Auditing the Federal Reserve – Ron Paul style

Financial Fiasco: How Americas Infatuation with Homeownership and Easy Money Created the Economic Crisis

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&#8220-A loose monetary policy that created lots of cheap money, government interventions into the housing market, and the hubris of Wall Street firms deemed &#8216-too big to fail&#8217- combined to send the world economy into a tailspin, argues Swedish author Johan Norberg.&#8221-

&#8220-Financial Fiasco: How America&#8217-s Infatuation with Homeownership and Easy Money Created the Economic Crisis, an overview of what caused the current financial crisis (and what did not) and how politicians of all parties and all ideologies helped make the problem much worse.&#8221-

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The definitive proof that HubDub is an indispensable prediction exchange. [*]

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As I told you, I am blogging as often as possible on the other blog (Midas Oracle .COM) about the 2008 US presidential elections as seen thru the eyes of the prediction markets. As I wrote there this morning, I have just found out a truly interesting set of prediction markets at HubDub. (I wasn&#8217-t able to find its equivalent on InTrade, BetFair, or NewsFutures.) It&#8217-s trying to predict where the Dow Jones will be, come November 4, 2008. (As you may remember, the deeper the financial crisis, the more likely it is that Barack Obama will be elected president of the United States.)

As of this morning, the Dow Jones is barely above the 8,000 level (8,175.77), and the futures say that the stock market will rebound, at least in the first hours. However, I am bearish. I would bet that the Dow Jones will stay around the current level (or lower) until Election Day. In other words, I am betting on the red, on the chart below.

At what level will the Dow Jones Industrial Average close on Election Day?

[*] And if Emile (whom we highly respect, overall) is pissed off by that statement, then, great, that&#8217-s a cool unintended collateral consequence. :-D

InTrade CEO John Delaney states that prediction markets can prevent the next financial cataclysms. Surely. Prediction markets can also restore womens virginity, and treat mens baldness.

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John Delaney states rightfully that the prediction markets are a mechanism that aggregates information dispersed among the population. Then, he goes on at full throttle and states that prediction markets can help &#8220-avoiding future [financial] crisis.&#8221-

Jesus, Mary, Joseph, that&#8217-s quite an extraordinary statement.

John Delaney writes that crucial information is buried deep in the accounting books. That&#8217-s true, but that&#8217-s up to the financial analysts to decipher this problematic &#8212-our event derivative traders can then just pick up on what those experts conclude. The financial experts were unable to prevent the current financial cataclysm. Adding more event derivative traders and more prediction markets won&#8217-t solve any problem.

Prediction markets are only a reflection of the current knowledge of the best experts in town. At best, they are the best umpire you can get between, on one hand, the mass media or the politicians and, on the other hand, the best experts. But when nobody knows anything (or when nobody listens to Nouriel Roubini), the prediction markets are of no help.

What the prediction market industry needs right now is not an ill-informed, bragging rant.

What the prediction market industry needs is a way to discriminate between accuracy and utility.

What we need is more of Robin Hanson.


Mortgage Crisis -> Credit Crisis -> Financial Crisis -> Economic Crisis -> THE GREAT DEPRESSION

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Feed readers: Download this post to be able to watch this CBS 60 minutes video on the credit crisis.

Watch CBS Videos Online

Washington Mutual is seized by the US government.

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– New York Times

– Another one bites the dust:

(Sorry for those who have a narrow screen and don&#8217-t see the right part of this big chart.)

According to InTrade, here are the banks that could fail next:

– Bank United Financial

– Downey Financial

External Links About The Big Bailout:

– Reason magazine have collected opinions from the leading free-market economists on the Bailout issue.

There is no reason to expect the correct solution from the same people who created the crisis in the first place and who until very recently thought the economy was strong and that there was little or no chance of recession. [Mark Thornton]

This is a financial coup d&#8217-etat, with the only limitation the $700 billion balance sheet figure. [Yves Smith]

– Mike Linksvayer has some additional good links&#8230- and some strong words, too. :-D

– Arnold Kling:

– NYT:

UPDATE: Paul Krugman

UPDATE: The Manhattan Institute on financial crisis and the Bailout