All of Robert_Scarth's Comments + Replies

The risks in government bonds aren't only those of default. Inflation (or exchange rates if you hold foreign bonds) can reduce the real value of bonds.

tc said "If you're an optimist about the economic effects of AI/nanotech etc, then it seems that should make the chance of defaults less likely, not more."

This is correct, but what are you holding the bonds for? Suppose during the next 30 years we experience a technological singularity. Your 30 year bonds will pay out as you expect, but the money will buy you relatively much less stuff; you might e... (read more)

Hanson's simple models say that even under conservative assumptions, machine intelligence could increase annual world GDP growth rates to 25% from 3 or 4%. In that sort of steady state model, presumably the future growth would be priced into bonds or else investors would flee them for equities. On the other hand, if the market is insufficiently efficient/omniscient to foresee such an increase in growth rates, then there'd be a period where investors locked into low fixed-rate bonds will be screwed and missing out on the huge gains being reaped by equity investors. I think markets are mostly efficient and I haven't heard of even long-term bonds being priced very highly, so I would guess that either no machine intelligence is in the offing or the markets are not being efficient about this. Since I have strong reasons to believe that the former is false, I choose the latter - the markets are inefficiently prizing the current low fixed-income offerings. Hence, buying equities would be a better long-term strategy.

This might also explain why some women often think that "all men are bastards" - there are a few cads out there in continual circulation and with no intention to settle down, whereas men with honourable intentions have much fewer relationships, and settle down more quickly.