Last week, President Donald Trump made two ridiculous moves on Iran. He began by threatening to “destroy” Iran’s energy plants unless the Strait of Hormuz was safely opened. He gave a deadline of 48 hours. Then, before that deadline came, Trump backed down. But minutes before he did, the oil markets saw a huge spike in oil prices—so big that it seems clear that someone knows something.
It appeared that heavily guarded national security information was being used to make a quick buck. As Nobel Prize-winning economist Paul Krugman argues, if a spy gave our adversaries this kind of information, we would surely call it treason. So why not use the same language now?
Nor is it the first time White House moves have been linked to questionable business practices. When the president went out and brought back the “Independence Day” rates last year, some wondered if Trump was putting the country on the hook so his friends could buy dips. In other words, everything here happens in the open.
On a recent episode of What Next, host Mary Harris spoke with Krugman about how people are killing the war in Iran. This article has been edited and shortened for clarity.
Mary Harris: I want to focus on what happened with the situation in Iran and the future of oil. How does one make money with a business like this? We see a lot of activity before the announcement is made. What happens now that I get more money, in theory?
Paul Krugman: You can sell a lot of oil futures at 6:30 in the morning at, say, $98 a barrel, and, of course, you can also sell oil futures that you don’t own. You can actually borrow them and buy them back at 7:07, after Trump makes his announcement, at $90 a barrel. So he goes ahead. You sold items for $98 and bought them for $90. The actual amount of money you make is not the total amount of the business. But it’s a lot of money. Basically you have arguments between the price before the time and the price right after.
Do we have any idea how much money the person or people made here?
I haven’t run the numbers, but let’s say there was something like a 10 percent movement in oil prices, and there was $580 million in transaction volume, then somebody collected 10% of that. So let’s say it was $58 million.
How would we know who these traders are? It seems to be a popular thing. Does that just depend on a completely different system, a completely different Securities and Exchange Commission? What would a normal game be like if we were in a normal world?
I don’t do financial research, but I’m sure that in some cases, these instructions have to be placed on someone. They may not have been identified, but I am sure that if you have researched the power of subpoena to seek financial institutions that should act as brokers to disclose information, there will be a clear path that points to it. But of course, we don’t know that. Normally, these things are not public knowledge. That’s how financial markets work in many cases.
Can the trail be dry? I understand that maybe something can’t be researched now, but I’m just wondering if time means less research?
It is possible. The people who placed these trades really have to face the possibility that they may be tracked, that they will eventually be found, and they are working on the fact that they will never be held accountable. Maybe they think we’re a one-party state now, or they think when it’s over there will be enough people to protect them, but it’s very surprising. If someone suggested to me, “Look here, you can make a million dollars using this national security information, and, trust us, you won’t be found,” I wouldn’t do it. Leaving patriotism and morality aside, I used to say, “No, I don’t trust that.” But obviously someone did.
Can you make your case for this more than insider trading? You have done very well in your life Substack.
This type of insider trading would be illegal. If you were an insider who knew about the financials of XYZ corporation and you were sold as a result, that would be legal. But in this case, there are three things. First, the nature of the information. There is absolutely nothing more sensitive and protected. That goes beyond knowing that there are unexpected losses on the balance sheet of the business.
Do you really think that foreign governments, at this point, have a glass of light, are looking at our markets and think that something might happen?
Of course they are! It’s the easiest thing. It does not require any deep secret operation. Put it this way: The fact that the financial media was there immediately—if CNBC and the Financial Times are watching this stuff, how can you imagine that the Russians and the Saudis and the Chinese aren’t watching it? The second point is that this is revealing.
But it’s not a direct issue, is it? It is not a specific issue. It’s idle news, right?
Very close to! If all of a sudden there’s a big operation and we’re in the middle of a war with Iran and the operation is a bettor that things will look very low, then this clearly indicates that Trump will go down in a few minutes, right? And specifically he would give a four-day window, or something about not having the bombs.
Are you making a case there that it’s probably the most reliable brand you can find?
Yes. While Trump has announced that he has entered into productive negotiations with the Iranian government, there is no credibility in his statements about what is happening. But if you see what looks like an insider making a big financial deal, that carries more weight than a simple statement.
Because you are putting your money on the line.
The third one was a bit vague, but as I see it, the behavior, the general practice of selling or selling state secrets through financial transactions is not really different from just selling state secrets. Someone is willing to bet $500 million on the futures market on the basis of national security. How is that different from simply selling the information to a foreign government? Or home energy!
It shows what you value. You appreciate making money from it.
Yes, and for what it’s worth, this is pure speculation, but my guess is that it wasn’t actually someone close to the White House doing business directly. This was someone close to the White House who was selling information to a big financial trader to make a deal.
ProPublica has done little research on government employees who appear to be doing questionable stock trading in this second Trump administration. In fact, they looked, like, This happened on Independence Day, it looks like you sold $20,000 or $50,000 worth of stocks. What happened? It was interesting because part of what struck me was how difficult it was to prove that this business was done with insider information. They should have a line there. It was basically like, “We don’t know that this is proof—we just know that the timing looks suspicious.” Could it be that what seems questionable to you and me is somehow lazy?
Normally, I would have said, “It’s hard to confirm this, and putting anyone’s finger on it would be very difficult.” But the truth is that this is not the number of transactions made within a day or more, but in fact it is a large amount of money, in fact at the same time, just 15 minutes before the big announcement. That might be a coincidence, but it’s also possible that a meteor is going to crash through my window and hit me right now. It’s not very easy. And so the circumstantial evidence of some kind of error is very strong Here.
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