CDS is Crazy

Joe: We’re both broke.

Sue: Let’s each loan each other $100. You can spend your $100 since you know I owe you $100. I can spend mine since I know you owe me.

Joe: Cool. What should we call this so people take us seriously?

Sue: Something stuffy and official so it sounds legit.

Joe: How about “Credit Default Swap?” We’re swapping credit.

Sue: CDS for short.

Joe: Great. Now we’re not broke anymore, at least until other people find out what we’re doing.

Sue: That’ll never happen.

CDS is really happening around the world. Somehow we all owe each other billions of dollars. Don’t say you didn’t see the end of the game coming.

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