The Hopelessness of Insider Trading Prosecutions

Rep. Bachus faces insider-trading investigation ... The Office of Congressional Ethics is investigating the chairman of the House Financial Services Committee over possible violations of insider-trading laws, according to individuals familiar with the case. Rep. Spencer Bachus (R-Ala.), who holds one of the most influential positions in the House, has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation's banking and financial services industries. The Office of Congressional Ethics, an independent investigative agency, opened its probe late last year after focusing on numerous suspicious trades on Bachus's annual financial disclosure forms, the individuals said. OCE investigators have notified Bachus that he is under investigation and that they have found probable cause to believe insider-trading violations have occurred. – Washington Post

Dominant Social Theme: You see! The US justice system is equitable after all ... Even congressmen are not immune from being prosecuted ...

Free-Market Analysis: Insider trading is important to prosecute, we are told, because it makes the markets less "fair." Someone with access to information that someone else doesn't have is taking advantage of those people and somehow making a profit at their expense.

This "law" has never made much sense, but most laws and regulations make little or no sense. In fact, every law and regulation is a price fix, forcing people to do certain things under penalty of imprisonment or worse.

Thus every law fixes a price, mandating a transfer of wealth from those who made it to those who didn't and don't really know what to do with it. Central banking itself is nothing but a massive price-fixing and wealth-transfer operation.

In the case of central banking, the wealth flows from ordinary citizens and savers to the richest among us. The proximate rationale for this wealth transfer is that the financial system itself will implode if the biggest banks and financial firms are not propped up.

But this justification is nonsensical. The West is facing an outright depression because a handful of elite bankers have propped up their cronies using the phony rationale that certain entities are "too big to fail."

They are NOT too big to fail. Central banking monopoly funny money has stimulated Western economies to absurd heights, causing first a boom and now a terrible bust. Yet the insolvent companies themselves have been propped up once more with the same fiat currencies.

As a result, lenders have no idea who is really solvent and what industries are healthy and what industries are not. This is no hypothetical issue, either. The US government has propped up failing General Motors with billions. It is seen as a company on the "comeback" but is it really? Who can tell?

Nobody knows who to do business with and as a result the system is effectively frozen, with lenders refusing to lend and companies refusing to hire.

The current inflationary depression is a direct result of central banking policies. And yet central banking in the US and abroad is the "law of the land." Why is something so destructive not only legal but nestled at the heart of Western industrial economies?

Well ... because the Anglosphere power elite that is trying to take over the world wants it that way. Central banks are integral to their schemes because central banks provide the funding for them.

But stock markets are important, too. Stock markets allow the elites to monetize their financial and industrial promotions while sucking money out of the middle classes – ever the historical enemy of the elites.

This is one reason why stock markets must be seen as "fair." If they are not, then middle classes will not "invest." Another reason that elites need stock markets to be accepted is that they provide a rhetorical antidote to inflation.

Central banks are inflation makers and if the elites cannot suggest a solution then people will grow even angrier at the system. And they are plenty angry. It has occurred to many of them, especially in the US, that the dream of retiring wealthy with a portfolio of solid "investments" is more of a mirage than a reality.

In fact, the idea of stock market investing for many is nothing but a kind of dominant social theme. People have been stampeded into the stock market through a clever manipulation of fear and greed. And now that Western-style is being viewed with more skepticism than almost ever before, it is time to trot out new memes.

The biggest of these memes is the resentment-of-the-wealthy meme. This promotion seeks to redirect people's anger at being lied to into a healthy hatred (from the top elites' point of view) of powerful people generally and especially financiers.

Ironically, many of these powerful people work for the top elites in one capacity or another. But when it comes to protecting the larger enterprise, those great central families that want to run the world are quite unsentimental about sacrificing their enablers and associates, especially lower level pols and bankers.

And thus the insider-trading meme has been powered up. It is likely another stick to use to beat lower-echelon elites upside the head. Beat hard enough to create a din that drowns out the larger systemic problems. That's the plan anyway.

We're not sure it's going to work in this era of Internet activism. The Internet Reformation, as we call it, has enlightened many about the Way the World Really Works. Class envy is one more tool in an increasingly empty toolkit but it may not be an effective one this time round.

Certainly the concept of insider trading is a fairly insubstantial one. It doesn't stand up to even a breath of scrutiny. Markets OPERATE on insider information. Everyone seeks it and everyone tries their best to trade it on it.

Trading advantages can be found in numerous ways. Some people are simply mathematically inclined and are better at stock trading than others. Some market participants may have the funds to buy top-end charts and graphs that show market trends more clearly.

And what about the Wall Street firms themselves that have the wealth and savvy to buy top-of-the-line computers and hire the best minds to run them? What about companies that write proprietary software or operate systems that utilize artificial intelligence?

All of the above constitutes forms of insider information that gives people access to insights that others do not have. Some of this information is a good deal more powerful than run-of-the-mill public-company "insider info."

Insider information was not even penalized 50 years ago. Today, it's big news in the US and throughout the West – and is becoming an issue in China as well. But what this focus really tells us is that the legal and regulatory structure surrounding the financial markets is breaking down.

When nonsensical laws are put into practice and enforced brutally but with little intrinsic logic, then one can begin to predict the larger marketplace itself is in systemic jeopardy.

In fact, this is true. Western equity markets are being manipulated mercilessly these days – often by trading cliques that have penetrated government and seek to line their own pockets by legally trading via extra-curricular authority. The US "plunge protection" team is a good example of this.

Insider trading is an entirely bankrupt and indefensible legal paradigm. But its ubiquitousness based on a foul brew of ignorance and class envy is a harbinger of much worse to come. One simply cannot legislate fairness.

Conclusion: When states and cultures set down this path – often at the behest of manipulative elites seeking to present a sense of fairness that doesn't exist – the larger fabric of civil society is surely jeopardized. Societies organized around lies inevitably rot and topple.