Buying Government Bonds Is Immoral

If you loan money to a person so that they can to do something bad, you are implicated in the evil deed. Likewise, when you voluntarily loan money to the government you become responsible for its actions.

Let’s be real for a second. We all know that governments do some very disagreeable things. Patting down old people and little kids at the airport. Torturing suspects in secret military prisons. Blowing up stuff and killing innocent people. Spying on the citizenry. Wasting monumental amounts of hard earned resources. Giving bureaucrats the authority to arbitrarily intervene in the economy. The list goes on and on.

When you buy a government bond, you are furnishing the resources for these acts. You are on the hook.

Perhaps governments can do some good on a local level. Its good to have police and firemen. Unfortunately, government makes these services much more expensive than they need to be.

But on a national level, its almost all bad. The people of the country never stop complaining about whats going on in Washington D.C. We either hear that the right is composed of a bunch of evil fascists or that the left is made up of bunch of commie socialists.

Either way, evil acts are being perpetuated and they need to be financed. The politicians know that they can’t tax us for all the money. The schemes are too stupid for the taxpayers to pay the whole bill voluntarily. So they look for other sources of money.

Over the couple of decades, but especially in the last 5 years, U.S. government debt has earned safe haven status. Its a place where you can park your money, earn a bit of interest, and wait until something better comes along. You know that you’ll get your money back, with interest, because the government has the power to tax the citizenry.

But, the safety of this investment comes with a hefty moral price tag. In order to receive the interest on your risk free debt, somebody must be taxed. The tax payer has not agreed to pay you interest on your debt. You’ve made an agreement with the U.S. treasury. However, the U.S. treasury has no money of its own. The treasury will have to take money from the citizens to pay you back. If the citizens refuse to pay you the interest that you’ve been promised, the citizens will be penalized and eventually put in jail.

This transaction is clearly unjust.

But beyond just being immoral, government debt is clearly a ridiculous investment. The nature of the investment is truly idiotic. The value of government debt must always collapse eventually.

Here’s how it works. You give your money to the government, you get a bond in return. The bond says that you’ll get your money back in 10 years. In the meanwhile, you’ll get paid interest.

The government then spends your money something. The key question is, what do they spend it on? Don’t forget, they have to pay you back someday. You’d hope that the money will be spent on something that produces cash flow. That way, they can pay you interest and eventually give you back your money.

Unfortunately for you, the money almost always gets spent on people sitting at desks filling out paperwork, warplanes, subsidies to big business, welfare for people who are perfectly capable of working, and other such cash flow negative  projects.

How, then, can the government pay your interest and return your principal? We already know the answer, by taxation. But who are they going to tax? You! You give them the money and they tax you to pay you back.

If you think that’s a good deal, allow me to propose an investment opportunity. Loan me some money. Then, every year when interest is due on the bond, give me more money to pay you the interest. Then, when its time to pay back the loan in full, give me more money so that I can pay you back. I’d pay you back myself but I’ve spent all of your money on nonsense. Any takers?

But it gets even crazier. Most investors roll over their government debt. This simply means that instead of paying back the money when its due, the government gives you another bond. This way, the government can keep putting off the date when they actually have to pay people back their money. If investors stop rolling over their debt, the government will have to declare bankruptcy. Its a simple as that.

Hey! I’ve got another great investment opportunity for you. A bunch of people are loaning me money. You should loan me some too. But fair warning, if everybody asks for their money back, I’ll go belly up. You in?

So, we’ve seen that government bonds go towards financing morally reprehensible projects. The method of repaying government bonds requires coercion in the form of involuntary taxation. Finally, we’ve learned that the nature of government debt makes it a truly asinine investment.

Now what?

Now, I’m going to ask you to take action. Sell your government bonds today. Call your financial adviser and ask if you have any government bonds in your portfolio. Do own any mutual funds that invest primarily in government debt? Get rid of those too.

Take your money and invest in anything else. But, what else is there?

In truth, their are an unlimited amount of investment opportunities out there. Most of them will actually make the world a better place. The money will go towards developing new products and services that will make people happy.

The companies that you invest in will actually sell products to real, live, customers. The businesses will generate cash flow and you can be paid back, with interest, without having to put more money in.

Invest in a side business. Invest in a local company. Invest in stocks and corporate bonds. Buy a rental property. Buy an old car and fix it up and sell it to a antique car collector.

Just don’t buy government bonds.


2 Responses to Buying Government Bonds Is Immoral

  1. Never thought about government bonds in that way but I completely agree! It’s not right that the government can tax us and then put it towards things that aren’t what we are supposed to be paying for. Seems like a scam.

    Let me also say that your posts have been so helpful for me in thinking about the logic behind the libertarian philosophy. I’ve only recently identified myself as a libertarian, and while in my gut I know things make sense, I am still trying to figure out exactly why they make sense and your blog has helped me a lot in that way.

    Currently, I am struggling with the concept of nullification, which my libertarian friends whole-heatedly agree with but I am still skeptical. What are your thoughts?

  2. Thank you for the kind words Kendall! I’m glad to be able to help. Just keep reading, writing, and thinking and the whole thing will make more and more sense.

    I read your blog too and enjoy it very much. You’re a much more ambitious writer than I was at age 19. Keep it up. Your writing is definitely worth the energy that you put into it.

    I wrote an article about my thoughts on nullification. You can see it here, It needs to be edited and cleaned up a bit. I just wrote it and posted it and moved on.

    The crux of the argument is that I don’t think that State governments are much better than the federal government. I also don’t think its realistic to expect any State government to get into a face off with the federal government. In short, I think that State nullification is a futile tactic.

    As far as I can tell, the only peaceful way to slow down the government is large scale tax revolts. That is hard to pull of, of course, but it goes to the source of the problem much more than state nullification. Cutting off the funding is the way to bring about change.

    Keep on keeping on Kendall. If I can be of further service, please don’t hesitate to ask.



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