Investment Archives
Treasuries can be considered as the safest investments in the world and they earned a good reputation from that.
Treasuries are backed by “the full faith and credit” of the U.S. government. The risk of default on these fixed-income securities is NIL. Not even the safest corporate bond in the world can make that claim. If you’re primary goal is to not lose money, treasuries are for you. When you buy a Treasury Bill, Bond or Note you’ll get your interest payments and you’ll get your principal back.
They are not a risk-free. There are, in fact, two very clear risks to holding Treasuries.
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Another “Pay-As-You-Go” concept. Such a system does not create savings, which means when inflation and or interest rates are above zero, money is essentially lost. With our demographic upheaval of worker to retiree ratios, it became a Ponzi Scheme. Someone is left holding the bag when the cash runs out; as things stand, that means everyone under 50.
When Social Security starts paying out more than it takes in, whether it be 2012, 2015, or a few years later, the system will be running a deficit in real terms because the trust is virtual. If you put $10,000 in the bank, take it all out for some home repair and maybe a few weekends in Vegas, that money is gone, IOU or no. If you write an IOU to yourself to replace that ten-grand, and you stick to your word, you still have to come up with the money somewhere…that original 10k, again, is already gone. The Social Security Ponzi Scheme thus was a not-so-elaborate method of shoveling trillions of dollars into the mouths of politicians and out onto their pet projects…original intention aside.
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