Futures Markets Say Austerity Votes are Going to Disappoint in November Elections

Futures Markets Say Austerity Votes are Going to Disappoint in November Elections

There’s been quite a bit of speculation that the November elections could be a bloodbath for incumbents, with a sweeping wave of austerity kicking ass and taking names.

But the futures markets are currently showing that austerity votes are likely to disappoint in next month’s elections.

Starting right here at the major nexus for irresponsible spending in Sacramento, CA, I saw that Democratic candidate Jerry Brown (largely referred to as a socialist by folks who don’t normally throw that term around lightly) has opened up a double-digit lead on Meg Whitman, who is primarily running on a campaign of austerity.

It’s been interesting to see Whitman hang around, with a platform that just four years ago would have seen her run out of town.  But it looks like California is not totally in the mood for austerity, as Intrade.com (a prediction market based on futures pricing) is currently giving Brown nearly a 95% chance of winning California’s governorship next month.

I imagine this will probably officially seal California’s fiscal fate, as I’d be very surprised if Brown makes the necessary spending cuts to make it through four budget cycles.  Federa bailout, here we come!

Which may be for the best, incidentally – it’d have been a shame if Whitman’s talk about responsible government had paved the way for this bankruptcy.  Better to have a more appropriate fall guy in place, if you’re looking at this from a libertarian standpoint!

Somebody might want to start the trading on the 2011 California State Government Default futures contracts.

On the national level, Intrade is showing the Republicans are likely to take back the House, with an 88% chance being priced in.  But the Democrats are favored to retain control of the Senate, with Intrade pricing their odds at 57%.

Tea party fav Christine O’Donnell is not favored to be one of the Senate winners, by the way – Intrade traders are giving her just a 7% shot.

If we’ve learned anything over the last 30 years, it’s that an all-Republican or all-Democratic Congress & Presidency is a recipe for increased government spending (see: Reagan, Clinton’s 1st 2 years, Baby Bush, Obama’s 1st 2).

The “best” us limited government folks have been able to hope for has been gridlock – a la 1994.

So, it’s looking like gridlock may be on the way again, with the Republicans in position to take the House.  While we shouldn’t expect any real austerity, we may see some monkey wrenches get jammed into the gears of the Federal government’s spending machine.

Will this be enough of a catalyst to tip the economy over the edge, and set off another wave of deflation?  Possibly – I doubt we’d see another massive stimulus plan to rival the previous one with this mix of players, and I also wouldn’t be surprised to see the Fed come under a bit of pressure, either.

In summary, the speculation that a significant challenge from a third political party appears to be premature at this stage.  But if you’re looking for an out-of-the-money call option to take a flyer on, here’s my personal favorite.  Courtesy of our alert reader Dave, we present you with The Rent Is Too Damn High Party (yes, this is actually for real, too!):