Will Debt Ceiling Be Raised by End of July?
Intrade.com, in case you didn't know, is a "prediction market" where people can wager real money on the outcome of certain events.
For instance, you can bet on who will be elected President in November of 2012, or if the United States will have its credit rating downgraded by the end of 2013.
Each contract has a maximum value of $10. If an event occurs, then the contract will be worth $10. If an event doesn't occur, then the contract will be worthless. People can buy, sell and short contracts.
As you can probably imagine, there are contracts that allow people to bet on the current debt ceiling situation in the United States. For this article, we are going to focus on two contracts:
1. Congress to approve increase in US debt ceiling to $15.1T or more before midnight ET 31 Jul 2011
2. Congress to approve increase in US debt ceiling to $15.1T or more before midnight ET 31 Aug 2011
As it stands right now, the first contract is currently trading for $4.91, while the second contract is currently trading for $7.15.
This means that "traders" on Intrade.com currently believe that there is a less than 50/50 chance of the debt ceiling being raised by the end of July. Back in April, this contract was trading for $8.00, but recently fell below the $3.00 mark before bouncing back up to its current level of $4.91.
The August contract, as mentioned, is currently trading at $7.15. This contract traded as high as $9.00 back in mid-May, but has recently dipped as the debt-limit talks have grown more contentious.
The general consensus still seems to be that the two sides will reach a deal just before Geithner's "drop dead date" of August 2nd, but it's certainly not the slam dunk that it once seemed to be. With so much on the line, anything could happen between now and August 2nd. A default is certainly not off the table at this point..
Filed under: General Knowledge