Think President Obama will win re-election come November? Don’t bet on it—well, at least literally. The Commodity Futures Trading Commission is reportedly expected to ban U.S. traders from betting on the 2012 election, the New York Times reports:
The Dodd-Frank Act... mandated that the agency ban event contracts tied to terrorism, war, gambling and other matters contrary to the “public interest” ... the agency on Monday is expected to say that election derivatives, while a novel idea, have the potential to improperly affect election results. One problem, the agency argues, would arise if a candidate’s supporters bought huge positions and drove public opinion in their favor.
The ruling could scuttle the plans of one Chicago-based derivatives exchange to offer futures contracts on the election results. It’s “unclear” whether the new law will also apply to Americans betting on the Ireland-based Intrade, the Times adds.
Once upon a time, the big worry was that the euro zone would implode and spark a global financial panic. But Jacob Funk Kirkegaard lists several reasons why that’s no longer likely to happen — at least not until after this year’s U.S. elections:
[T]he looming risk of a “European Lehman moment,” in which a large European bank would suddenly collapse and cause widespread systemic turmoil — and possibly have required a federal bailout of another US bank — has been dispelled for the foreseeable future. No large European bank is going to go bust... as long as it enjoys the benefits of the ECB’s long-term liquidity injections. This fact takes us well beyond November 2012. As a result, neither the Fed nor the Treasury needs to worry about an intervention that would be exceedingly unpopular.
There’s still plenty that could go wrong in Europe. Greece, say, could refuse to follow the IMF’s austerity plan and leave the euro. But even that wouldn’t happen until November or later.
On Monday, Rick Santorum offered his theory of the financial crisis: “We went into a recession in 2008 because of gasoline prices. The bubble burst in housing because people couldn’t pay their mortgages because of $4-a-gallon gasoline.” Is this crazy? Or is Santorum onto something?
It’s hard to find an economist who would go quite as far as Santorum. For one thing, the recession officially started in 2007, so the timing doesn’t work. For another, the collapse of the housing market, and the financial collapse that followed, had a variety of causes, which you can read all about in the Financial Crisis Inquiry Commission report. None of the members pinned the blame on high gas prices in the summer of 2008. But the idea that gas prices contributed to the problem isn’t totally far-fetched. After all, James Hamilton, an economist at the University of San Diego, has been arguing for awhile now that the sharp spike in oil prices in 2008 worsened the downturn.
Just a few days before the Michigan primary, a private equity trade group has released a video celebrating the impact of a $850 million investment by the Blackstone Group in the Detroit Medical Center. The group says the investment created 15,000 construction jobs and a children’s hospital, among other politically salient accomplishments:
It’s all part of the Private Equity Growth Capital Council’s campaign to rehabilitate the industry’s public image — an effort launched a few weeks ago after the attacks on Romney’s tenure at Bain Capital.
In his essay on President Obama’s first term, James Fallows dismisses Obama’s conceit that he would prefer to be “a really good one-term” president than a “mediocre” president who served two terms. “The reality,” Fallows writes, “is that our judgment about ‘really good’ and ‘mediocre’ presidents is colored by how long they serve. A failure to win reelection places a ‘one-term loser’ asterisk on even genuine accomplishments. Ask George H. W. Bush, victor in the Gulf War; ask Jimmy Carter, architect of the Camp David agreement.”
Northwestern University and University of Chicago’s business schools surveyed a group of top economists, as well as the public at large, and found some big differences when it came to economic policy. Some of the questions tested basic economic literary: A full 100 percent of economists agreed that permanently raising the federal tax rate by 1 percent for those in the top income tax bracket would increase federal tax revenue over the next 10 years. By contrast, only 66 percent of the general public agreed that this was the case, with just 50 percent of Republicans concurring and 80 percent of Democrats. The misconception could partly explain why there’s such aversion to tax increases.