Risk-Free Government Debt – Fact or Fiction?

Michael LebowitzAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Investors believe that U.S. government debt is risk free. Why shouldn't they? Every economic and financial textbook, media outlet, and bond guru says so.

It used to be an accepted 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.

Even if we are not 100% confident something is factual, "facts” provide stability in an otherwise chaotic world. Our need for stability allows unproven facts to perpetuate.

In this article, I challenge a "fact" that serves as the foundation for pricing all financial assets. But my concern for the risk-free status of government debt may be very different from where you think I am going with this article.