Insurance Cost Against US Default Hits Record

The cost of buying insurance against a default by the U.S. rose to a record on Wednesday, in a sign of growing unease that gridlock in Washington over raising the federal debt ceiling may result in the Treasury failing to pay interest to bondholders.

Perhaps the strongest indicator that a nation is heading for the same  fate as Greece is a spike in the yields offered on Credit Default Swaps the end result of which is the eventual slide into default.

Comments from Michael Ruppert:

 “The reason the yields go up on CDs is that in order to offer insurance against a sovereign default the CDS seller has to offer enough yield to make the insurance attractive. Another way to say that is that credit default swaps must make it more profitable to let a country go down than try and save it. This is what's happening for the U.S. right now”

The one thing about this story is that it offers no insight at all into who is buying credit default swaps, just as there have been no stories about who made money off Greece’s default.

."Make money on the way up. Make money on the way down." 

Note the ad accompanying the article

THE EURO IS DOWN? YOU CAN MAKE MONEY OUT OF IT.

Illustrates our point

Wednesday, 27 Jul 2011 | 10:14 PM ET

The cost of buying insurance against a default by the U.S. rose to a record on Wednesday, in a sign of growing unease that gridlock in Washington over raising the federal debt ceiling may result in the Treasury failing to pay interest to bondholders.

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