Odds on a Depression, or Depression Odds-on?

While Centrebet here may be running a book on the chances of a recession in Australia, Intrade has gone one better by doing the same thing for a depression.  I’m a bit confused about the definition they’re using for Depression, but the really depressing thing is the way the odds have moved in recent times, as the graph demonstrates.  Note that the prices on the right hand scale (currently 55.5) represent the likelihood of a depression (around 55% based on these numbers).  Click the graph to see contract specs etc.  It’s also worth having a look at Calculated Risk here for their summary of the definition of “depression” and why it’s flawed.

Closer to home, it’s encourage to see that Centrebet punters are taking a slightly less jaundiced view of the Australian economy, with the price for an Australian recession in 2009 drifting out to  $1.27 from $1.20 in mid-December.  Click the graphic for more info.

 

 

Alas there seems to be a bit of a disconnect between Centrebet and the SFE – the mid 2009 cash rate implied by bank bill futures prices clearly suggests a fairly serious recession in the offing.