Greek CDSs may not pay out…

If you haven’t followed the housing market, you may not be aware of what a Credit Default Swap entails. Basically, it’s insurance against default. Of course, there is a twist. You need not own the asset on which you’ve taken out the insurance. This is part of the process that broke the US housing market.

The practice should be abolished. No other insurance policy allows you to insure something you don’t own.

All that said, the notion that Greece – via this most recent bailout – may be able to sidestep paying the insurance on their default is absurd. It’s word games. The notion that a state bailout, in Europe or America, avoids a default is a false premise. Greece, like the banking industry here, defaulted. That is why they need and needed a bailout.

All of this is just further evidence the rule of law is broken.

 

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