random2348

Shorting U.S. Government Risk

Let me stress that I believe that it is very unlikely that the U.S. will ever default on its debt (maybe "default" is too strong of a word - yes, the U.S. can always print more dollars - let's say "restructure" instead - and by "restructure" I mean changing the terms of its obligations in a way that is akin to default, not merely adjusting the mix of bills, notes, and bonds). Until recently, the conventional wisdom was that for the U.S. to have to restructure its debt would be basically impossible - even now, if someone asks you for "risk-free rates," you're probably going to look up Treasury yields. Well, maybe a future debt crisis that results in a restructuring is not impossible, but just very unlikely. Note that foreign governments would bear much (but not all) of the pain of a restructuring.