The Financial Times reports that the price of credit default swaps, insurance for corporate debt, has been going up again. Â The FT interprets this as meaning that the credit crisis is worsening. Â I interpret it as meaning that Wall Street, London’s City, and the other financial markets are finally learning what they are doing when they make credit default swaps. Â They are insuring that a company will pay its debts, and they are saying, “If that company doesn’t pay, we will.” Â For years they have been blithely issuing these swaps as if they were just cheap ways to make money with no consequences. Â The horrendous failure of AIG due to the issuance of these CDS’s shows that they do have consequences. Â Finally, after years of failing to understand the business model for CDS’s, Wall Street is learning. Â As a result, CDS’s are becoming more expensive as they should have been for the last decade, or however long they have been around. Â The markets may be bad, but for years the CDS’s were priced incorrectly by idiots who did not know what they were doing. Â The whole credit crisis was created not so much by the sub-prime mortgages, but by the ridiculously under priced CDS’s sold to cover them, which now have the issuing institutions on the hook for trillions of dollars. Â The banks don’t have enough capital to stand behind these promises; so, the Federal Government has had to step in to prop them up. Â