Black Holes and Time Bombs: Derivatives and Credit Default Swaps

The Dow and the S&P 500 are both up about 8% today, so if you really need a sigh of relief, we'll let you take one now.

But don't enjoy it too much, because there are still serious holes in the global economy, and nobody knows how deep they are. As I mentioned this morning, the Independent had a story yesterday about the derivitive market. Worth about ten times the value of the entire world's output, it's called a "time-bomb," a "black hole" and a "weapon of mass destruction." The scariest part about them is that so few people, if any, really understand their full complexity.

Fortune focuses on the most volitile piece of the derivatives market: Credit default swaps. A couple of really excellent charts lay plain just how quickly the ubiquity of these instruments has grown, and the dramatic volume they have reached over just the past decade. Both articles are well-worth reading.