Should U.S. Government Debt Be Rated Junk?
September 7th, 2010Via: Fortune:
Typically, a bond receives junk status due to its increased risk of default, and therefore pays higher yields to the owners of the bonds to make up for the risk. In general, the owner of a bond is subject to many risks: interest rate risk, inflationary risks, currency risk, duration risk, and so forth. In this instance, as it relates to the United States, we are actually most concerned with the risk related to future repayment. Specifically, with projected deficits for at least the next fifty years, will the United States be able to repay its debt and, if so, on what terms?
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