Pro
04
2011
Credit Default Swaps 2
Systemic risks of credit default swaps. Financial weapons of mass destruction.
Systemic risks of credit default swaps. Financial weapons of mass destruction.
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No different than the pyramid scheme we had with bottles of booze while in Engineering School. You only need 7 buddies to start and share the instant wealth at the ’4th Level’ of sucksalescomittment. Someone always gets screwed. You can’t create something out of nothing. Peoples greed ultimately caused this chaos…and some will jump into a noose and others will simply be content and not even care as they simply didn’t play the game in the first place.
Good video. But unfortunately more gov’t regulation on these credit default swaps will not solve the problems of insolvency, that’s like treating the symptom instead of the disease. This whole system is allowed to exist only b/c of the FED’s easy credit policies and artificial fixing of the interest rates. If the money supply could not be manipulated so easily but instead was backed by a commodity standard, this whole ponzi scheme would not be able to exist in the first place. RON PAUL 2012!!!!!
You forgot to add another bracket, „Government „, and extend an arrow from Moody’s giving % to political campaign’s so the government would advice
to trust in Moody’s judgement, as in to direct pension funds and all others
into taking their services. Because after all, there must be someone above Moody’s who vouches for them, and gives them credit rating.
perfect explanation
people need to go to jail for this collapse!
@klrscout Im not sure of the laws in the USA however it is my understanding that one must have an interest before one can insure. So I could not insure against the death of my neighbour for example since I don’t really have an interest in his/her life. But the stock market appears that it’s ok to insure something you don’t own. I believe this is what happened with Lehman Bros. Someone may be able to answer that better….<3
@thenumber13dotnet
I’m interested in the answer to the second question. How can you insure something you don’t own?
@vonnegut77 Wrong. Make it clear to them that they will not get bailed out, and the shareholders will be VERY careful.
@IvanAndreevich Except, since the insurance company is ‘too big to fail’, they are bailed out by the tax-payer if they overextend.
Bonuses for all!
3:55 yes there is a limit on how much you can insure. You don’t need a law, because the market imposes that limit. If they insure too much, they go bankrupt
@Kaysersoze5 You are missing, that the ionsurance company does not have the need to lend the money, if they insure a lending op for 2-3% they earn 2-3% for doing nothing than saying „I guarantee for this“, if they lend the money to the company they would need to put a lot of cash on the table in return of 10% interest, which they cant do frequently, as they have limited money to spend. but their word is unlimited, which means they can guarantee for 300 comapnies and get 300 x 3%.
So @ 4:10 approx. really the Insurer should have to put aside for the amount insured because if it’s not regulated as being required the Insurer could go belly up leaving the whole thing high and dry? Also how can a Hedge fund that has no interest in company B take insurance on the debt of that company ^_^? The WHOLE thing makes me say OMG lulz
@Kaysersoze5, the answer to your questions is over confidence because all company categorize too big to fail.
OMG, you have explained everything that I’ve been trying to do so in years. Thank you so much.
insurance stupid company.
@TheTomMan95 It knows it’s a bet. I-2 takes the deal on the assumption that B is good for the money. Hedge Funds are speculator’s. They try to predict where markets are going. I-2 as you saw in the video, held the position that B was good for the money. If B hadn’t defaulted then I-1 would have made pure profit.
does i2 know it is in a bet with h1 or does it believe h1 is actually giving b2 the money?
Holy Moly.
Thanks for this, Sal.
@Kaysersoze5 insurance companies are counting on favourable market conditions where they expect the company (which has borrowed money) to not default. so just by promising insurance they get money without havng to formally put any capital of their at risk.plus they don’t insure money of just one company.they insure it for many others.so imagine free money comng to their organizatn from many sources with them havng to do almost nothing.yes there is risk involved.bt they take it nd hence recession
had they*
@Kaysersoze5 In this system the insurance company does not need to back up their guarantee with actual collateral thus enabling them to insure infinite amount of loans. Had the taken 100% of the interest by supplying the actual loan they are limited by the amount of assets they actually have
Given your explanation, wouldn’t H1 actively conspire to undermine B2 in an attempt to put them out of business?
@thegoonist On the twelve minute mark of this video ( watch?v=Rz1b__MdtHY ), Bill Black talks about US regulator Brooksley Born trying to regulate Credit Default Swaps. Larry Summers, Robert Rubin and Phil Grahmm (Wall Street insiders) immediately said they’d block the regulation, and also pass a law that you can’t regulate it.
@thegoonist Yes, that’s because the government is not a democracy (rule/power by the people), it’s a plutocracy (rule/power by wealth). After we elect representatives, we have no control over what they do, but industry does. Bill Black (the chief regulator during the averted S&L crisis) explains this process better than I can – watch?v=Rz1b__MdtHY
@juujuuuujj that may be true. but you have not answered my question. the govt, according to the information you have provided me, is guilty of gross negligence by omission of act. this system may work during the bubble. but what abt during the recession? this system is not something we want in the long run. the govt is obligated to let people know that their money is at great risk of disappearing during the recession.