Lawrence York

Credit Default Swaps, Part One: Origins and Implementations

Look the fact is that at its peak the CDS market was in excess of $62 trillion and today it is at $55 trillion. The magnatude of these credit default contracts is currently a double-digit multiple of the net worth of the world. When you consider the enormity of this leverage and that by definition one side has a loss, you get too big to fail, you get amortized losses, you get governments doing creative Enronesque accounting, and you have the world holding its breath. It will take a couple years to deleverage to a safe level. Meantime, its more of the same. Printing money and rewarding too big to fail because solvency trumps fairness. But yes we need transparency and the soon a CDS's can trade the better.