Do Credit Default Swaps On Treasuries Mean Anything?

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Unless you can collect the protection in Swiss Franc, we find it difficult to get our head around credit default swaps on U.S. Treasuries. Surely, if you find yourself actually needing the protection, the last thing you want is U.S. Dollars. And in addition, if you find yourself in a position to expect payment from your counterparty, how likely are you to get paid? And finally, why in the world would the U.S. choose to default, rather than just turn on the printing presses?
First, default, at least domestic default, is much more common than you might think. Reinhart and Rogoff's The Forgotten History of Domestic Debt is an interesting place to start if the topic compels you.
Second, what constitutes a default isn't at all clear when you see credit default swap prices thrown about. To the extent the OTC market is a substantial portion, it is difficult to know exactly what constitutes a default.
Third, use of the "no-arbitrage" model to price credit default swap spreads can be misleading, particularly in times of financial crisis. (Sound familiar?)
All this is a gentle way of bracing you for the rumor fact that spreads on credit default swaps on U.S. Treasuries have blown out to triple digits today.
Uh oh.
Now if only we could find a reliable counterparty to write us some CDS contracts denominated in gold.

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