By Ann Pettifor,  Open Democracy, 11th December, 2007

On 9 August 2007, globalisation’s rickety financial levees were broken by a storm-surge of debt, invisible to most punters, but scary enough to frighten bankers. This debt includes highly leveraged corporate debt traded on secondary markets, household mortgages, credit-card debts, car loans and other substantial outlays. But what scares financiers and other experts are the truly big debts racked up by financial institutions, including those that have insured against loan defaults.

One of the least understood, but potentially most lethal financial products they have engineered – away from the regulatory scrutiny of central bankers and finance ministries – is called a credit default swap (CDS). In reality, they are not “swaps”, but a form of insurance (for illumination, read the blog of one “Hellasious”, of Sudden Debt).

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