On Bookies and Economic Gurus
I monitor a chart on a website that almost no economic forecaster pays any attention to. The chart has indicated a remarkable shift toward economic optimism. It has indicated that the American economy will not fall into recession this year. This shift has taken place in the last three weeks.
The problem with the chart and the site is that, by design, no explanations are ever offered. There is no theory of why the economy will or will not fall into recession. That is because the site is a gambling site. You pays your money and you takes your chances.
The site is Intrade. It is a web-based site. It is run from Dublin. If the owner ever sets foot on U.S. soil, he will be arrested, tried, convicted, and sent to jail. But he can afford to stay out of the United States. He is a very rich bookie.
The site allows gamblers to make bets on future events to take place or not take place during a defined time frame. One of these listed events is recession in the U.S. in 2008. As recently as mid-April, betting was over 70% that there will be a recession this year. Then, without warning, the odds turned the other way. Today, the odds are 27%.
This is a major shift of opinion. In the sports world, it would be as if Michael Jordan had been seriously injured mid-season when he played for the Bulls. You can see the chart here.
A law passed in 2006 that prohibits U.S.-based banks from making credit card payments to off-shore gambling sites: The Internet Gambling Enforcement Act of 2006. So, the betters on Intrade are not Americans, other than Americans who have opened off-shore bank accounts and who use foreign post office boxes as their addresses. This is not many Americans. The site is limited to those few Americans who value their privacy and who want a way to make payments even if the government closes certain doors, either on all Americans or on them personally.