roydo
in memoriam - 1965-2024
Remember a few years ago when Iceland, (the country), effectively went bust? West Ham fans do! Well, this week, £1 billion was repaid by Iceland to several UK councils who had wisely lodged our cash with their banks. Thanks guys.
Bearing in mind that Greece, a pimple of an economy globally, is pretty much wrecking the Eurozone, imagine if a country the size of say, Italy, went pop? Carnage, absolute carnage. Think 1929 and all that came from that. (For younger viewers, google WW2).
Now, ALL countries borrow money, every month. They issue IOUs to international markets to the tune on BILLIONs, each time. (UK issued something like £40b last month). So when someone, usually a bank or another country, buys that IOU, they take out an insurance policy in case the issuer, goes bust and cant repay their loan. That is called a CDS.
So, a CDS is an insurance policy, the premium of which reflects the risk of it actually being used, like car insurance. I am 46. I am prepared to bet a lot of money that my car insurance is way cheaper than that for a 18 year old. I am lower risk, so lower premium.
So, back to good old Italy; the cost, today, of insuring yourself against Italy not honoring the debts you bought, IE, going BUST, is 60% more expensive than our friends in Iceland, that beacon of economic prudence.
And Italy is one of the largest 20 economies in the world. My friends, this might be dull, but, strewth, we could be in for a world of pain.
Bearing in mind that Greece, a pimple of an economy globally, is pretty much wrecking the Eurozone, imagine if a country the size of say, Italy, went pop? Carnage, absolute carnage. Think 1929 and all that came from that. (For younger viewers, google WW2).
Now, ALL countries borrow money, every month. They issue IOUs to international markets to the tune on BILLIONs, each time. (UK issued something like £40b last month). So when someone, usually a bank or another country, buys that IOU, they take out an insurance policy in case the issuer, goes bust and cant repay their loan. That is called a CDS.
So, a CDS is an insurance policy, the premium of which reflects the risk of it actually being used, like car insurance. I am 46. I am prepared to bet a lot of money that my car insurance is way cheaper than that for a 18 year old. I am lower risk, so lower premium.
So, back to good old Italy; the cost, today, of insuring yourself against Italy not honoring the debts you bought, IE, going BUST, is 60% more expensive than our friends in Iceland, that beacon of economic prudence.
And Italy is one of the largest 20 economies in the world. My friends, this might be dull, but, strewth, we could be in for a world of pain.
