Wall Street bets on Russia and Venezuela defaults

The Venezuelan economy had already been struggling with political instability and sky high inflation. And the spectre of default looms larger for the nation's socialist government, which is deep in debt and has been burning through its foreign currency reserves. For every dollar that the price of oil declines, the Venezuelan government loses $800 million in export receipts, according to a recent report from the Institute of International Finance. The government has been selling assets and borrowing from China, but the continued decline in oil prices could force a "massive devaluation" of the Venezuelan currency, the IIF warned. "Worsening conditions are increasing the risks of default, social unrest and political instability," in Venezuela, according to the IIF. It's no surprise that the insurance contracts, or the credit default swaps as they known on Wall Street, cost five times more than they did in June. To insure $10 million of Venezuela's five-year bonds, traders today have to pay as much as $5 million. More…