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Subject:  Re: The Political-Economy Crisis in Europe Date:  11/18/2011  11:00 AM
Author:  fullofcarp Number:  4616 of 5166

There's one thing about all this that confuses me. I heard a rumor a week or two ago that Geithner had played a role a few weeks ago in the final form of the Greek "agreement". Supposedly he'd gone to Europe and delivered the warning that if a real default were allowed it would trigger the effects of CDS's and supposedly some large US banks, hedge funds, and insurance companies have significant exposure to them. The argument supposedly went that if Greece were to sink, it could sink the US economy, and thereby sink the European economies, so the European leaders needed to be tough on Greece and not allow a technical default to occur.

Don't CDS contracts insure bondholders from significant losses, thereby transferring much of the risk from the bondholders to the CDS writers? Because if that's true, then I'm guessing that that rumor I'd heard isn't true because the European banks aren't nearly as dangerously exposed to certain risky bonds as we think ... unless it's the pressure from US CDS institutions that is keeping the pressure on the European leaders from behind the scenes.

... now removing my tin foil cap for a little while ... ;-)

as always, i am full of carp
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