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Banks Offering Higher Interest Rates if Obama Wins!

Banks Offering Higher Interest Rates if Obama Wins!

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Published by Jack and friend

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Published by: Jack and friend on Oct 15, 2008
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06/16/2009

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Banks Are Offering Higher InterestRates if Obama Wins
A Portuguese online bank,Banco Best, is offering deposits tied to the results ofthe U.S. presidential election: If U.S. Sen. Barack Obama, D-Ill., wins the WhiteHouse,Banco Bestwill pay 8% for the period betweenthe depositand Nov. 4; if Sen. John McCain, R-Ariz., wins, the bank will pay 2%. That reflects the generalpreference for Obama held in Europe; it’s worth noting that the bank’s notoffering an equivalent deposit product biased the other way, which by all the rulesof hedging it should be (opening branches in Arizona and Wasilla, Alaska, wheredemand might be expected to be greatest, for example).You don’t need to go to Portugal to bet on the election. AtIowa ElectronicMarkets, or IEM, Obama is currently trading at 85 cents asked, so if you bet $85, you stand to be repaid $100 if Obama wins. You can get much better odds onMcCain; you only need to bet $16 to win $100 if he wins.Aside from the amusement value, there’s actually a very real hedging question here.Most of the differences between Obama and McCain come down to questions ofpolicy preference that are difficult to express in a monetary form. Thus, the twocandidates’ policies on the Middle East have quite different implications, andthough you may have strong views on which candidate you prefer, it is impossible toput a monetary number on those preferences. Even on policies such as healthcare,the details are so complex – and the application to your own circumstances involvessuch indeterminable unknowns as your future health – that a net monetary numberis impossible to calculate.There is one exception, and that is in the tax field. For those of moderate incomes,there is probably not much to choose from between the two: Obama may bringslightly higher taxes, but the additional government services he promises toinstitute may provide benefits to offset them.For high-income people, however, there is a clear difference: Obama promises torepeal the Bush tax cuts (whichlowered the top tax rate 4.6%) on incomes over

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