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Swaps are sold by institutional guys in limited partnerships. As to the exact size, nobody knows. You know - over the counter - unregulated? Faint idea. Wasn't until a few years ago that they even got organized into keeping track of who sold what to whom - under pressure.
"How big is the credit default market?"
Derivative market is about 500 trillion, swaps are a large portion of that (probably larger than our economy in monetary terms)
"Are we likely to see cascading defaults caused by closed loops (or more complex closed webs) where Company A insures the bonds of Company B who insures the bonds of Company C who insures the bonds of Company A?"
Yes, the bond insurers are next.
This is a huge deflationary event, the near money created in the derivatives market is quickly vaporizing. Deflation is impossible? Other than some trillions in housing wealth, some trillions in global stock wealth, and many more trillions in false credit all vaporizing, no, I'd say deflation is impossible. Right.
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