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Originally a CDS (credit default swap) was a protection against the default of an underlying bond, usually a mortgage. It was a fine idea.
But now enter the speculators who developed a scheme to trade these CDS's independent of the underlying mortgage. This has developed into a $30,000 billion dollar trading market. It is this market that is destroying world economies like they are twigs snapped in the wind.
Enter now a voice of reason. Democrats led by Collin Peterson, House Agriculture Committee chairman are drafting a bill that would limit the use of a CDS to match exactly an underlying position in the actual bonds. Under his bill, the ban would extend to over-the-counter derivatives, not just credit derivatives which are cleared by clearing houses.
Well, this draft has driven the supporters of unregulated CDS's crazy. What a wonderful way to go -- right to the asylum where they belong for what they did to the world economies. They claim it would just about shut down the derivatives market. That's fine. Ending the wild speculation and greed of the past decade is the right thing to do.
What are your feelings on this matter?
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Reader Comments (Page 1 of 1)
2-04-2009 @ 12:06AM
Iridium said...
It needs to happen and is a good idea. We need to return to a market where something is traded at its value, rather than 400 times what it is actually worth.
The speculators will be driven mad but they will find some other market to steal from the average person. They always have.
The financial market is rigged and has been from the beginning. It is nothing but a shell game con where debt is constantly transferred and inflation works to cover the debt. Someone always has to go further in debt to give someone else profit.