>So if we think that interest rates will skyrocket due to the collapse
>of the dollar and the impending Social Security and Medicare crisis
>then that would seem to favor ... stocks? In this case wouldn't
>i-bonds be a better bet?
Everything would be guessing with this loaded question...
But no I-Bonds will not be a better bet. I-bonds are protected against
inflation.
And they don't take advantage of inflation.
In the case of a major dollar crisis caused by Social Security and Medicare
shortfalls, US Bonds will be devalued. This is because US Government, who
has never defaulted on a loan, will be seen as a credit risk. Japan and
China will begin to sell of US Bonds at a torrid pace. Thus devaluing
bonds even more.
Do you know what happens when you don't pay your government bonds? Look at
Argentina. They are essentially cut off from the public capital markets of
the world. They took the money, issued bonds, and they won't pay back
their bonds. The president also made some snide remarks that Argentina
didn't need anymore money and that it would not pay back those debts. Last
I heard, they need a cash infusion to control a nightmarish inflation
situation. Of course no one is willing to pump cash into Argentina. I also
heard that the IMF is unwilling to bail out Argentina unless previous bond
obligations are paid in full with interest earned.
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