Credit-default swaps got a bad reputation for a faulty political-scapegoating reason during the 2008 financial debacle. Yet, they are still being used, because they serve a useful, legitimate purpose.
The problem with credit-default swaps is that the market is little understood. It provides a form of insurance that bonds will pay off, particularly when the bonds are being issued by governments whose credits are very shaky
Without them, countries on the brink of bankruptcy such as Greece and Portugal, Spain and Italy, would have problems selling their bonds at any price. ( See the Earl J Weinreb NewsHole® comments.)
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