Why Buy the Bonds of a Poorly Run, Overleveraged Government?

With each tremor in the national and international economy, there is a rush to buy U.S. Government Bonds. This may seem wise at a certain level, but on balance I don’t think so.

As to the wisdom argument; it certainly makes more sense to buy U.S. Government debt than any other government bonds. One of the reasons that U.S. bonds are purchased these days is, of all the potential government in which to invest, the United States is “safer” than the U.K., Germany (which in affect guarantees all of the European nation bailouts), Mexico, Greece, and Spain, because of those countries higher debt levels and less productive economies.

The U.S. is a better deal than China, because of the heretofore adherence to the rule of law, the democratic republic form of government, the productivity of the workforce, the high probability that you can get your money back out of what you invest it in.

But back to my original question: Why buy the debt of any entity which is compounding additional debt at an alarming trillion dollar rate, which has looming debts for social security (for the first time in 2010 will spend more in benefits than it takes in from wages based taxes), and that is adding foolish government regulations and taxes which further stymie any economic growth? You wouldn’t loan money to a brother-in-law who did this, would you?

The better investment is to put your money in the companies and institutions which have the soundest financial balance sheet and income/cash flow situation, which will also benefit regardless of conditions in the future. The best run organizations are going to have a well crafted response no matter what happens, and these are the places to put your money.

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