Credit Default Swaps

About: CDS: The Sabotaging Asset -- Seeking Alpha

This is my item for gathering information about credit default swaps and answering some questions:
  1. How much of the current banking crisis can be traced to CDSs?
  2. Should credit default swaps be banned?
  3. To what extent is our bailout of AIG just paying off CDSs?
  4. ...
Solid non-partisan information about CDSs is greatly appreciated.

Tags

  1. cds
  2. credit default swaps
  3. banks
  4. aig

Comments

Seth says
The Wikipedia article on CDS looks excellent but will require some detailed study.
Seth says
source:The Big Takeover : The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution
... 8 pages of fun about AIG and CDSs ... a must read for anyone who wants to understand the current banking turmoil.
Seth says
M 2011-11-07 07:48:54 11603
M 2011-11-07 07:38:08 11603
M 2011-11-07 07:36:51 11603
M 2011-11-07 07:24:06 11603
Another item in Wikipedia on Credit derivatives: http://en.wikipedia.org/wiki/Credit_derivative
What is fascinating in the dashboard for the National debt is the item called ...

Which goes up a $million every 10 seconds or so. Is that all the value of all the money bet against debt?  I am trying to wrap myself around exactly what it represents since it could go to a quadrillion in our lifetimes - the biggest chunk size yet.
BTW, Seth you had a nice representation of a $Trillion$ somewhere which had trucks & boxcars can you point me to it?
~ approx 713 days according to: http://bit.ly/rEFAhU the number will be quadrillion.


Actually that is how fast it was run up.  To get to a quadrillion only takes 444 days.

I think Credit Default Swaps are tangible proof of the rot that is our current financial industry.   These have become the currency of greed ... money betting on money ... not investment in industry and jobs.  In fact i believe a case has been made that they actually work against growth by allowing people to profit on the decay of some institution, industry, or even a country.   It's time that we woke up and stopped carrying the water for these greedy bastards.

I believe the visualization you are referring to is here.
Mark de LA says
Thanks for the visualization link for $T dollars.  Your screed doesn't help discovering what that number actually represents.  What CDS & other credit derivatives do is make more credit available.  Now whether that is good or bad or whether the relationship between creditor & debtor is wholesome is yet another question. I am really curious about that 2/3 of a quadrillion number represents.  The pop-up explanation is not very enlightening.

Seth says
source: M above
What CDS & other credit derivatives do is make more credit available.
I guess that would be the traditional thinking.  I doubt that it is true.  What CDSs do is they hedge the risk of investing.  My instinct tells me that they actually take money out the pool of money that would otherwise be invested in actual enterprise.  Please make you point mathematically, if you can.
Mark de LA says
seth 2011-11-07 10:43:34 11603
source: M above
What CDS & other credit derivatives do is make more credit available.
I guess that would be the traditional thinking.  I doubt that it is true.  What CDSs do is they hedge the risk of investing.  My instinct tells me that they actually take money out the pool of money that would otherwise be invested in actual enterprise.  Please make you point mathematically, if you can.
What created the real estate bubble was that banks & mortgage brokers were able to offer more loans to people with higher risk than traditional.  That was more credit being available. The down side was that it was ultimately a complicated ponzi scheme. What takes money out of actual enterprise is having money stuck in real estate in the first place (a la RS); money being sunk into the ground - so to speak. No math needed.

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