Risk Free Government Debt - Fact Or Fiction

Most investors believe that U.S. government debt is risk free. Why shouldn’t they, every economic and financial textbook, media outlet, and bond guru say so?

Did you know it used to be a fact that the earth was flat and “health cigars” were a thing? Obviously, those facts and myths have been disproven, as have many others that seem equally preposterous today. 

Facts, even if we are not 100% confident that they are factual, provide stability in an otherwise chaotic world. Our need for stability allows unproven “facts” to perpetuate.

In this article, we challenge a “fact” that serves as the foundation for pricing all financial assets. However, our concern for the risk-free status of government debt may be very different from where you think we might be going with this article.