Monthly Archives January 2009

Insuring Debt is Stupid

With talk of £300BN being used to insure banks bad debts it rang alarm bells because it’s one of the prime factors that has seen Western economies fall to their knees. Do you know what a ‘Credit Default Swap’ (CDS) is? It’s a bit like an insurance policy to protect against defaults on debts. But it’s not really insurance it’s just an agreement to pay a regular amount in return for a lump sum if a default occurs. Payment protection has been around for a long time as a consumer product which will protect a borrower if they lose their job or can’t
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