that U.S. treasury bonds are free of credit risk.

I don't question the basic assumption that U.S. treasury bonds are free of credit risk. Or any other country that issues debt repayable in its own currency - they can always print more. Now excessive printing may lead to other problems such as inflation, but that is not a credit default. If a country issues debt payable in another country's currency (e.g. bonds issued by Argentina government with a promise to be repaid in US dollars), then there is credit risk.

[yankees60]

I agree that investors in general should question the basic assumption that U.S. treasury bonds are free of credit risk.

I don't question the basic assumption that U.S. treasury bonds are free of credit risk. Or any other country that issues debt repayable in its own currency - they can always print more. Now excessive printing may lead to other problems such as inflation, but that is not a credit default. If a country issues debt payable in another country's currency (e.g. bonds issued by Argentina government with a promise to be repaid in US dollars), then there is credit risk.

All seems correct to me.

[Smith1776]

I understand that perspective but don't necessarily agree.

The last time the U.S. defaulted on its debt was 1971, and the time previous to that was 1933. We often paint this narrative that these were simply changes or repudiation to the gold standard, but in reality, they were simply defaults.

[Xan]

I understand that perspective but don't necessarily agree.

The last time the U.S. defaulted on its debt was 1971, and the time previous to that was 1933. We often paint this narrative that these were simply changes or repudiation to the gold standard, but in reality, they were simply defaults.

Those were indeed defaults, but none of them were defaults on a fiat currency with debt denominated in that currency. THAT regime only started as a result of the 1970s default.

[yankees60]

I understand that perspective but don't necessarily agree.

The last time the U.S. defaulted on its debt was 1971, and the time previous to that was 1933. We often paint this narrative that these were simply changes or repudiation to the gold standard, but in reality, they were simply defaults.

Those were indeed defaults, but none of them were defaults on a fiat currency with debt denominated in that currency. THAT regime only started as a result of the 1970s default.

I was alive and alert during 1971. I don't remember any default. I do remember Nixon imposing price controls.

[Xan]

A dollar went from being redeemable for 1/35 oz of gold to being redeemable for... nothing. That's a default.

[Jack Jones]

I understand that perspective but don't necessarily agree.

The last time the U.S. defaulted on its debt was 1971, and the time previous to that was 1933. We often paint this narrative that these were simply changes or repudiation to the gold standard, but in reality, they were simply defaults.

Those were indeed defaults, but none of them were defaults on a fiat currency with debt denominated in that currency. THAT regime only started as a result of the 1970s default.

Great points, both of you.