Whoever came up with the name “junk bonds” for high-yield corporate debt was a master of propaganda. The truth is, the bonds the Fed is buying are more like wha

Whoever came up with the name “junk bonds” for high-yield corporate debt was a master of propaganda. The truth is, the bonds the Fed is buying are more like what Ben Graham would call “senior securities with speculative features” (although classically that referred to preferred stock) and really aren’t that different from the BBB-rated bonds they were buying last week. (Indeed, they’re buying bonds that were investment-grade until a couple weeks ago.) These aren’t contingent claims on a company’s assets, like Alphabet stock or a S&P 500 index fund, they’re senior claims, which are structurally and legally less risky than equities, if not actually less risky than every equity security. Personally, it seems to me that if you’re not willing to let capitalism work itself out in a crisis, you should stop pretending to have a capitalist system at all; Norway is a pretty entrepreneurial country despite being a certain shade of pink. But the arbitrary dividing line between “investment grade” bonds and “junk” bonds is not some Platonic boundary between “safe securities” and “crap.” It’s there for complicated historical reasons which are perfectly reasonable to ignore during a crisis caused by an unforeseen and unprecedented economic slowdown.