there is a risk free alternative to stocks
The value of that money depends on how scarce it is.
The government constantly raises and lowers that scarcity at will.
Sometimes the government decides to double the supply in just a few years:
https://fred.stlouisfed.org/series/BOGMBASE
So it seems highly risky to me.
The inflation for two different assets traded in the same currency are equal, so there’s not much of a comparison to be made there.
When I lend 2022 dollars to the government, I give away a certain amount of buying power.
I don't know if I will get that buying power back when I get my 2032 dollars.
The government does not always have the capability to pay me back my buying power. It cannot create value at will. It can create money at will. But the more money it creates, the less value it has. So it cannot create value at will.
No asset is risk free. Bonds are a relatively less risky asset.
>The government constantly raises and lowers that scarcity at will.
Nope. Notes, Bills, Bonds are auctioned.
Just like doubling the money supply every couple of years seems to be the new normal since it started in 2008?
> How is holding a bond risk free? It is a promise to give you a certain amount of money at a certain time in the future.
I Bonds. They are guaranteed not to lose purchasing power and not to have a negative return. Unless the U.S. government defaults on its debt obligations. That is as close to risk free as one is going to get :-)
Imagine Tesla would hand out a certain type of share that after 10 years turns into 2 shares. Nobody would call that a risk free return. Because you don't know how much dollars you will get for those two shares.
The same with dollars. You don't know how much Tesla shares you will get for those dollars.