Treasury Bonds: Are they Safe?

Treasury Bonds are the Securities issued by the Federal Reserve Bank of USA and they are fully backed by the full faith of the Government of USA. They are known as safe-heaven on this earth. No other Investment vehicle is safer than Treasury Bonds on this earth because by default, US Government never defaults in its payments.

Now here the question is that, How Safe Treasury Bonds are?

You will now say that, this guy is crazy. How any one on this earth can raise a question about safety of the Treasury Bonds?

Well, actually this is not my question but the government of China which is the largest treasury ,security holder on this earth (US $ 800 Billion) has recently asked this question to USA.

Since last so many years, China is buying US Treasury Bonds like anything and today China is world’s No.1 Treasury Security Holder. Japan is second I think and India is within first top 15 lenders of USA.

Recently US Government has truly printed US $ 1 Trillion out of thin air only in March 2009. So How did US Government has printed Money in the true sense? Well, The Federal Reserve Bank has issued Treasury Bonds and US Federal Government has bought it. In Normal Economy, countries like China, Russia, Japan, India and Private investors buy these securities. But this time US Government has itself bought all the bonds and this is how they have printed US $ 1 Trillion in the true sense. It means that nobody has landed this much of money to US Government but Government itself has printed this much amount of money.

Now over the past few years, China is a major Consumer of US Treasury Bonds. So if China stops buying USA Bonds or if it starts selling its treasury bonds, the value of US Dollar will be zero and the US Bond market will be crashed because there is not this much demand to absorb this much treasury securities in this world.

And that’s why US Treasury Secretary Timothy Geithner assured China recently that “its Dollar Assets are safe.” This statement came because several Chinese economists described US Treasury Bonds as very risky.

The opinion poll of Chinese economists was conducted by Global Times. And Several Chinese economists opine that, US Treasury Bonds are not the safe heaven but they are the riskiest Investment on this earth….!!!!

Can you believe this? Whole the world believes that, US Treasury Bonds are the safe heaven but Economists of China and many part of this world believe that they are the riskiest one.

The risk increased recently because US government has truly printed money out of the thin air only. And thus Supply of these Treasury securities is much more than its actual demand.