Bonds, as we saw in Chapter 2, are no more than promises by governments to pay interest and ultimately repay principal over a specified period of time. Either through default or through currency depreciation, many governments have failed to honour those promises.
Bonds represent government commitments to pay interest and repay the principal amount borrowed over a designated time frame. These financial instruments are based on trust, relying on the issuing government's ability and willingness to fulfill its obligations. However, history has shown that some governments have not been able to maintain this trust.
Instances of default and currency depreciation illustrate the vulnerability of bonds as a financial investment. When a government fails to meet its debt obligations, it can lead to significant losses for bondholders, highlighting the risks associated with governmental promises in financial markets.
