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here's an article that leans toward your contention that the CDS's are not the megamonster that they have been pcitured to be...
An analogy I often use in explaining the effect of CDS's and other derivate derivatives is the simple lever. Just as a lever increases physical leverage, derivatives increase financial leverage, allowing a small amount of money to effective control a much larger one. They thus act as amplifiers of market conditions.
Derivatives certainly amplified our current crash to some degree -- possibly small, probably large -- but they in no way engendered the crisis, nor even precipitated it, no more than a lever can, by itself, move a large boulder.
The crisis is a textbook case in government market meddling, just as was the Great Depression. You artificially suppress interest rates long enough, and you coalesce a large number of small business cycles into one massive one.
I can't believe I'm gonna say this... but I agree with you 100%.
What did the economy in was the prolonged low interest rate. But how else can you get the country behind an unpopular war? You make the economy seem to be great.
A gem cannot be polished without friction, nor a man perfected without trials. ~Chinese Proverb
The early bird gets the worm, but the second mouse gets the cheese. ~Jon Hammond
