These have the potential to unwind the entire financial system as we know it…
Imagine if you bought an insurance policy from Company A, because they were solid and well capitalized, HOWEVER Company A then sold it to a weaker company, who then sold it to others.
Today, you cannot even find out who you are actually insured by.
CDS give them the right to do that.
In another twist, YOU as the insured can sell the policy also, if you can find a buyer.
This is so complex, people won’t grasp the potential consequences.
Regarding subprime loans, most people still have no clue what one is.
We are closer to the financial equivalent of Red at the airports.
