Mark Thoma, Superficial Blogger

His post, &#8220-The Myth of the Social Security Shortfall&#8221-, here, but if you don&#8217-t want to defer thinking, read Mish Shedlock on pension underfunding instead. Yes, taxes will have to go up, but it&#8217-s not as though sunsetting the Bush cuts and tacking on a couple percent here or there will stem the entitlement spiral, of which social security is a single piece. Thoma is quoting Michael Hiltzik, whose message, when you strip away the authoritative tone is basically, &#8220-don&#8217-t worry so much, it&#8217-s in the future and stuff.&#8221- That strategy hasn&#8217-t worked out so far.

Deferral, abetted by private and public conflicts of interest, is the essence of the problem and is at the root of both the corporate and sovereign credit crises. Now, it&#8217-s one thing when you have an impaired balance sheet propped up by good cash flow, but there are reasons to believe that prospective growth and public income will also be lacking relative to the 20th century. These reasons of course are swept under the rug by at least one liberal economist. Paul Krugman chides someone for rambling on about demographics one day, and tells us we are turning Japanese the next. Why are we turning Japanese? Krugman sees this, but thinks we must defer that issue to deal with unemployment and deflation. To what extent, however, are unemployment, deflation, and the series of booms and busts over the last 30 years symptoms of demographics? If that&#8217-s the case, if pension rate of return assumptions are off for this or other reasons, things could get late early.

– out of your titles if you aren&#8217-t going to have any real discussion. If everything is quoted, the quotes lose their meaning and everything is implicitly endorsed.

Jason Ruspini, vice president of Conquest Capital, reveals the three indicators he uses to predict how high gold prices will go.

The Street:

Download this post to watch the video, if your feed reader does not show it to you.

Previously: The Interdependence of Prices and Gold &#8211- by Jason Ruspini



I did not give $1500 as a gold target this year! When asked for my gold price prediction, I said, if you look at gold as a % of global fx reserves and investable assets you can justify very high gold price predictions, but I don’t like to model absolute levels, I like to look at marginal, incremental signals. If you put a gun to my head though: $1300-1350 — not “$1300-1500?.

Also edited out was a differentiation of liquidity shock vs. deflation vs. disinflation.

I should add that long-term trend-following is a fine way to trade gold.

These are all my own opinions, not those of Conquest.

Multi-millionaire, Republican, professor of economics Greg Mankiw uses Jason Ruspinis tax prediction markets at InTrade to assess the probability that a hypothetical John McCain presidency starting in 2009 assumes a raise in federal taxes.

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Via Marginal Revolution

P(tax hike / McCain) = 74%.

APPENDIX: Robin Hanson does not know yet who he is going to vote for, in November 2008&#8230- and feels that no scholar can help him.

The Chicago Mercantile Exchange is not a friend of the prediction markets. Nor is the ISDA.

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Will the Chicago Mercantile Exchange write to the CFTC?

&#8230- asks Google&#8217-s Bo Cowgill.

That could be&#8230- However, I&#8217-m not holding my breath. Here&#8217-s why. The CME (along side the CBOE and ISDA) represents forces that does not push for the kind of financial innovations we are pushing here, on Midas Oracle. We are pulling for Web-based, de-intermediated, low-cost, event derivative exchanges. The financial dinosaurs (like the CME) do not.

Take a look at the CME&#8217-s 2003 letter to the CFTC about HedgeStreet&#8217-s application as a DCM. – (PDF file) – Here are the titles of the first 2 sections:

  1. HedgeStreet’s Proposal is Materially Deficient.
  2. The [HedgeStreet] Application Violates the CEA.

No need to go further. :-D &#8230- You have computed that the CME was (in 2003) no friend of HedgeStreet &#8212-and, thus, of our prediction markets. (For those who are just surfacing from an Afghan cave, yes, the CFTC did approve HedgeStreet&#8217-s application, finally, and told the CME to go fugging themselves.) So, I&#8217-m not holding my breath for a CME comment to the CFTC&#8217-s concept release on &#8220-event markets&#8221-. Saying that the CME is talking for the prediction market community is like saying the Ayatollah Khamenei was talking for priests, ministers, and rabbis.

As for the ISDA, they represent big institutional traders&#8230- who do not use exchanges ( !! ). What they say to the CFTC (PDF file), basically, is to be careful not to hurt the framework of the whole landscape. Well, thanks ISDA, but the CFTC knew that already.

As I said, 2 prediction market organizations will, each, submit their comment to the CFTC. I don&#8217-t expect that to be a deep read, with regards to derivative regulations. However, their industrial strategy might transpire, and that might be interesting for curious people like me. :-D

The 3 interesting takes about the &#8220-event markets&#8221- are from:

  1. the CFTC &#8212-if you are able to sense what their true opinion is.
  2. Jason Ruspini &#8212-(PDF file).
  3. Tom W. Bell &#8212-upcoming.

The future of US-based, non-sports, non-hedgeable prediction markets depends on those 3 poles of thought.

In the coming weeks, you&#8217-ll see many intellectual interactions between them.

The real question is: Will Jason Ruspini and/or Tom W. Bell have a proven impact on the CFTC process? I wish that, but both of them do stray away from the CFTC&#8217-s strict framework.


COMMENTS TO THE CFTC: What should be expected, next.

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Two prediction market organizations will submit, each, a comment. I suppose that what they will tell the CFTC will say more about their industrial strategy than about the right state of the US regulations on event derivative markets, but I could be damn wrong.

Tom W. Bell is working on a comment to the CFTC (that&#8217-s public information). Once it is published, the next thing to do is a comparative analysis of Bell versus Ruspini. With that question in mind: Which of these 2 luminaries will have the best impact on the CFTC?

I can&#8217-t wait.

COMMENTS TO THE CFTC: What to expect from Tom W. Bell and Jason Ruspini

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For those who are just surfacing from an Afghan cave: Tom W. Bell is a law professor at Chapman University (in California) and Jason Ruspini is a Wall Street professional (in New York).

It seems that both will, independently of each other, write to the CFTC about the legalization of the &#8220-event markets&#8221- (here are the comments to the CFTC) &#8212-a bad term for the &#8220-non-hedgeable event derivative markets&#8221- (which is also, probably, a term that is quite awful to your ears :-D ). What to expect from them? (WARNING: This is highly speculative.)


  • He will state the libertarian point of view &#8212-laissez faire, laissez aller. – [DISCLOSURE: I am a mid-core libertarian myself, so I like that.]
  • Overall, he will try to put up a basket of legal hacks &#8212-to establish that the real-money prediction markets should be as free as possible.
  • In particular, he will try to make the point that &#8220-event markets&#8221- should be covered by the laws governing &#8220-notes&#8221- &#8212-not by the laws governing &#8220-contracts&#8221-.
  • By doing so, he will tell the CFTC to go fugging themselves &#8212-since the CFTC is allegedly about &#8220-contracts&#8221-, not about &#8220-notes&#8221-.


  • He will state that all the real-money prediction markets should be covered by the CFTC.
  • He will navigate within the legal framework that the CFTC has established in their &#8220-concept release&#8221-. – [See this document from the Arnold &amp- Porter lawyers, if you wanna know what’s a “concept release”, in the mind of the CFTC regulators. – PDF file.]
  • He will be very careful not to offense those bureaucrats.


  • It&#8217-s great that the libertarian point of view is elaborated and disseminated to these bureaucrats. However, the CFTC is an agency, not the US Supreme Court Of Justice &#8212-and the fact that Tom W. Bell is right does not mean that he will prevail.
  • Jason Ruspini&#8217-s approach is extremely reasonable: he adopts the enemy&#8217-s point of view, and, from within, tries to maneuver the regulatory barriers to create as much room as possible. Also, Jason Ruspini will address only the CFTC questions which he grasps well. (Contrast that with some who spread themselves too thin, and answer all the CFTC questions, even those where they have no expertise or experience. Their answers are, and, will be totally ignored. It&#8217-s not what you say that is important- it&#8217-s what you say in relation with who you are to say that.) I&#8217-m pulling for Jason Ruspini&#8217-s approach.


  • If Jason Ruspini does not fuck it up, he has the potentiality to influence positively the CFTC, and to become one of the great leaders of the field of prediction markets. Let&#8217-s wish for that. Our field needs courageous men (and women) with the right political compass and the sense of pragmatism.


– CALL TO ACTION: Let&#8217-s fight so that the CFTC allows the FOR-PROFIT prediction exchanges to deal with &#8220-event markets&#8221-.

– In the for-profit vs not-for-profit debate, our prediction market luminaries, doctored by Bob, are on the wrong side of the issue.

– A young economist rebuts the American Enterprise Institute.


CFTC’s Concept Release on the Appropriate Regulatory Treatment of Event Contracts&#8230- notably how they define &#8220-event markets&#8221-, how they are going to extend their &#8220-exemption&#8221- to other IEM-like prediction exchanges, and how they framed their questions to the public. Here are the comments sent to the CFTC.

– The Arnold &amp- Porter lawyers explain the meaning of the CFTC&#8217-s concept release on &#8220-event markets&#8221-. &#8212- (PDF file)

– The Schulte &amp- Roth &amp- Zabel lawyers&#8217- takes. &#8212- (PDF file)

– The Sullivan &amp- Cromwell lawyers&#8217- takes. &#8212- (PDF file)

– What Vernon Smith told the CFTC.

The American Enterprise Institute’s proposals to legalize the real-money prediction markets in the United States of America


Paul Wolfowitz&#8217-s profile at the American Enterprise Institute

– How the neo-cons drove the United States of America into the unecessary Iraq war

JASON RUSPINIS CROCKERY: The Brain states forcefully that they are not event futures, but binary options. Still, as soon as he premieres prediction markets on tax rates at InTrade, he calls them tax futures -of course.

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Measured Enthusiasm for Prediction Markets – (PDF file) – by Jason Ruspini.

My thoughts:

  1. Peter McCluskey thinks they are &#8220-futures&#8221-.
  2. PAM was only extremely marginally about &#8220-terrorism and assassination futures&#8221-.
  3. Even though they don&#8217-t do much more than discounting known information, &#8220-prediction markets&#8221- is not a misnomer, since the term means that each prediction (in the form of an event derivative contract) is traded on a market.
  4. &#8220-Decision-aid markets&#8221-, not &#8220-decision markets&#8221- &#8212-I&#8217-d leave that last denomination for Robin Hanson&#8217-s original idea, when the decision applies automatically, after the trading.
  5. And what was Justin Wolfers&#8217- reasoning? Might we know? (And why did you swallow it?)
  6. Which are the manipulation papers making &#8220-unrealistic assumptions&#8221-? Names, please.
  7. Tax futures are great. But, who else in the world, other than mister Ruspini, believes that they can be fiscal hedging vehicles? (Not doubtful. Just asking. External links, please.)

Jason Ruspini on the regulation of US event derivative markets:

CFTC-like regulation would save these markets from having to navigate national and state gambling laws, but would come at the cost of flexibility. Some contracts would not be approved for political reasons even if they had demonstrable hedging utility and “economic purpose”.