My argument is that they are not now, and never were, primarily a hedging instrument. While they can be used for hedging, like options for instance, they are p

My argument is that they are not now, and never were, primarily a hedging instrument. While they can be used for hedging, like options for instance, they are primarily used for leverage. That is, it is much cheaper go long or short a particular name with CDS than it is just trading bonds. (Especially short which used to be nearly impossible.) It is argued that this actually allows for better price discovery more efficiency in the credit markets. But that has be balanced with the fact that the CDS's have become untethered from the actual bonds that they purport to insure, and the tail has begun to wag the dog (as evidenced in the original article.)