Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

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coupleofcents
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Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

Can you guys help me understand the difference between holding bonds verses FDIC type money market/savings account. I'm planning to roll over my work retirement account to my Vanguard IRA when I leave. I use the Bogle 3-fund porfolio. My work account is a private trust that has about 30% allocated to bonds but they are professionally managed and heavy on corporate bonds. The Vanguard Total Bond fund is much heavier on U.S. Government bonds.

So:

1. Which one would be considered safer if the U.S. Government were to default? Is it equal?
2. Bogleheads tend to say take your risk on equity side, not bonds, but if that's true, are we not accounting for the default risk of the U.S. Governemnt. National debt continues to climb and the only way I see out of it is eventual default given our track record of not addressing this problem. (no political commentary, just trying to understand)
3. With bond rates seemingly at a low rate of return for potentially a long time, is accepting a 2% or greater rate on cash savings a good option if this allocation is just for safety?

Thanks.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Theoretical »

Default risk is not zero for either but with debt it’s as much about the amount of liquidity as it is the debt burden.

Most US debt is nominal, so in the worst case, you get inflation rather than default. This is the (up/down)side of a fiat money system, unlike in WWI (entente powers) or the Depression.

As to the trigger for default, domestic political pressures would make cancelling or altering FDIC protection (say to $250K of deposits TOTAL) nearly impossible. It’s theoretically possible you get some debt ceiling oops but even then I suspect you’d see some duct tape and glue strategy that makes it a “technical glitch” in the financial system.
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greg24
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by greg24 »

Default risk on either is very low.

More likely downside scenario is the printing presses are fired up and inflation takes off.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by jpelder »

Like others have said, the risk for either is pretty low.
US debt default would be a political, rather than financial, occurrence, since the government can simply make more dollars to pay their debts if desired.
On the other hand, FDIC insurance only becomes an issue if the bank itself becomes insolvent and no buyer can be found (like what happened to Wachovia and Wells Fargo). Bank failures are pretty rare, overall (see https://www.bankrate.com/banking/list-of-failed-banks/)
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by alex_686 »

It is almost impossible to pull these 2 risks apart.

Technically banks and the FDIC have their own pools of capital that would carry them though if US Treasuries defaulted. The problem here is that a large chunk of those reserves are in US Treasuries.

I would give a slight edge to banks and the FDIC. Banks kept chugging on the last time the US Treasures defaulted. IIRC this was 3 days over a weekend in the 70s, so more of a technical default than anything else.

Once again, the chance of this is very, very low.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by gmaynardkrebs »

Are you aware that not all "US Government Bonds" are backed by the full faith and credit of the US? For example, some US agency bonds are not. Vanguard offers Treasury funds and Federal funds. The latter, while extremely safe, are not backed by the ff&c of the US.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by munemaker »

If the US Government defaults on its financial obligations, you are going to have a lot bigger problems to worry about. US currency, for example, has no intrinsic value; its value comes from the integrity of the US government.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Phineas J. Whoopee »

I agree, both are very low risk.

The FDIC doesn't have to cover the whole value of all insured deposits. Even when banks fail they almost always have assets. It's just that their assets aren't completely enough under US regulations to back their obligations.

The FDIC only has to provide cash to the extent the failed bank's assets are less than the sum total of its insured deposits.

There's a cottage industry in false statements about the FDIC and what it does.

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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

@theoretical, greg24 - that makes sense, the real concern is inflation
@jpelder - thanks for the link
@alex_686 seems like my question is really a non issue. Thanks.
@munemaker- yeah if the U.S. defaults I'd imagine the whole world would go in a economic depression
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by gmaynardkrebs »

Phineas J. Whoopee wrote: Mon Sep 24, 2018 1:34 pm I agree, both are very low risk.

The FDIC doesn't have to cover the whole value of all insured deposits. Even when banks fail they almost always have assets. It's just that their assets aren't completely enough under US regulations to back their obligations.

The FDIC only has to provide cash to the extent the failed bank's assets are less than the sum total of its insured deposits.

There's a cottage industry in false statements about the FDIC and what it does.

PJW
The bank assets might not be worth that much in the (inconceivable) situation where the US government is truly unable to meet its bond payments.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

gmaynardkrebs wrote: Mon Sep 24, 2018 12:31 pm Are you aware that not all "US Government Bonds" are backed by the full faith and credit of the US? For example, some US agency bonds are not. Vanguard offers Treasury funds and Federal funds. The latter, while extremely safe, are not backed by the ff&c of the US.
I didn't know that. I really do not know a lot about bonds. I just started thinking that everyone in the world count on the ff&c of the U.s. for bonds or Treasuries, then at some point there will be a world of hurt if the U.S. defaults on it's debts. Wasn't sure if there is some way to hedge against that risk be it very small.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by gmaynardkrebs »

coupleofcents wrote: Mon Sep 24, 2018 1:45 pm
gmaynardkrebs wrote: Mon Sep 24, 2018 12:31 pm Are you aware that not all "US Government Bonds" are backed by the full faith and credit of the US? For example, some US agency bonds are not. Vanguard offers Treasury funds and Federal funds. The latter, while extremely safe, are not backed by the ff&c of the US.
I didn't know that. I really do not know a lot about bonds. I just started thinking that everyone in the world count on the ff&c of the U.s. for bonds or Treasuries, then at some point there will be a world of hurt if the U.S. defaults on it's debts. Wasn't sure if there is some way to hedge against that risk be it very small.
US bonds are the world's "safe asset," which really means "as safe as any asset can be." However, some might answer that gold and other physical assets would be safer in certain disaster scenarios. I would say that US TIPS now the true "safe asset," because the are indexed to inflation, which is a the most plausible threat to US Treasuries as a practical matter. That's why they don't pay much, and there is no upside to holding them in real terms. They might also be difficult to liquidate in a severe crisis.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by alex_686 »

coupleofcents wrote: Mon Sep 24, 2018 1:45 pm I didn't know that. I really do not know a lot about bonds. I just started thinking that everyone in the world count on the ff&c of the U.s. for bonds or Treasuries, then at some point there will be a world of hurt if the U.S. defaults on it's debts. Wasn't sure if there is some way to hedge against that risk be it very small.
I doubt that the US will every default on its debts, or at least in the short to medium term future. It would take incredible mismanagement for this to occur.

What is more likely is "Financial Repression" where the US keeps long term bond rates lower than the inflation rate. This is what often occurs in developed countries when they need to lower their unmanageable debt levels. IIRC, the last time his happened in the US was after WWII and the high debt levels taken on from the war. We are sorta in that situation now, where long term treasury debt is just a whisker above the longer term expected inflation rate.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by nisiprius »

I don't think it's possible to make any sensible assessment of this. For either one to happen, the United States would have to be in a financial crisis worse than any yet experienced. The chances of this happening might not be all that small, but since it would be unprecedented there is no experience to serve as a guide.

Any such event would have completely unique causes, whose probability can't even be estimated. And what the government decided to do would be very much a human and political decision. If they run out of money, they would have to decide to stiff someone. Whether it would be big foreign institutional investors, or millions of voters, is hard to judge. (And there could be many in-between scenarios. For example, I personally like TIPS; those who don't have speculated that if inflation really got out of control, the government might elect to default selectively on TIPS but not nominal bonds).

Treasuries and FDIC-insured bank accounts are in a different category of safety from money market deposit accounts. Treasures and FDIC-insured bank accounts are as safe as you can get. Deciding relative safety is like deciding if an asteroid is more likely to strike in the Eastern or Western hemisphere. To riff on your statement: everyone in the world counts on an asteroid strike not occurring. If it does, whichever hemisphere it hits, the whole world will be in a world of hurt. And, no, IMHO there's no way to hedge against that risk.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by kagantx »

There is one somewhat insignificant difference between the two instruments. Banks can and do fail, and if there is no buyer your money will be tied up for a few days or even a week as the FDIC process goes through. In contrast, Treasuries will not significantly decline in liquidity unless a total disaster occurs.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by dm200 »

kagantx wrote: Mon Sep 24, 2018 2:22 pm There is one somewhat insignificant difference between the two instruments. Banks can and do fail, and if there is no buyer your money will be tied up for a few days or even a week as the FDIC process goes through. In contrast, Treasuries will not significantly decline in liquidity unless a total disaster occurs.
This would be a complete meltdown of the financial system.

Banks and credit unions, typically, can hold a lot of government bonds - and that value would plummet - pulling down the bank or credit union.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Vulcan »

kagantx wrote: Mon Sep 24, 2018 2:22 pm There is one somewhat insignificant difference between the two instruments. Banks can and do fail, and if there is no buyer your money will be tied up for a few days or even a week as the FDIC process goes through.
That is not what typically occurs, I believe. In most cases FDIC enters into a conservatorship and deposits are available next day.

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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by munemaker »

coupleofcents wrote: Mon Sep 24, 2018 1:37 pm @munemaker- yeah if the U.S. defaults I'd imagine the whole world would go in a economic depression
Thinking about this further, the US Government owns a printing press, so it would be almost impossible for them to default.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

nisiprius wrote: Mon Sep 24, 2018 2:04 pm I don't think it's possible to make any sensible assessment of this. For either one to happen, the United States would have to be in a financial crisis worse than any yet experienced. The chances of this happening might not be all that small, but since it would be unprecedented there is no experience to serve as a guide.

Any such event would have completely unique causes, whose probability can't even be estimated. And what the government decided to do would be very much a human and political decision. If they run out of money, they would have to decide to stiff someone. Whether it would be big foreign institutional investors, or millions of voters, is hard to judge. (And there could be many in-between scenarios. For example, I personally like TIPS; those who don't have speculated that if inflation really got out of control, the government might elect to default selectively on TIPS but not nominal bonds).

Treasuries and FDIC-insured bank accounts are in a different category of safety from money market deposit accounts. Treasures and FDIC-insured bank accounts are as safe as you can get. Deciding relative safety is like deciding if an asteroid is more likely to strike in the Eastern or Western hemisphere. To riff on your statement: everyone in the world counts on an asteroid strike not occurring. If it does, whichever hemisphere it hits, the whole world will be in a world of hurt. And, no, IMHO there's no way to hedge against that risk.
Interesting thoughts. I would think the government would stiff the foreign institutions/countries first, but then who knows. I hear people toss around TIPS, but I haven't done enough research to see if those are warranted. The 3 fund portfolio is probably adequate for my needs.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Phineas J. Whoopee »

Not so many years ago the prospect of defaulting on the US debt was used as a political stick. You'd better vote for our legislation or we'll financially kill all of us. We held ourselves hostage.

That was what prompted S&P to downgrade US federal debt from AAA, their highest rating, to AA+, the second highest.

AA+ still indicates a very high level of confidence that interest and principal will be paid as scheduled and in full.

But the question did come up.

In the US, the prospectuses of funds holding foreign assets always mention political risk. Now it's here, too.

PJW
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Phineas J. Whoopee »

munemaker wrote: Mon Sep 24, 2018 2:39 pm
coupleofcents wrote: Mon Sep 24, 2018 1:37 pm @munemaker- yeah if the U.S. defaults I'd imagine the whole world would go in a economic depression
Thinking about this further, the US Government owns a printing press, so it would be almost impossible for them to default.
In the US we have self government. There ain't no them. There's only us.

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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by JackoC »

Phineas J. Whoopee wrote: Mon Sep 24, 2018 1:34 pm I agree, both are very low risk.

The FDIC doesn't have to cover the whole value of all insured deposits. Even when banks fail they almost always have assets. It's just that their assets aren't completely enough under US regulations to back their obligations.

The FDIC only has to provide cash to the extent the failed bank's assets are less than the sum total of its insured deposits.
I also agree that the answer to a beginner's question about which is credit riskier US govt obligations or FDIC insured deposits is basically: same, for practical purposes.

However it seems to me more common to assume govt debt is safer, and there isn't much basis for that IMO. Even if it is an 'advanced' topic, the fact is that in lending to the govt you have one counterparty, the govt. In lending to a bank insured by the govt you have two layers. In ordinary circumstances the relevance of that is some chance of illiquidity, hassle and potential opportunity cost* in the unlikely but not so remote possibility that someday a bank with your insured deposit fails. But in the admittedly probably less likely case the US govt ever decides not to pay back its bonds in full, that doesn't release your bank from its obligation on a deposit, nor would a 'haircut' on US bond repayments necessarily mean every, or even most, banks would fail, nor that the FDIC would disappear for small depositors. Such a plan would presumably be adopted to reduce financial chaos, as opposed to the old saw 'they'll run the printing presses'. It might come to a point where you don't want the massive disruption of high or hyperinflation, you don't want all the banks to collapse, you (the body politic that is) just want out of unmanageable (and presumably by then perceived as 'unfair') debt obligations by reneging on the holders most viewed able to weather the hit: the 'rich' and foreigners. They are more likely to hold treasuries than insured bank deposits. There are cases in shakier countries where public defaults have been implemented trying to avoid hitting small depositors.

I think it would be more justified to write that kind of scenario off as too far fetched to consider if the US federal govt were on a sustainable rather than unsustainable fiscal path as it is, in terms of keeping program promises and paying back debt at full expected (nominal minus moderate inflation) value. It will either get off the current path or something bad will happen, I believe. It's fair enough to say one has high confidence it will be the former, or the something bad will be well short of a populist political decision not to fully pay back debt, and thereafter the problem will be fixed. And I guess so, but not AAA-ishly probably so IMO. This is a non-negligible consideration now for long term US debt IMO, although for say a 5 yr treas v. 5yr CD comparison I think it could still be ignored.

*for example you get a great rate on a CD, rates go down, the bank is liquidated (not taken over by another bank with FDIC help as often happens). You get back your principal but not your great rate.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by NoHeat »

FDIC is more at risk of default than the US government.

A huge run on banks could exceed the capacity of the FDIC. And the FDIC did come close to running out of cash in early 2009. Congress bailed out banks with a huge bill, hundreds of billions of dollars in that bailout, and that saved the FDIC from failing.

The FDIC is supposed to be a self-funded deposit insurance fund. There's no assurance Congress will be a sugar daddy again.

The US Government in principle cannot fail to pay its debt, simply because it has its own currency that it can print. Greenspan has said that for this reason, there's zero risk of failing to pay its debt.
https://www.cnbc.com/id/44051683
The Federal Reserve can "print" as much as desired, and use the proceeds to pay off loans that are coming due. Of course nowadays it won't print paper currency, but instead click a mouse a few times, fiddling around with some credits and debits as only the Fed can. The result could be high inflation and a devalued currency, but the bonds would be paid when they come due.

Buffett repeated the same thing, back around 2012 when news stories focused on the credit rating of the US government dropping from AAA to AA. Buffett said the US Federal Reserve can print enough to pay bonds when they come due, and he pointed out in contrast that Euro-zone countries can't do that, because the individual Euro-zone countries issue their own debt but do not control their own currency.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Theoretical »

NoHeat wrote: Mon Sep 24, 2018 10:29 pm Buffett repeated the same thing, back around 2012 when news stories focused on the credit rating of the US government dropping from AAA to AA. Buffett pointed out that Euro-zone countries are in a different situation, because the individual countries issue their own debt but not their own currency -- Euro-zone country can't print its way out of debt as the US can.
This is also partly why Greece got toasted but Japan has gotten mere stagnation despite astronomical debt and abysmal demographics. It hasn't hit the apocalypse and is nowhere near it. In fact, if the US were to suddenly have a liquidity crunch on its treasury debt for some reason, the new world liquidity bastion would be Yen government debt with the UK and Chinese debt being way behind.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

Phineas J. Whoopee wrote: Mon Sep 24, 2018 3:02 pm Not so many years ago the prospect of defaulting on the US debt was used as a political stick. You'd better vote for our legislation or we'll financially kill all of us. We held ourselves hostage.

That was what prompted S&P to downgrade US federal debt from AAA, their highest rating, to AA+, the second highest.

AA+ still indicates a very high level of confidence that interest and principal will be paid as scheduled and in full.

But the question did come up.

In the US, the prospectuses of funds holding foreign assets always mention political risk. Now it's here, too.

PJW
Thanks for your reply. I'm gathering from your response and others that my question really involves macro level economics and geo-political realities that are really out of my hands. Given the unknown, I don't think it will matter if I choose FDIC insured savings or Vanguard Total Bond for my fixed income portion of my portfolio.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by alex_686 »

coupleofcents wrote: Tue Sep 25, 2018 6:50 am Given the unknown, I don't think it will matter if I choose FDIC insured savings or Vanguard Total Bond for my fixed income portion of my portfolio.
There is a pretty big difference here. First, risk and return are linked.

CDs are very safe short term bonds. You won't lose any money but there is a good chance that inflation will eat away at it.

Vanguard Total Bond has a mixture of long and short bonds, Treasuries and corporate bonds. Longer term so slightly more risk. Decent chance to outpace inflation.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by JackoC »

NoHeat wrote: Mon Sep 24, 2018 10:29 pm FDIC is more at risk of default than the US government.

A huge run on banks could exceed the capacity of the FDIC. And the FDIC did come close to running out of cash in early 2009. Congress bailed out banks with a huge bill, hundreds of billions of dollars in that bailout, and that saved the FDIC from failing.

The FDIC is supposed to be a self-funded deposit insurance fund. There's no assurance Congress will be a sugar daddy again.

The US Government in principle cannot fail to pay its debt, simply because it has its own currency that it can print. Greenspan has said that for this reason, there's zero risk of failing to pay its debt.

The Federal Reserve can "print" as much as desired, and use the proceeds to pay off loans that are coming due. Of course nowadays it won't print paper currency, but instead click a mouse a few times, fiddling around with some credits and debits as only the Fed can. The result could be high inflation and a devalued currency, but the bonds would be paid when they come due.

Buffett repeated the same thing, back around 2012 when news stories focused on the credit rating of the US government dropping from AAA to AA. Buffett said the US Federal Reserve can print enough to pay bonds when they come due, and he pointed out in contrast that Euro-zone countries can't do that, because the individual Euro-zone countries issue their own debt but do not control their own currency.
The US Congress could change the terms of FDIC insurance to the harm of small depositors. It's a law, laws can be changed. However the current system does not depend on a special bailout of the FDIC, there is a pre-existing commitment to support the FDIC. Subject to the body politic, via its representatives in Congress, changing its mind.

But the same thing applies to the supposed 'zero' chance of the US govt defaulting on bonds. If the debt becomes unmanageable there are various choices the political system can make. One is to create deliberate inflation. That has costs and benefits. Another is to pay back less than what was promised in nominal terms, usually done via a forced exchange into bonds which are worth less nominally. That has costs and benefits. It's not as simple as some pseudo-axiom that the former course would always be preferred just because it's possible. There's a serious constraint on how much inflation you can create, how quickly, and with how much collateral disruption, v the fact that bond investors will then demand higher rates next time around. This is particularly relevant in terms of a US debt with avg maturity in the ballpark of only 5 yrs. How much can you whittle the real debt with deliberate unexpected inflation within just 5 yrs, without creating a total mess? And how does that play out over 20 yrs say, where lenders will return in just 5 yrs (on average) with far higher demands for both nominal and real rates to compensate for the now manifest risk of deliberate inflation?

It's not as simple as pointing out the obvious fact that the USD is a fiat currency. So was the Ruble when the Russians defaulted on Ruble debt but not all forms of foreign currency debt debt in 1996. It was because more inflation wasn't found to be a practical way out of rolling over shorter term Ruble debt at ever higher rates as investors reacted to the deliberate inflation, and given all the collateral damage deliberate inflation does to ordinary investors and citizens. They decided to just do a forced exchange for bonds worth less. Anyone who says that's 'zero' chance in case of the unsustainable US fiscal path is wrong IMO (Greenspan has been wrong about plenty of things, the Buffett quote doesn't seem quite on point but he's not infallible either). The chance isn't large or else you'd see it in the market more clearly. That doesn't make it zero.

The problems of weaker credit in a currency union, Greece before and the bigger issue of Italy looming, is a different and more proximate one than the over indebtedness of fiat currency issuers like the US, but not only the US. Pointing out a different case doesn't mean the US case is no risk at all. The 'simple explanation' they could 'just run the printing presses' ignores the simple fact it would ultimately be a political decision how to deal with a debt crisis in an over indebted rich country which issues in own currency, and 'running the presses' wouldn't necessarily be the political path of least resistance. Nor would stiffing FDIC insured small depositors in favor of (typically) bigger holders of treasuries necessarily be either.

The relative credit risk of treasuries and insured bank deposits is indeterminate IMO. Both are small enough to neglect for short to moderate term IMO.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by coupleofcents »

alex_686 wrote: Tue Sep 25, 2018 9:29 am
coupleofcents wrote: Tue Sep 25, 2018 6:50 am Given the unknown, I don't think it will matter if I choose FDIC insured savings or Vanguard Total Bond for my fixed income portion of my portfolio.
There is a pretty big difference here. First, risk and return are linked.

CDs are very safe short term bonds. You won't lose any money but there is a good chance that inflation will eat away at it.

Vanguard Total Bond has a mixture of long and short bonds, Treasuries and corporate bonds. Longer term so slightly more risk. Decent chance to outpace inflation.
I think I mispoke here. I really meant in terms of risk, both FDIC or gov't backed bonds similarly have very low risk. But good point, choosing bonds will hopefully mean a better return. I do plan to stick with Total Bond fund for my fixed income.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by alex_686 »

coupleofcents wrote: Tue Sep 25, 2018 12:28 pm I think I mispoke here. I really meant in terms of risk, both FDIC or gov't backed bonds similarly have very low risk. But good point, choosing bonds will hopefully mean a better return. I do plan to stick with Total Bond fund for my fixed income.
To extend a bit, bond risk can be divided into "interest" and "principle" risk. If you try to reduce risk in one you tend to get a bit more in the other.

As an example I will point to the 10 year Treasury bond. It has a very low principle risk but a high interest rate risk. The chance it will default is low to nil, the chance that inflation (a sub component of interest rate risk) will eat at the return is high. While I think the chances of the US returning to double digit inflation is low, it is not nil. So not risk free.

On the other hand, a 1 year CD or Treasury note have very low principle and interest rate risk. But also low return.
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by garlandwhizzer »

Neither government backed bonds nor FDIC insured accounts have sufficient default risk IMO to worry over. There are many things in investing that are worthy of concern. This is not one of them.

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dm200
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by dm200 »

garlandwhizzer wrote: Tue Sep 25, 2018 1:05 pm Neither government backed bonds nor FDIC insured accounts have sufficient default risk IMO to worry over. There are many things in investing that are worthy of concern. This is not one of them.

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My opinion and conclusion as well.
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jhfenton
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by jhfenton »

Phineas J. Whoopee wrote: Mon Sep 24, 2018 3:04 pm In the US we have self government. There ain't no them. There's only us.
We have representative government, not self government. So there is most definitely a them.

That said, for planning purposes I would assume the practical default risk of both U.S. treasuries and FDIC-insured bank accounts to be zero. It is sufficiently close to zero to make no meaningful difference.
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Phineas J. Whoopee
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by Phineas J. Whoopee »

jhfenton wrote: Tue Sep 25, 2018 3:01 pm
Phineas J. Whoopee wrote: Mon Sep 24, 2018 3:04 pm In the US we have self government. There ain't no them. There's only us.
We have representative government, not self government. So there is most definitely a them.

That said, for planning purposes I would assume the practical default risk of both U.S. treasuries and FDIC-insured bank accounts to be zero. It is sufficiently close to zero to make no meaningful difference.
Run for office yourself, by all means.

PJW
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jhfenton
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Re: Are Government Back Bonds or FDIC Insured accounts more at risk of Default?

Post by jhfenton »

Phineas J. Whoopee wrote: Tue Sep 25, 2018 4:10 pm
jhfenton wrote: Tue Sep 25, 2018 3:01 pm
Phineas J. Whoopee wrote: Mon Sep 24, 2018 3:04 pm In the US we have self government. There ain't no them. There's only us.
We have representative government, not self government. So there is most definitely a them.

That said, for planning purposes I would assume the practical default risk of both U.S. treasuries and FDIC-insured bank accounts to be zero. It is sufficiently close to zero to make no meaningful difference.
Run for office yourself, by all means.

PJW
I have. I was elected to city council before we had kids. I eventually ran for city law director and lost 54%-46%. At that point we had young kids, and I've had other priorities beyond running for office.
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