>>18607173 (pb)

Anon asked about CDSs.

Not a financefag but as I understand it a credit default swap (CDS) is a type of derivative, basically an insurance policy. If the named party, e.g. Credit Suisse, fails to pay its debt the policy pays it. They are often used as an indicator of the markets view of the stability of financial institutions. If the CDS price goes up for an institution is is taken as a sign that the institution may be in trouble. Also they can cause trouble because if the issuer of the CDS is having trouble they may not be able to pay either.

Think of of it this way. Goldman Sachs think Lehmen Bros. may not be able to pay up so they go to AIG and get an insurance policy. If LB pays on time GS is only out the cost of the policy. If LB defaults AIG pays GS and GS is happy. Now what happens if LB goes tits up and AIG can't pay either? Now GS has a problem.

Current estimates of the derivative market (all derivatives not just CDSs) puts the value at somewhere in the neighborhood of 100+ Quadrillion (I have heard estimates as high as 250Q), not Billion or Trillion but Quadrillion. When that starts to blow up all bets are off.

Now do you understand why some of us pay attention to the financial markets?