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Anorak | European Parliament Goes Bonkers Trying To Rid EU Of Speculators Betting On Greece Going Bankrupt

European Parliament Goes Bonkers Trying To Rid EU Of Speculators Betting On Greece Going Bankrupt

by | 6th, July 2011

IT’S bad enough that we’re being ruled by foreigners but why do they also have to be either ignorant or bonkers ?

The European Parliament is attempting to rid the EU of speculators betting on Greece going bankrupt, voting for a ban on the practice of naked short-selling of credit default swaps.

You what? Is it just because it’s all about money in offices that our lawmakers are so horribly ignorant?

A credit default swap is insurance. Just like house insurance: you own a house, it might burn down, so you pay an insurance company money and on the off chance that your house does burn down they will then give you lots of cash.

You own a bond, the b’stard who borrowed the money from you might go bust. So, you pay a premium to an insurer and if the b’stard does go bust, you lose all the money you lent, then the insurer sends you a nice fat cheque to replace it. This is called a CDS.

“Naked” selling is when you sell something you don’t own. Obviously, in the above the insurance company doesn’t own the same bond you do (just like your house insurance company doesn’t own a house). He’s selling you insurance on your bond, nothing else

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Posted: 6th, July 2011 | In: Money Comment | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink