Liberty Forged

the State has no money of its own, so it has no power of its own. ` Nock

Posted by Jesse on January 15, 2008

If this had been a mere subprime crisis, it would now be over. But it is not, and nor will it be over soon. The reason is that several other pockets of the credit market are also vulnerable. Credit cards are one such segment, similar in size to the subprime market. Another is credit default swaps, relatively modern financial instruments that allow bondholders to insure against default. Those who such sell such protection receive a quarterly premium, based on a percentage of the amount insured.

The CDS market is worth about $45,000bn (£23,000bn). This is not an easy figure to imagine. It is more than three times the annual gross domestic product of the US. Economically, credit default swaps are insurance.

read the rest here:This is not merely a subprime crisis [Financial Times, Wolfgang Munchau]

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