STAFF NEWS & ANALYSIS
The Insider Trading Promotion
By Staff News & Analysis - November 26, 2010

Insider-Trading Case Accelerates With 'Expert' – Firm Arrest … A broad U.S. crackdown on insider trading accelerated as the government charged an employee at an expert-network firm with conspiring to leak confidential information. Prosecutors also won a legal victory against a founder of the Galleon Group hedge fund that cements their ability to use wiretaps against Wall Street investors … The arrest Wednesday of Don Ching Trang Chu and the criminal complaint filed in federal court in Manhattan also show how prosecutors are using cooperating witnesses from their case against Galleon's founder, Raj Rajaratnam, to help them bring a separate and larger insider-trading case that is expected to continue unfolding between now and the end of the year. Mr. Chu, 56 years old, is accused of providing inside information on a technology company to one of those cooperators, a hedge-fund manager, and of arranging meetings for the manager with public company employees to receive nonpublic information. – Wall Street Journal

Dominant Social Theme: Catching the real crooks, darn it.

Free-Market Analysis: The criminalization of communication continues apace. More "insider traders" are about to feel the full brunt of US justice. It is kind of sickening, actually, to watch it play out, given what the US government chooses NOT to prosecute or even investigate. And what is that? We've combined it for efficiency's sake. Take a deep breath. In the past few decades, US government agents and politicos under the watchful eye of the Anglo-American power elite, have, based on our observations …

… irradiated parts of the Middle East, caused the death and suffering of untold thousands, including their own troops; sent unmanned drones into houses containing women and children; gunned down reporters and civilians from helicopters; refused to reinvestigate 9/11 despite evidence that shows that military intelligence and the Bush administration lied repeatedly about it; created a Homeland Security department that spends further billions "keeping America safe" with the flimsiest of rationales; distributed backscatter scanners that produce an unknown amount of radiation aimed at recipients; further poisoned senior citizens and children with vaccines that are evidently and obviously unsafe; attacked the natural health and vitamin industry with an eye toward making natural nutrition illegal; prosecuted medical inventors who have apparently created cures to numerous supposedly incurable diseases; participated in the growth and dissemination of Afghan heroin (overseas and likely at home); pursued a drug war that has poisoned addicts and ruined the lives and families of millions and undermined whole countries (Colombia and Mexico most recently); instituted the unnecessary and invasive "war on terror" and suspended civil liberties to do so; exhibited strange intimacies with "terrorists" who supposedly had in mind setting off explosives on planes; advocated torture and rendition as a matter of policy; declined to investigate more than US$2 trillion in mislaid Pentagon funds; misspent more trillions on failed, bloody wars; appropriated US$700 billion from the public treasury to pay off crony "banksters"; spent another US$2-10 trillion (no one knows how much) on illegally bailing out banking entities worldwide; evidently and obviously manipulated the gold and silver markets, costing investors untold billions if not trillions over at least two-three decades; removed the dollar (and the pound) from the gold standard and further debased the currency; created a tax structure that allows corporations to opt out but endlessly punishes and threatens the middle class; allowed the Fed to fix prices over a century long period resulting in vicious recessions and two major, worldwide depressions (including this one); bankrupted businesses and whole industries with the ongoing, debt-based, fiat-money business cycle; put millions of families out of their homes during the current downturn; created ongoing, never-ending fear-based promotions that are provably false, including global warming which has been buttressed by phony academic and UN statistics; produced a variety of certifiably manipulable electronic voting machines that lack a verifiable voting trail – resulting in an unknown amount of fraudulent elections; conspired with foreign governments to create a series of "trade" treaties that have sucked wealth and treasure from the nation; attempted to build a NAFTA "superhighway" through the center of the US, thus bifurcating and further balkanizing it with an eye toward creating a North American super state consisting of Canada, America and Mexico; created a judicial caste system that has created a slave society of 3-6 million inmates working within a prison-industrial complex; continued to pursue unconstitutional wiretapping and other privacy-invading technology via 16 separate intelligence agencies that serve the one-world Anglo-American agenda by intimidating critics and harassing libertarian-leaning legislators …

Add up the figures and it seems the US government itself, in cahoots with private industry (including the military industrial complex) has wasted, misdirected or misappropriated something close to US$50 trillion (or more) in the post-World War II era.

None of these funds are being sought. There are no investigations, only more laws to ensure that the criminal malfeasance of the perpetrators can never be legally challenged. In fact, it seems fairly obvious (to us anyway) that America has long since departed from what most would consider an honorable or decent society. The "law" in the US is pretty much what you can make of it and with the exception of a few high-profile cases is applied in a haphazard if brutal way. Just look at the way Marc Rich was publicly chastised (to cite one small example) after Rudy Giuliani used his platform for self-serving gain by bringing baseless and unprecedented RICO charges against Rich for what would have otherwise been a civil matter at best.

And now there is insider trading. In this case, those who are accused will likely pay with their lives (given that almost any wrongdoing in the US is now punishable by at least 20 years in prison, especially white collar crime). Certainly they will stand accused (no doubt after years of unconstitutional wiretapping) of a number of violations. And similar to the Rich case, which should have never existed in the first place in our opinion, these insider-trading targets will be slandered and tried in the court of public opinion and their collective guilt will be a forgone conclusion.

Of course this is to some degree a question of timing. Had these individuals spent the bulk of their professional years in the 1950s, 60s and 70s on Wall Street, they would not have been subject to the various charges. Insider trading only began to be prosecuted so far as we can tell in the 1980s. The law "evolved."

Insider trading as we have argued before is a terribly cynical legal philosophy, as it posits that some people have more "information" about the markets than others and therefore have gained an unfair advantage. From our point of view insider trading is more of a power elite promotion than a crime. The public is to be led to believe – through endless promotional propaganda whenever one of these cases is publicized – that law enforcement is doing its best to punish the Wall Street crooks in order to keep US markets efficient, honest and transparent.

The real problem with Wall Street is that like virtually every other part of American society, a century or more of relentless centralizing has turned into a command central for virtually every major US deal and plenty from abroad. The damage was done, of course, during the Civil War. Once states no longer had the option of leaving the union, the powers-that-be were free to mold society as they wished. Education, health care, municipal government and the securities industry were only a few of the areas that began to consolidate. The NYSE itself went on a buying rampage and purchased about 16 stock exchanges in several decades' time. The centralization of order flow was no accident but was a way for money power itself to gain control over America's industrial viscera.

Modern Wall Street, then, is a creation of a bloody military victory and subsequent relentless pressure to centralize order flow – a campaign that reached its ultimate expression in the regulatory reconfiguration after the Crash of 1929. With the creation of the SEC and NASDAQ, the current system was basically frozen into place, cemented with rules and regulations that ensured only a privileged few would have access to the tremendous wealth that comes from positioning oneself at the center of securities trading. Simply to work on Wall Street is to, in a sense, participate in a kind of generalized "insider trading."

We find this latest eruption of insider trading to be even more cynical than usual. The power elite's chosen method of dealing with irregular eruptions of public anger about the current money system, is to relentlessly publicize the sins of the "free-market." Private industry is reflexively blamed with the intention of absolving government from any wrongdoing. This time its different. The relentless truth-telling of the Internet has shown many people clearly the incestuous relationship between government and the private sector in the 21st century. The power elite has been caught off guard.

The mercantilism that drives most major industry has been revealed – the elite's operative construct which is to build and centralize government power in order to pull its levers for its own benefit. Under no circumstances can government be blamed for what has occurred. Government is to be the solution, not the problem. If there WERE problems with government oversight, then those problems need to be corrected and government will need MORE power so that abuses will not occur next time. (Of course, actually they will – and they will be worse.) Scapegoats have to be found. Blame has to be re-established in the right places.

Yes, with central banking under attack, with government generally revealed in the 21st as incompetent and corrupt, with regulatory democracy itself being questioned, the elite is desperate in our view not to lose its mercantilist privileges. What better way to distract the populace than the spectacle of a vast "insider-trading" scandal. It shows that government officials are on the job, that "fat cats" are being punished and that the markets are "fair" after all, because influential people are being caught up in criminal dragnets. No doubt they will be "perp walked" in order to show the public that Wall Street is once again a safe place for it to deposit money.

A thousand – a million – insider trading prosecutions would not "clean up" Wall Street even a little bit. The problem in fact is government itself (and those shadowy few who stand behind government) wielding the enormous power enshrined and concretized in Wall Street through a hundred years of misguided (cynical) financial regulation.

It is the centralization of order flow – virtually mandated by the current regulatory structure – which provides the opportunities to begin with. It is the corrosive and absurd booms and busts of fiat money that offers such tremendous and irresistible profits. It is the grasping, manipulative hand of the power elite that has structured Wall Street (and British and European bourses) for maximum profit for the fewest possible players.

The sham of these insider-trading arrests will not change a wit of the underlying corrupt structure nor will they prevent any further types of corruption, as the system itself is impossibly corrupt. The corruption is institutionalized by regulatory fiat along with the order flow. Insider trading from our point of view cannot be construed as a crime under any normal definition of the law. There is not even an identifiable victim. But it is easier to convict and sentence individuals for making paltry millions than to prosecute a shadowy handful for absconding with US$50 trillion. Perhaps the numbers are too large.

After Thoughts

The rule of law in America and throughout the West has been as corrupted as any other part of society. It is now more of a promotion than an exercise in judicial problem solving. It is a way of blaming the marketplace rather than an ever-more oppressive government.

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