Thursday, September 25, 2008

What's the risk-free asset now?

I think that part of the terror in financial markets right now is that the system has lost its bearings: if everything is priced off US govt debt as the "risk-free" rate, and that debt suddenly takes on risk (which seems reasonable when you think of $1 trillion rescue that needs to be financed on top of the endless war), what is the appropriate risk-free anchor in the world?

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