Protection

I noticed in the Economist's coverage of the latest European agreement over the sovereign debt crisis that the countries agreeing the terms would prefer the 50% write down of Greek debt by the private sector to be voluntary, as any actual default might trigger payments from Credit Default Swaps, and these are 'untested'. Just so we're all clear here, Credit Default Swaps are insurance against a company or country not paying back the money it has borrowed in the form of a bond. Let's just check that again: this is insurance against a country defaulting and the politicians don't want countries to default because it might mean the insurers would have to pay out on the policies. Am I the only person who struggles with this concept? Isn't this a bit like someone telling me I can't have a crash in my car in case my insurance company has to pay for it? Surely the the clue is in the word 'insurance', perhaps that is why that word is not included in 'Credit Default Swap'.
But seriously, do we need to go back to basics? Capitalism 101: a company will exchange goods and services with a customer in return for payment. Capitalism 101b: if those goods or services are shit the customer will stop paying for them. For many years now the insurance industry has been charging healthy sums of money to insure against the possibility of countries defaulting, indeed the rising price of this insurance was one of the causes of the sovereign debt crisis in the first place. However, now there is the threat that they might have to pay back some of the money that they have been accumulating rather than keep all of it as profit, they seem a little unsure of the whole process. Let's be clear, I'm not saying 'the evil insurers should pay their debt to society', I am simply saying maybe its time they honoured some of the contracts they've made with their customers.
So whilst we're all busy bashing banks, maybe we should be asking ourselves who is really profiting from this crisis and why our leaders are happy to let them quietly get on with it.