The Financial Product That Blew Up the Global Economy Is Back

April 17, 2026


The floor of the New York Stock Exchange on September 15, 2008, in New York City

For anyone alive and aware in 2008, this weekend’s economic news probably sent them to the drug store to buy some Pepto Bismol. First, the Federal Reserve demanded that the nation’s biggest banks detail their exposure to the opaque, multitrillion-dollar private credit market. Then, almost simultaneously, word broke that some of those same banks are imminently launching a credit default swap index with S&P Global, targeting that same market.

For the past two months, we’ve watched America’s macroeconomic program quickly erode. President Donald Trump’s illegal war in Iran, which closed the Strait of Hormuz and marked the end of the Carter Doctrine era, cut off the supply of cheap oil from the Persian Gulf, raising inflation at a time when many have yet to see their pre-Covid purchasing power restored.

Another consequence of this shortage is that the U.S. Treasury is now desperately trying to finance a $1.9 trillion deficit without a large pool of captive foreign buyers, having failed to prepare for the crisis in which the United States now finds itself. China is dumping U.S. Treasuries at a rate not seen since the Global Financial Crisis, while stalwart buyers like Japan are seeing their bond yield rates creep up to their highest levels in 27 years.

All of that is structurally unhealthy for the U.S. macroeconomy, representing the rapid acceleration of a dynamic that has been playing out more slowly for the past six years. But the events of this weekend mark a shift that might be felt on a one-to-two-year horizon in the form of a liquidity crisis.

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https://newrepublic.com/article/209166/credit-default-swaps-financial-crisis