Dear Friends,
I have mentioned that Credit Default Swap (CDS) is the MAIN WAVE of the Financial Tsunami, and what we experienced last week, i.e. the World Stock Market Crashes, are nothing compared to the CDS Crisis that is still to come.
So what exactly is a Credit Default Swap? Check out this video from Youtube.Com.
In my opinion, this is THE MAIN REASON why the banks are not lending to each other. A normal economic recession and housing correction with mortgage defaults would not cause such a massive crisis of confidence amongst the banks of the world.
Governments and Central Banks all over the world are trying to untangle this mess and solve the problem before it blows up.
Why is the CDS an even bigger crisis and the MAIN Wave of the Financial Tsunami? Because there is about US$60 trillion of it floating around the world. This dwarfs even the US Housing Mortgages total loans of only US$11 trillion.
What is this CDS financial product? Effectively, it is a type of an insurance policy, but it has been traded all over the world, with absolutely no regulation by any authority. Just imagine the hedge funds, banks, and all the rogue speculators running wild with this financial product for the last few years, quietly doing all the deals on the sidelines, without the authorities knowing about it (REALLY???), and you have a very, very scary scenario on your hands. Do invest 5 minutes to find out what it is.
Please note that at this stage of the banking crisis, there is still "hope" that the CDS Crisis will be averted. This would be like the Tsunami which was right on target to hit you, suddenly turning in a different direction. What a relief this would be. However, we cannot rely on good luck alone. It is wise to "Hope for the best, but be prepared for the worst."
Best wishes,
Ooi
© Copyright of Praesciens.blogspot.com, 2008
Here are two other videos entitled "Credit Default Swaps the Next Crisis" including an interview with Mr. Jeff Greenberg, possibly one of the Kings of CDS, who have made more than US$500 million trading the CDS market.
The 2nd part of the Credit Default Swaps - Next Crisis Video.
So what exactly is a Credit Default Swap? Check out this video from Youtube.Com.
In my opinion, this is THE MAIN REASON why the banks are not lending to each other. A normal economic recession and housing correction with mortgage defaults would not cause such a massive crisis of confidence amongst the banks of the world.
Governments and Central Banks all over the world are trying to untangle this mess and solve the problem before it blows up.
Why is the CDS an even bigger crisis and the MAIN Wave of the Financial Tsunami? Because there is about US$60 trillion of it floating around the world. This dwarfs even the US Housing Mortgages total loans of only US$11 trillion.
What is this CDS financial product? Effectively, it is a type of an insurance policy, but it has been traded all over the world, with absolutely no regulation by any authority. Just imagine the hedge funds, banks, and all the rogue speculators running wild with this financial product for the last few years, quietly doing all the deals on the sidelines, without the authorities knowing about it (REALLY???), and you have a very, very scary scenario on your hands. Do invest 5 minutes to find out what it is.
Please note that at this stage of the banking crisis, there is still "hope" that the CDS Crisis will be averted. This would be like the Tsunami which was right on target to hit you, suddenly turning in a different direction. What a relief this would be. However, we cannot rely on good luck alone. It is wise to "Hope for the best, but be prepared for the worst."
Best wishes,
Ooi
© Copyright of Praesciens.blogspot.com, 2008
Here are two other videos entitled "Credit Default Swaps the Next Crisis" including an interview with Mr. Jeff Greenberg, possibly one of the Kings of CDS, who have made more than US$500 million trading the CDS market.
The 2nd part of the Credit Default Swaps - Next Crisis Video.
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