one that acknowledges that the issue is liabilities rather than assets, and that focuses on the fact that a lot of these liabilities are wholy unrelated to any economic or financial activity, and are contingent rather than actual - ie nobody loses anything if they are cancelled. If a 100:1 bet you made is cancelled, your actual loss is not 100, it is 1 - something that could be paid back to you.
I agree with you that by (say) making the CDS voidable - so that the premium may be refunded and the contingent liability may be extinguished if there is no insurable interest - is a cool idea.
This would limit the leverage, and hence further systemic damage, but it doesn't actually limit the existing - increasingly unsustainable - liabilities which at least some of the CDS legitimately insured.
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An out-of-town visitor was being shown the wonders of the New York financial district. When the party arrived at the Battery, one of the guides indicated some handsome ships riding at anchor. He said, "Look, those are the bankers' and brokers' yachts". The naive customer asked: "Where are the customers' yachts?"
"Look, those are the bankers' and brokers' yachts".
The naive customer asked:
"Where are the customers' yachts?"
The customers still don't have the yachts do they? The mechanisms you list only addresses the symptoms of the Anglo Disease which gave the bankers and brokers the yachts.
First, people have to become more creditworthy, and that can only be achieved through a fiscal mechanism. And redistributing taxes on income will not be enough, since it leaves wealth untaxed.
I advocate Systemic Fiscal Reform, by taxing Privilege not People. We may achieve this by shifting taxes away from earned income and onto the unearned gains and income and arising from privileges such as limited liability, and exclusive property rights over Commons.
Second, we must make the credit worthy of the people.
I advocate "Open" Credit - ie undated redeemable credits - issued directly Peer to Peer by producers of money's worth or value. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
"Who built seven-doored Thebes? In the books are the names of kings. Did the kings haul the rocks? And Babylon, many times destroyed- who built it up these many times? In which houses of golden-gleaming Lima did the construction workers live?
In the evening, when the Chinese wall was finished, where did the masons go? The great Rome is full of triumphal arches. Who erected them? Who did the caesars triumph over?
Did the many-sung Byzantium have only palaces for its inhabitants? Even in legendary Atlantis, the night the sea vanquished it, did the drowning cry for their slaves.
The young Alexander conquered India. He alone? Caesar defeated the gauls. Didn't he have at least a cook with him? Philip of Spain cried after his fleet had sunk. Did no one else cry?
Frederick the Second was victorious in the Seven Year war. Who won besides him? Every page a victory. Who cooked the victory feast? Every ten years a great man. Who paid his expenses?
So many reports. So many questions." "Schiller sprach zu Goethe, Steck in dem Arsch die Flöte! Goethe sagte zu Schiller, Mein Arsch ist kein Triller!"
Given that these products were and are largely to totally unregulated, why should we not expect that there are examples of multiple CDSs on a given default exposure, in some cases by the same institution? Given the lack of appetite for prosecuting very wealthy individuals, why should there not be cases that have deliberately been set up to fail and then multiply insured? As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
according to the Financial Ombudsman
The essential components of fraud are intent to deceive and desire to induce the firm to pay more than it otherwise would. Establishing these points can require an analysis of the claimant's motives.
Unless you wish to ad,it it's all just a big casino I think it fits. Any idiot can face a crisis - it's day to day living that wears you out.
CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the specified events occur. However, there are a number of differences between CDS and insurance, for example: the seller need not be a regulated entity; the seller is not required to maintain any reserves to pay off buyers in the United States CDS contracts are generally subject to mark to market accounting, introducing income statement and balance sheet volatility that would not be present in an insurance contract; Hedge Accounting may not be available under US GAAP unless the requirements of FAS 133 are met; if it were not possible to, it could increase income statement and balance sheet volatility if the CDS was purchased to hedge an exposure; The buyer of a CDS does not need to own the underlying security or other form of credit exposure; in fact the buyer does not even have to suffer a loss from the default event.[2][3][4] By contrast, to purchase insurance the insured is generally expected to have an insurable interest such as owning a debt.
CDS contracts have been compared with insurance, because the buyer pays a premium and, in return, receives a sum of money if one of the specified events occur. However, there are a number of differences between CDS and insurance, for example:
