IS there such a thing as a risk-free asset? According to conventional wisdom short-term government bonds are generally considered "risk-free" to investors. The problem with this principle is that they are hardly riskless.
THE general idea is that nations rarely default. This is because governments have the power of coercion, meaning they can send police to your door to collect taxes if necessary. Since they have this power they rarely default on their debt. And since countries rarely default, so the reasoning goes, there is very little risk in investing in them.
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