‘Take back, your insurance, cause baby nothin’, is guaranteed.’
Credit Default Swaps (CDSs) appear to me to be insurance policies that banks issued to each other. The only problem is that, while insurance companies are regulated and have to have a certain level of reserves, CDSs are issued by banks in an unregulated environment. And it seems there is nothing to back them up.
Read this link if you want to become uneasy.
$681 trillion is a lot of money.