Bank Nationalization No Trigger For Credit Default Swaps, But Will Devalue The US Dollar

Caught this story today on the wire.  - Spinmeisters are trying to get expectations out there that if and when the USA decides to “Nationalize” some of the banks - I feel this is inevitable.  That action will not trigger CDS’s.  In my opinion this is the equivalent of just de-valuing the currency. The government is suggesting that they’re taking ownership via equity and that the businesses are still solvent. - Great for the bondholders.  Total fiction.  The only reason that they are taking an equity stake is because they really are “insolvent”.  

I guess it means that everyone will be paid, but it will be in US Dollars - which incidentally - may be worth less than a couple of years ago - but in light of the rest of the World’s predicament - they might still be worth more than other currencies.  This is going to be a waiting game.  Problems will continue to dribble out.  When the tide turns though - It will be violent to the upside. Keep some powder dry.

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