Markets Give Geithner a Vote of Confidence

Treasury Secretary Geithner‘s fears about unemployment appear to be disappearing fast. Or at least his personal fears. According to the prediction markets at Intrade.com, the chances that he departs his post this year have declined from a high above 40 percent to around 10 percent.

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It is surely no coincidence that the Geithner option has reverted to more “normal” levels in parallel with other financial prices.


Mel Velgell

As recent events have reminded us, markets are sometimes wrong, even prediction markets at Intrade. They apparently haven't noticed all the egg on Geithner's face over the apparent abandonment of the PPIP, the much-ballyhooed plan to allow banks to sell toxic assets to buyers aided by big subsidies.

The unbelievable arrogance of banks (which even the Economist is criticizing - http://www.economist.com/opinion/displaystory.cfm?story_id=13829437 ) could come back to bite the Geit.

John Lewis

The Intrade market was marginally wrong about Sonya Sotomayor(she opened at the highest level and declined thru the period of speculation vis and vis other choices, but she never ran bellow second and had the highest volume...hard to say much about Intrade markets if the volume isn't sufficient.) Intrade markets were also wrong about the winner of the Iranian election far over estimating the likelyhood that Mir Hussein Moussavi won...but then again it is Iran so it is possible that Moussavi did win, just not in a way that counts. In terms of Geithner what is interesting is the way his popularity among democrats crossed with his popularity among republicans. Of course Summers was to replace Geithner which was the speculation...you might also find if Gallup polling data had been available that the popularity of Summers peaked among "conservatives" following the aftermarket on his remarks on gender at Harvard...

If the gallup data is good and Geithner is now more popular among democrats, I wonder if the price of Oil which is rising in tandem with recovering markets will impact consumer sentiment(see the flat michigan numbers 69 in line with forcast) then opinion of Geithner if heavily tied up with populist/democrat thinking might suffer a downturn if the price of gas countinues climbing.

Of course the probability of Geithner departing must decrease with time as every day that goes by is one less day that the contract can be settled favorably for those long the affirmative.

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frankenduf

don't get the point of this post- why would geithner "depart"?- it's not like he was elected- i agree with Mel Velgell- geithner is essentially a point man for the banking industry in the Obama administration- as long as the banks have a say, he will not be departed

Eric

This is not a fair representation of the data. It is the middle of June, and the probability of him leaving "by the end of 2009" has about cut in half. But every day we are closer to the end of 2009. They are more confident that he won't leave by the end of 2009 because they can now be certain that he won't leave in Feb-May.

Siddhesh

How is Probability that Geithner will leave or not useful to readers? I guess policy implications need to be discussed more. We had a discussion about the same a few days back. Read more here- Why Obama's plan can fail : http://strat.in/2009/06/why-obamas-plan-can-fail/