'Treason in the futures markets'
The focus this morning of both Heather Cox Richardson and Robert Reich is the sudden activity in oil and stock-index futures early Monday, about 15 minutes before President Trump announced on Truth Social that he was postponing strikes on Iran power plants because of “productive” talks with Iran.
Richardson cites Nobel Prize-winning economist Paul Krugman, whose Substack post on Tuesday was titled “Treason in the futures markets.”
“Somebody close to Trump knew what he was about to do, and exploited that inside information to make huge, instant profits,” Krugman said.
“This wasn’t the first time something like this has happened under Trump,” Krugman said. ”There were large, suspicious moves in the prediction market Polymarket before previous attacks on Iran and Venezuela. But this front-running of U.S. policy was really large: the Financial Times estimates the sales of oil futures in that magic minute Monday morning at about $580 million, and that doesn’t count the purchases of stock futures.
“When officers of a company or people close to them exploit confidential information for personal financial gain, that’s insider trading — which is illegal. But we have another word for situations in which people with access to confidential information regarding national security — such as plans to bomb or not to bomb another country — exploit that information for profit. That word is ‘treason.’
“Why is profiting from insider information about national security decisions effectively a form of treason? First, it’s hard to think of a more fundamental principle for officials we entrust with important decisions, especially those that involve national security, that they or people they know should not be allowed to exploit their positions for personal gain.
“Second, financial trading based on what should be closely held secrets reveals information to current or potential foreign adversaries. To exaggerate a bit, but only a bit, who needs to bribe agents within the government, or recruit them with honey traps, when you can infer the same information by keeping track of transactions on futures markets?
“Finally, there isn’t that big a gap between using knowledge of national secrets to make lucrative financial trades and simply selling those secrets to the highest bidder. Once you’re breached the line that says you shouldn’t profit personally from access to information that is or should be highly classified, the line between trading based on state secrets and selling those secrets directly is a blurry one.
“One question that may be harder to resolve is the extent to which the possibility of insider trading may actually have influenced policy. Are decisions about war and peace in part serving the cause of market manipulation rather than the national interest? If you dismiss this as unthinkable, you just haven’t been paying attention.”
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