Has the large US Government deficit has provided financial markets with a...

  • Thread starter Thread starter terry
  • Start date Start date
T

terry

Guest
...risk free investment opportunity? I just can't get my head around how the financial markets have a risk free investment opportunity in any sense, due to the US government deficit. I know it is a complicated question but i really need the answer to it and was hoping that the economists out there would be able to shed some light on the subject for me.

Thank you in advance...
 
There is no such thing as a risk free investment. The safest investment is US Gov. Bonds, but even they have risk. The deficit, and the bailout are two totally different things. The bailout only adds to the deficit, and is totally separate from the viability of banks. Banks for the most part are publically owned companies, just like General Electric and Ford.
 
huh?
you mean has the national debt created by budget deficits allowed investors to invest at the risk-free rate? well, yes, of course it has. sovereign debt, when the government can print money, is generally considered to be free of default risk.

why is this surprising, though? i mean, one could argue that having some national debt is actually a government service, because there will always be demand for investments that return the risk-free rate. even countries with high surpluses sell sovereign debt, as a service to its citizens.

I really don't think i'm understanding what you're getting at, though.
 
Back
Top