The CDS market and hedge fund speculation have caused the chain reaction closure of banks worldwide.
THis crisis is American made. A single 55 minute of the SEC decided to not regualte Credit Default Swaps or require them to have any cash reserive to back up any of the bets that only millionaires were allowed to bet. Minimum bet $5 million.
What is a credit default swap? At first it was like insurance, Just like you can insure your house but in this market other people start to get insurance on your house too. Every policy is secret and between two people AND no one is required to have the money to pay in case the house does burn down. CDS don;t insure houses of course they insure things like a billion dollar bond at a rate of about 2% which would be $20 million. This kind of betting creates a chain in which each link is secret, unsecured, unregulated and unstable. When one link goes...