On Mon, Apr 05, 2004 at 11:06:35AM -0700, Gautam Mukunda wrote: > Different types of risk, sorry. I'm slipping into financial sector > jargon. US Government Securities (and all of the ones you are talking > about are US Government securities) are all riskless assets. The risk > referred to is the risk of default only - basically the risk of losing > your nominal principal. The other stuff is, of course, relevant to > calculations of your real risk, and stuff you should take into account > in financial planning.
And interest rate and inflation risk should be taken into account in this situation, which is why I mentioned it. The SS trust fund will go negative in not too many years. So it is NOT a long term investment. It will need to come up with the cash, and risking it on a 30 year bond which could lose a lot of value when interest rates rise would be foolish. That's why I assumed it was "invested" in shorter term debt. On the other hand, unlike an individual, the government can raise taxes to come up with cash, so the risk is different than for an individual. And the government "defaulting" on debt to its own trust fund would be a strange phenomenon -- I'm not sure how that would go. Things get strange when trying to analyze government investments by comparing them to private investments. -- Erik Reuter http://www.erikreuter.net/ _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
