The intraday fluctuations on Monday (using Intrade’s contract for a bailout passing in September) imply the bailout makes a bigger difference (closer to 25% on the S&P 500). That evidence should be better because the news changed 3 times while the markets were trading. But I’m unconvinced that Intrade and the stock market had the same expectations—Intrade had been saying since Sunday evening that the bailout had about a 20% chance of passing in September, but all the comments from supposedly informed people said the vote was more surprising.
If the bailout passes and unemployment exceeds 7.5% by the end of 2009, that will be weak evidence that the bailout was desirable. I’d still say there were better alternatives, such as briefly relaxing bank capital requirements, unless the government claims to have made money on the bailout in five years. Or maybe we could tie some of the compensation paid for the people running the bailout to how much money the bailout makes or loses.
The intraday fluctuations on Monday (using Intrade’s contract for a bailout passing in September) imply the bailout makes a bigger difference (closer to 25% on the S&P 500). That evidence should be better because the news changed 3 times while the markets were trading. But I’m unconvinced that Intrade and the stock market had the same expectations—Intrade had been saying since Sunday evening that the bailout had about a 20% chance of passing in September, but all the comments from supposedly informed people said the vote was more surprising. If the bailout passes and unemployment exceeds 7.5% by the end of 2009, that will be weak evidence that the bailout was desirable. I’d still say there were better alternatives, such as briefly relaxing bank capital requirements, unless the government claims to have made money on the bailout in five years. Or maybe we could tie some of the compensation paid for the people running the bailout to how much money the bailout makes or loses.