Why in the world would you own bonds?
Some loose threads:<p>The main difference between bonds and cash is mostly based on the fact that cash is the means of settlement.<p>But in fact what we call cash can also have two main forms: federal reserves (debt of the feds) that can be dealt with only by banks and regular bank depositories (debt of the particular bank). And there is even a third layer of Euro Dollar which is debt of non-US banks who cannot hold federal reserves and who can only rely on deposits at &#x27;correspondent banks&#x27; in the US who can hold federal reserves.<p>The fed reserves is the most liquid form of money - but it cannot be held by individuals, only by US banks. Bank depositories are less liquid because there can be a bank run - in that respect US government bonds are in fact less risky even though they are not used as a settlement or accounting mechanism. They are less risky because the US government will always pay them back, because they are USD denominated and there is no gold parity any more. Non rhetorical question: are there any scenarios where the US defaults on their debts?<p>It is only 50 years that we can a complete fiat based money - before that the system was based on gold (and silver and other resources like shells) - so the current USD based system is really incomparable with the past reserve currencies. Somehow Ray Dalio in his essays with historical comparisons completely misses that - but of course it only makes his thesis stronger.<p>Non US bonds denominated in USD are completely different - because they can default. In gold based system all bonds used to be like that, because in the end no government could print gold.<p>Maybe 50 years is not enough to have any full cycle and there is no way to extrapolate.<p>The economists base their inflation and similar models mostly on the US economy and fiscal mechanisms - but because of globalisation the share of USD transactions outside of the US economy is probably growing. I would love to see stats on that.