Monday, March 30, 2009

Who'd you rather invest in, the USA or McDonald's?

Andrew Biggs writes...
Who do you think is more reliable —- the full faith and credit of the United States backing up Treasury bonds, or the McDonald’s Corporation, backed only by “billions and billions served”?

By some market measures it is the latter, and for good reason. The price of credit defaults swaps guaranteeing payment on 10-year Treasury bonds has risen by 1000 percent since December 2007, with an implied 12 percent probability of default on government debt over the next decade. In the view of the markets, this makes U.S. government bonds a more risky proposition than debt issued by McDonald’s.

Why? ... [To find out you'll have to read the whole thing.]
Big Mac, please!