And yes, Uncle Sam will always be able to borrow. That's what "risk-free rate of return" means. Is it possible to conceive of scenarios where the US defaults? Yes -- but under those scenarios it's improbable, to say the least...
Read the whole thing. And I should note that, as an investor, I behave more consistently with Felix's views. That is, I have not pulled out of my relatively large position in long-term inflation-indexed Treasury bonds. But my thinking is somewhat bubble-esque. That is, I pretend that if a default really becomes a significant probability, then I will get out before those bonds lose value.
Where would you turn for safety? I'm not one of those people who sees gold as the safe asset. In a world where the U.S. defaults on its debt, I don't think stocks will maintain their value. I like the federalism of Switzerland and the peace and stability of Scandinavia, but I'm not convinced that those countries have great balance sheets.
a police captain receives $306,000 a year in pay and benefits, a lieutenant receives $247,644, and the average for firefighters -- 21 of them earn more than $200,000, including overtime -- is $171,000. Police and firefighters can store up unused vacation and leave time over their careers and walk away, as one of the more than 20 who recently retired did, with a $370,000 check. Last year, 292 city employees made more than $100,000. And after just five years, all police and firefighters are guaranteed lifetime health benefits.
Even the City Council has at last faced facts and voted 7 to 0 for bankruptcy.
Thus, we have an example of a government that could not scale back on its promises until it declared bankruptcy.
In the U.S., the AARP plays the same role that the public-sector unions did in Vallejo.