The Stranger | Slog | To Charles:
I wrote about this very madness back at the start of this crisis in October.
What's happened, since then, is the same parasitic sociopaths have started betting on the failure of the US Government:
The recent widening in United States Credit Default Swap levels has gotten a lot of attention once it cleared the magic 100bps level intra-day.
As with any CDS-related news, you will get heated commentary in the blogosphere with a large perception of folks simply calling for all CDS trading to be banned. The general consensus appears to be “don’t the buyers of CDS realize that in the event of default by US, these contracts are not likely to be honored anyway?” This is Krugman’s line. Taleb chimes in with “It would be like buying insurance on the Titanic from someone on the Titanic”.
Why would one do such a thing? If these traders are successful in generating a panic, the spreads should increase, netting them a neat paper profit—as they drive us all a bit more into the iceberg.