The US Government Defaults On Its Debt Every Day

This story is interesting. The S&P put US Treasury debt on review for a negative downgrade.

They are referring to the political risk of a default. If no budget agreement is reached, and the "debt ceiling" is not raised, then a Treasury default could occur.

This is entirely missing the point. The US government defaults on its debt every day, via inflation.

Treasury yields are 0.25%-3%, while true inflation is 20%-30% or more. Instead of a technical default, it's a moral default. You'll get your payment. Its purchasing power will be eroded via inflation.

If you have an unleveraged long investment in Treasury debt, you're guaranteed to be robbed via inflation. You'll almost definitely receive your payments as promised. Unfortunately, the purchasing power will be eroded via inflation.

As long as US government debt is all dollar-denominated, insiders can always print new paper to refinance their debt. S&P's "downgrade" is not referring to the inflation risk of Treasury debt. It's referring to the political risk of an outright default due to a lack of a budget agreement.

A pro-State troll says "Long-term Treasury yields are low. Therefore, inflation is low." The fallacy is that the Federal government repurchases its own debt, in collusion with the Federal Reserve and financial industry.

The Federal Reserve directly sets overnight interest rates. The Federal Reserve indirectly sets long-term rates. Suppose the 1 year Treasury yield is 1%. Therefore, the average Fed Funds Rate over the next year should be approximately 1%. If it were greater, some bankster would borrow at the Fed Funds Rate and buy Treasury debt. If it were lower, some bankster would short sell Treasury debt and lend the proceeds at the Fed Funds Rate. The yield curve is entirely determined by future Federal Reserve policy expectations. It's approximate equality and not exact equality, due to transaction costs and uncertainty about future Federal Reserve policy.

Banks, especially Primary Dealers, eagerly buy Treasury debt. They don't care that true inflation is greater than Treasury yield, because they're heavily leveraged. Therefore, Treasury bond yields are completely uncorrelated with true inflation.

An individual is an idiot if he buys Treasury debt. You would have an unleveraged long investment. You would be robbed via inflation.

The "FSK credit rating" for Treasury Debt is an F minus. If you invest in Treasury debt, you're guaranteed to be ripped off by inflation.

S&P gives US Treasury Debt an AAA rating. That is misleading. As long as Congress passes a budget, you'll get your interest payments. As long as the slaves are forced at gunpoint to use State paper money, then Congress can always print more paper to refinance its debt.

When investing in Treasury debt via an unleveraged long position, your risk is not "You won't get payments as promised." Your risk is "The purchasing power will be eroded by inflation." That's practically guaranteed. The AAA Treasury debt credit rating is an evil fnord. It completely ignores the risk of default via inflation.

True inflation is 20%-30% or more. The US government defaults on its debt at a rate of 2%-3% PER MONTH, or more. It isn't a technical default. It's a moral default via inflation.