When Will the Debt Ceiling Be Raised?
When will the debt ceiling be raised in the United States? This is a question that is on the minds of many Americans right now.
Some people believe that the debt ceiling should not be raised at all. Instead, they believe that spending should be drastically cut so that the government can balance its books.
Others believe that the government has no choice when it comes to the debt ceiling, and that undertaking substantial spending cuts at this point would derail an economic recovery in the country.
Both sides are digging in their heels on the issue, and most people are expecting that this issue will not be resolved until August.
I thought that it would be interesting to look at what Intrade's traders are predicting when it comes to a resolution to the debt ceiling issue.
Intrade.com, in case you didn't know, is a "prediction market" where people can buy and sell shares of "predictions" for real money.
For instance, as of this second, the "Congress to approve Increase in US debt ceiling to $15.1T or more before midnight ET 31 May 2011" contract is trading at $0.71 per share. The maximum value of a share is $10, which means that traders on Intrade believe that there is a 7.1% chance that the debt ceiling will be raised by May 31st. If you buy shares at $0.71 and the debt ceiling is raised by May 31st, then you will be paid out the maximum of $10 per share. If the debt ceiling isn't raised by May 31st, then your shares will be worthless.
So, Intrade's traders are of the opinion that there is basically no chance of the debt ceiling being raised by May 31st.
Intrade.com has contracts open for four other dates - let's see where they are trading at:
June 30th - 32.0%
July 31st - 72.0%
August 31st - 71.0%
September 30th - 85.0%
The debt ceiling is going to be hit on Monday, May 16th. However, according to Treasury Secretary Timothy Geithner, "extraordinary measures" will be taken in order for the US government to continue borrowing until August 2nd.
Most people don't expect that the debt ceiling issue will be resolved until late July/early August, and the traders on Intrade.com seem to agree.
Filed under: General Knowledge