But it strains language to breaking point to describe CDS transactions as anything but gambling. The traders in AIG’s financial products division were inheritors of the amusements of Edward Lloyd’s coffee shop rather than the values of Swiss farmers.
I am not sure that this is an accurate description. It seems to me that AIG was taking the risk from the Swiss farmers and receiving the income for total collapse that they did not believe could happen. However, when all the crops failed, AIG could not compensate the farmers and had to be bailed out by the government. There is speculative trading there, but it is not being done by AIG.