http://onlinejournal.com/artman/publish/article_3356.shtmlCredit Default Swaps the next crisis -- subprime is just a ‘Vorspeise’
While attention has been focussed on the relatively tiny US "subprime“ home mortgage default crisis as the center of the current financial and credit crisis impacting the Anglo-Saxon banking world, a far larger problem is now coming into focus. Sub-prime or high-risk Collateralized Mortgage Obligations, CMOs as they are called, are only the tip of a colossal iceberg of dodgy credits instruments which are beginning to go sour. The next crisis is already beginning in the $62 trillion market for Credit Default Swaps. You never heard of them? It’s time to take a look, then.
The next phase of the unravelling crisis in the US-centered “revolution in finance” is emerging in the market for arcane instruments known as Credit Default Swaps or CDS. Wall Street bankers always have to have a short name for these things.
-snip containing "Blythe Masters"-
Credit Default Swaps resemble an insurance policy, as they can be used by debt owners to hedge, or insure, against a default on a debt. However, because there is no requirement to actually hold any asset or suffer a loss, Credit Default Swaps can also be used for speculative purposes.
Warren Buffett once described derivatives bought speculatively as "financial weapons of mass destruction."
-snip-
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note: it is impacting the "Anglo Saxon" banking world.