Pentagon Wants to Help Investors Profit from Death and Terror in the Middle East
Former Reagan advisor and Iran-Contra boy John Poindexter at it again...

It sounds too disgusting to be true, but then again, so has every plan from John Poindexter's new Terrorism Information Awareness (formally Total Information Awareness) office. According to this morning's New York Times ("Pentagon Prepares a Futures Market on Terror Attacks"), the TIA is planning to start a futures market in Middle East instability:

It is an online futures trading market, disclosed today by critics, in which anonymous speculators would bet on forecasting terrorist attacks, assassinations and coups... . Traders bullish on a biological attack on Israel or bearish on the chances of a North Korean missile strike would have the opportunity to bet on the likelihood of such events on a new Internet site established by the Defense Advanced Research Projects Agency.

The Pentagon called its latest idea a new way of predicting events and part of its search for the "broadest possible set of new ways to prevent terrorist attacks." Two Democratic senators who reported the plan called it morally repugnant and grotesque... "Can you imagine," Mr. Dorgan asked, "if another country set up a betting parlor so that people could go in — and is sponsored by the government itself — people could go in and bet on the assassination of an American political figure?"

I mean, how would Dubya feel if, say, the Saudi Arabian government started a futures market in which investors could bet on his assasination? Would he congratulate them on their dedication to free-market capitalism?

Anyway, the Pentagon's defense is that investors are somehow magically going to help them predict events (perhaps a sign that they're feeling less than confident in the "intelligence community"?):

The Pentagon, in defending the program, said such futures trading had proven effective in predicting other events like oil prices, elections and movie ticket sales... "Research indicates that markets are extremely efficient, effective and timely aggregators of dispersed and even hidden information," the Defense Department said in a statement.

Yes, the market is a magic fairy godmother that will whisper in your ear right before a terrorist attack occurs. Who needs intelligence when you've got investors? (Let's for the moment forget all those burst stock market bubbles and lost fortunes...)

According to descriptions given to Congress, available at the Web site and provided by the two senators, traders who register would deposit money into an account similar to a stock account and win or lose money based on predicting events.

"For instance," Mr. Wyden said, "you may think early on that Prime Minister X is going to be assassinated. So you buy the futures contracts for 5 cents each. As more people begin to think the person's going to be assassinated, the cost of the contract could go up, to 50 cents... "The payoff if he's assassinated is $1 per future. So if it comes to pass, and those who bought at 5 cents make 95 cents. Those who bought at 50 cents make 50 cents."

And if you owned 100,000 futures, you'd have $100,000 dollars. Also, the betting is anonymous. So if someone has a lot of money riding on, say, an assasination, who's to say they won't do a little bit here and there to help make it happen? (Which I suppose would make the market a magical fairy godmother after all!) The consequences of this kind of insider trading make Martha Stewart look like the small fry she is, corporate-criminal-wise.

The initiative, called the Policy Analysis Market, is to begin registering up to 1,000 traders on Friday... "Involvement in this group prediction process should prove engaging and may prove profitable," the Web site said.

Yes, what fun! Let's bet that more soldiers will be killed in Iraq today!

Sigh... Anyway, it's further evidence that there's nothing moral or self-regulating about markets, and that many investors are just gamblers (and con men) without the stigma. Whatever the Pentagon thinks, the market is NOT a omniscient being or a magical predicting machine, and certainly not a benevolent one. It's made up of a bunch of institutions and investors often pulling their guesses and hunches from thin air (or even more fun, from insider information)... and all looking to make money for THEMSELVES. And in this case, looking to make money for themselves no matter how much blood that money is soaked in. So I'm appalled, but not shocked.