Since the economic markets started imploding in a major way earlier this year we’ve hear a lot about about “credit default swaps” (CDS). I’ve seen a few attempts to explain what these particular financial tools are but still didn’t feel like I had a good grasp on what they were.
Last night 60 Minutes had a segment on CDS (The Bet That Blew Up Wall Street) which I think does a pretty good job of spelling out what these beasts are. The audio is pretty poor, but it’s worth the 12 minutes and 26 seconds to watch:
After seeing this it seems pretty clear that the limitations the government removed eight years ago was not really a good idea. Not one Senator voted against it. Anyone know if they’ve learned their lesson and moved to make this illegal again?
3 replies on “What Are Credit Default Swaps?”
Ron Paul 2012. 😛
Anyway, instead, why not ditch flat currency and head back to sound currency (currency that’s backed by and exchangeable for gold or silver). Almost every single politician doesn’t understand how the markets and the economy works. Why are we still trusting them? (it could be because no one knows either…) The whole system is based on credit, and credit is… what?
Ah, oh well. I’m moving to Australia or Japan (which one depends on whether or not the world holds economically).
Just watching this makes me shiver as an american indeed it was one of the reasons i moved to japan as there most decisions are much more controlled and corruptness creeps less for better or worse one might argue.
credit is just virtual numbers and most politicians play with millions and billions as if our country is a monopoly game – one bet that shaked the country? … shame on them
It is pretty amazing to see these gigantic numbers.