Credit Default Swaps on Treasuries Becoming Hot Commodity

by Sal on February 23, 2010

in Economy,Politics

Credit Default Swaps on U.S. Treasuries are rising in price and becoming a hot commodity.  Credit default swaps are essentially insurance against default.  They are typically purchased against other countries’ debt, not the debt of the United States.  Investors are getting nervous about the unsustainable $14 trillion debt and $1.9 trillion annual deficits, and are trying to hedge against the government debt bubble bursting.  Unfortunately, as Professor Bainbridge points out, what exactly will people be paid in if the U.S. Government defaults, since the dollar is the basis of the world economy?

H/T: Instapundit

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