Many of us, when we look at the investment choices for our 401K will see a U.S. Government Bond Fund as one of the options. Or, when speaking to a financial advisor, will hear the advisor recommend allocating some of our investments to government bonds. Here on Anti-Economist, I clearly recommend against that, and for 3 reasons.
1. I don't like the government borrowing money and especially not $14 Trillion. So why should I help encourage that behavior by lending them money (which is what buying a government bond does?) The government is like this guy Rusty who went to my high school, and was always asking to borrow money. Whether or not they pay back is irrelevant at some point - it's just annoying.
2. I already lend the money government, albeit not by choice. That is because 1/3 of this $14T is owed to the Social Security Trust Fund, which everyone pays 7% of their wages into each year.
3. The government does not even use fair practices in determining the interest rate they pay. When it gets higher than they want to pay, then the Fed, which is part of the government, implements "Quantitative Easing" in an attempt to lower the interest rates. This is already on top of them forcing the Social Security Trust Fund to lend them money (point 2). So even if I got past points 1 & 2, I still would not lend the government money due to the poor business practices they play.
These are all non-financial reasons that I think should lead the thought process before the financial reasons. Financial reasons are "risk and reward', "default risk", 'interest rates", and whether 2% 3% 4% 6% 8% ... is high enough. As you know here on Anti-Economist we focus on the non-financial reasons first.
No comments:
Post a Comment