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By the way, when buying TIPS (or any kind of Treasurys), you are basically saying "Yes, I like the fact that the USA is deep in debt and I want it to go more in
by jblow 16y ago
By the way, when buying TIPS (or any kind of Treasurys), you are basically saying "Yes, I like the fact that the USA is deep in debt and I want it to go more into debt rather than balancing its budget!" That is what Treasury bonds are -- the USA borrowing money from you and promising to pay it back. This is where the debt comes from!
Somehow I do not think many people realize this...
- illumin8 16y agoThere is zero default risk in US Treasuries because the government has the capability of printing more money. Can you name any other type of bond or fixed income that has zero default risk?
- jblow 16y agoOkay, but I never said anything about default, so I don't know what this has to do with anything! As you know, when the government prints more money, it dilutes the value of the existing money. So then, when you buy Treasurys and they get paid back, you made your money by silently leaching it out of the pockets of all other Americans, with the government as intermediary. What a great financial model!