I've no idea at all what the above means but I am sure that "Synthetic EuroShorts" is an excellent name for a Roack Band!
Good 1
As for CDS, they are fancy named and hidden insurance coverage. With no financial reserve backing.
They are illegal contracts, but Paulson screwed the country, along with Greenspan and later Bernanke, via AIG crisis, that they are legal, and the USA was going to cover them.
Paulson and Bernanke actually had to come out and make a public statement that they were legal contracts. Bush was a blithering idiot to trust Paulson, and was crippled by his childish “no regulations” ideology. Obama, though, is hip to the game, and likes it.