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Old 02-25-2010, 06:26 PM   #26
Chubrehege

Join Date
Oct 2005
Posts
485
Senior Member
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Doom:

Do you think it has more to do with the idea of CDS contracts on government bonds is just silly in and of itself? When you're betting that a monetary power (or a department of one) is going to default on a debt--and they don't lose their monetary power in the process--who's going to pay you the face value of your contract if the collapse you're banking on (if you're the CDS buyer) leads to widespread panic and impacts the currency of record on the contract?


Or....

Soverign CDS's is just a new way to punish governments for their bad behavior for not encouraging capital to allocate itself freely--that's the real reason why nobody wants to lend Greece any money.
No market moves in a straight line. It is not so much that cash is more intrinsically valuable, it simply falls in value slower than other asset classes so that cash can buy more assets. A deflationary crash that usually occurs after the popping of a fiat credit bubble is typically followed by a currency crisis that re-ignites inflation in a hurry. A cyclical bull market for cash in the midst of a perpetual secular bear market is what characterizes all fiat currencies. Like I said..everybody is in a race to devalue and speculators are posting bets (deflation) and counterbets (inflation) to profit on both sides of the trade.

Sovereign CDS's do act as a function to punish governments for their bad behavior but those that wind up paying the brunt of the costs are the citizens. In the meantime, sovereignty is lost to a parasitic class of global financial con men....
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