U.S. Treasury securities are considered the safest investments in the world. The risk of default is so small that for decades the notion that Treasury wouldn't meet its financial obligations was unthinkable.
Primers on saving for retirement by financial institutions, investment guides penned by financiers, and personal finance books consider Treasury bills, bonds and notes as the safe-from-default option.
"Because Treasury securities are viewed as one of the safest assets in the world, they are broadly held by individuals — often in pension funds or mutual funds — and by institutions and central banks for use in everyday transactions," notes the Government Accountability Office. "In many ways U.S. Treasury securities are the underpinning of the world financial system."
There are several tense political negotiations going on right now in Washington, D.C. The unnecessarily risky one for savers is over raising the debt ceiling.
The limit on the amount of money the government can borrow came about in 1917 so that Congress wouldn't need to approve every single Treasury borrowing like it did before. The debt ceiling has been raised or suspended about 80 times since 1960.
For most of that history no one (rightly) paid attention to the debt ceiling. Yet in recent years the risk of default has emerged as a political weapon.
During the near-default episode of 2011, I called several finance economists to get their evaluation. Most brushed off any default concern. The next potential default crisis came in 2013 and by then economists were worried that default could happen.
Here we go again. The debt ceiling needs to be raised. A very dangerous and stupid partisan political game is being played. Treasury probably won't have sufficient cash to meet its financial obligations around Oct. 18.
