The financial instrument everyone loves to hate – Credit Default Swaps – are now flashing red when it comes to government debt. The worst offenders are the so-called “PIIGS” – Portugal, Italy, Ireland, Greece and Spain. But make no mistake, the big battleships like the US are in trouble, too. Note the uptick in the US CDS (the light blue line at the bottom – Greece is the dark blue line at the top) in the graph below.
Of course, recall that CDS were flashing red in advance of the credit crisis, too, yet were ignored by many.
And one persuasive blogger argues “the entire world is insolvent.”