When the analysts and experts talk about the current financial crisis, they often refer to credit default swaps. So, what exactly is a credit default swap? Marketplace Senior Editor Paddy Hirsch goes to the whiteboard for this explanation.
yeah it’s happening, except the paulson and bernanke demons aren’t letting them fail on their bets.this is the depression coming, the greatest depression
Your part of the problem, CDS is not insurance. One they are undercollateralized, not disclosed or regulated, and the guy who “bought” the “Car” doesn’t own the car. If this is insurance product then roulette with less panels should be insurance too…
You forgot the part when Henry’s helicopter crashes into the abyss because he took on more weight than any clear-thinking hiker would carry (or any group of hikers).
brilliant! i will share this with my friends, but please get more than 8000 people to watch these videos. 95% of the american people have no clue what is going on in the financial system, and the media does an abysmal job of explaining it to them. the only thing that the public takes away are hot words like “recession,” “depression,” and “crisis.” The bottom line is a fearful reluctance for consumers to spend, and a great discern for bailouts. please keep up the good work.
Bingo. Ultimately these complex financial instruments are without commonsensical provisions that are inherent in non-marketable contracts such as car insurance. The collateral call provision was substitute the non-value of the CDS in the first place – and it was enough to make the CDS a bankrupt instrument.
Really scary how the risk from CDS has spread exponentially throughout the financial system, like a mathematical progression that doubles with each step.
Thus, a secondary promise (CDS) made AGAINST an ALREADY levergaged ORIGINAL promise/contract (bank loan) is merely a secondary BET against a originating BET that was leveraged 10:1 before anyone issued a CDS.
The CDS has NO underlying assets of it’s own.
The CDS has NO underlying assets of it’s own.
The CDS has NO underlying assets of it’s own.
So, a CONTRACT (CDS) is created, and used as a negotiable instrument in it’s own right. Where is the REAL VALUE of ANY CDS? There is none. It’s a PROMISE that has NO UNDERLYING ASSET other than the impossible BELIEF that the FIAT SYSTEM is somehow “solvent”.
For example, if an insurance co. pays out too much in claims, they go BANKRUPT. How would a CONTRACT (CDS) prevent such an occurence?
It doesn’t.
25 Responses for "Untangling credit default swaps"
excellent video. this has become very clear to me. thank you
Thank you for explaining. I feel enlightened!
it’s the fact that the fed and treasury are colluding to not let the bets fail.
yeah it’s happening, except the paulson and bernanke demons aren’t letting them fail on their bets.this is the depression coming, the greatest depression
Your part of the problem, CDS is not insurance. One they are undercollateralized, not disclosed or regulated, and the guy who “bought” the “Car” doesn’t own the car. If this is insurance product then roulette with less panels should be insurance too…
Nice vid. Thanks for sharing.
very nice…you are explaining things very nicely..I watched your oder videos as well…They are excellent..
wow, really good explanation! thx
Man, that was a pretty clear explanation.
Now at least I can follow when those guys are talking at cnbc!
Thanks man!
I’ve had instances where I read news online and it take a week or two before it’s actually on the news.
You forgot the part when Henry’s helicopter crashes into the abyss because he took on more weight than any clear-thinking hiker would carry (or any group of hikers).
So it was the additional collateral that nearly dragged AIG down not the bad bets by AIG? I thought it was bad bets by AIG?
brilliant! i will share this with my friends, but please get more than 8000 people to watch these videos. 95% of the american people have no clue what is going on in the financial system, and the media does an abysmal job of explaining it to them. the only thing that the public takes away are hot words like “recession,” “depression,” and “crisis.” The bottom line is a fearful reluctance for consumers to spend, and a great discern for bailouts. please keep up the good work.
It’s all so clear now… Thanks man you should moonlight as a university professor at some point.
ultimate !!
nice video
Google UNIFIEDMARKETS
Bingo. Ultimately these complex financial instruments are without commonsensical provisions that are inherent in non-marketable contracts such as car insurance. The collateral call provision was substitute the non-value of the CDS in the first place – and it was enough to make the CDS a bankrupt instrument.
Pyramid Scheme!
,a fancy one, but a pyramid scheme all the same.
and we all know what happens to those.
Too bad this a $62 Trillion one.
thank you.
Really scary how the risk from CDS has spread exponentially throughout the financial system, like a mathematical progression that doubles with each step.
i m now addicted to your videos… great job
Thus, a secondary promise (CDS) made AGAINST an ALREADY levergaged ORIGINAL promise/contract (bank loan) is merely a secondary BET against a originating BET that was leveraged 10:1 before anyone issued a CDS.
The CDS has NO underlying assets of it’s own.
The CDS has NO underlying assets of it’s own.
The CDS has NO underlying assets of it’s own.
So, a CONTRACT (CDS) is created, and used as a negotiable instrument in it’s own right. Where is the REAL VALUE of ANY CDS? There is none. It’s a PROMISE that has NO UNDERLYING ASSET other than the impossible BELIEF that the FIAT SYSTEM is somehow “solvent”.
For example, if an insurance co. pays out too much in claims, they go BANKRUPT. How would a CONTRACT (CDS) prevent such an occurence?
It doesn’t.
It’s not greed, it’s options trading.
It’s trying to make money by guessing right on the future.
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