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Speculative swaps grew to dwarf real insurance swaps

Volume of speculative swap contracts grew to dwarf those for actual insurance—$5 trillion bonds issued in world but $60 trillion bet on those bonds via Credit Default Swaps: ie for every bond, 10 people promising to pay full amount if bond goes bad.

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The Global Financial Crisis
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Pathology in the Credit Default Swaps market
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Speculative swaps grew to dwarf real insurance swaps
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Global GDP in 2007 estimated to be $55-65 trillion
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CDS market complex, unregulated and secretive
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Complex financial instruments that few understood
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Credit default swaps became divorced from underlying value
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Hedging/Netting contracts created web of vulnerability
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Monoline insurers struggling to meet guarantees
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Reckless securitisation on top of reckless lending
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Resources of regulators limited in comparsion to market players
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Vast scale of rewards encouraged complicity with system
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