Pentagon terror futures market Nick Grimm 29 July 2003 Australian Broadcasting Corporation Transcripts MARK COLVIN: To the United States: grotesque, hare-brained, unbelievably stupid are just some of the words critics have used to describe the Pentagon's latest initiative in the fight against terrorism. It revolves around a plan to establish a stockmarket-style futures trading system on the Middle East. This would allow investors to make money on the prospect of terror attacks, assassinations, war and chaos. It may seem a far-fetched notion, but the US defence department has allocated around eight million US dollars to the scheme, and it's due to begin registering speculators on Friday. The terror futures market is then scheduled to begin trading in October. Nick Grimm has our report. NICK GRIMM: It's a plan which has emerged from one of the agencies deep within the US Pentagon, tailor-made for anyone who believes that chaos in the Middle East is a sure bet, and ready to put their money on it. The Pentagon's policy analysis market will work like this: investors trading with real money will be able to buy and sell futures contracts predicting what they believe could happen in the Middle East over the term of the contract. The Pentagon has suggested that could be, for example, an event like Yasser Arafat's assassination or the overthrow of Jordan's King Abdullah II. Investors who back a winner could then be paid the profits generated from those who'd predicted wrong. The scheme is explained on a website which invites potential investors to register by the end of this week, in time for trading to begin in October. The plan might have remained a low-profile opportunity for those in the know to take a flutter on the prospect of mayhem, had it not been stumbled on by a pair of alert Washington Democrats. BYRON DORGAN: I think this is unbelievably stupid. NICK GRIMM: Senator Byron Dorgan from North Dakota, and Senator Ron Wyden from Oregon, called a media conference to voice their outrage. RON WYDEN: The idea of a Federal betting parlour on atrocities and terrorism is ridiculous and it's grotesque. NICK GRIMM: Soon after the Democrats went public, the policy analysis website was modified, removing any references to investing in the future prospects of assassination attempts, and even an outside prospect of a nuclear war on the Korean Peninsula. But the principals of the scheme explained on the site remain unchanged. The policy analysis market is being administered by a private company called Net Exchange, along with a branch of the company which publishes magazine. But it remains the baby of the Pentagon's Defence Advanced Research Projects Agency, DARPA, which is run by the retired Admiral John Poindexter, who himself is no stranger to controversy. A key figure in the Iran-Contra Scandal of the 1980s, he was charged and found guilty of conspiracy, obstruction of justice, and the destruction of evidence, but his conviction was overturned on appeal. Now this new controversy is causing utter bewilderment. NICHOLAS GRUEN: It seemed to be a hoax. I'm still shaking my head. NICK GRIMM: Dr Nicholas Gruen is a former economist with the Productivity Commission, who has studied methods of corporatising risk, a concept usually utilised by the insurance industry. NICHOLAS GRUEN: The idea of using markets, there may be some areas at the margins which shouldn't be dismissed for using markets, but that a government agency can participate and be funded by government to propose developing a futures market which includes futures markets in the assassination of foreign office holders is really pretty serious, that such important organisations - organisations that hold all of our safety in their hands - are so lacking in kind of basic commonsense. NICK GRIMM: In theory a futures market could be conducted this way, couldn't it? NICHOLAS GRUEN: In theory that can happen. But that we can seriously contemplating something so wacky is I think a real sign of the times. NICK GRIMM: And Nicholas Gruen is not the only person appalled and staggered by the Pentagon's initiative. Neil Fergus is Chief Executive of the corporate security consultancy, Intelligent Risks, and a former head of counter-terrorism for the Sydney Olympics. NEIL FERGUS: The possibility of Wall Street pundits putting large money on those outcomes could actually lead to the situation where some people have a vested interest, illegal I hasten to add, in ensuring those outcomes do become a reality. MARK COLVIN: Neil Fergus, Chief Executive of the security company, Intelligent Risks, and a former Chief of Intelligence for the Sydney Olympics. Nick Grimm was our reporter there.