60 Seconds Report on Congressional Inside Trading and a Few Mises Pieces

60 Minutes has come out with a great report that highlights specific acts of "insider trading" by members of U.S. Congress:


Be sure to check out former Speaker Nancy Pelosi's spectacular failure at trying to shrug off the accusations of insider trading around the 10:00 mark.  The pattern of denial presented is a clear sign something is amiss.  Power centers always attract the worst of individuals as Hayek taught.  That members of Congress would use their authority over the financial sector to make a quick buck on the side is anything but surprising.  Insider trading, which is essentially the quick disbursement of market information by individuals closest to select industries, shouldn't be illegal by libertarian standards.  This has been outlined numerous times by the likes of Robert P. Murphy and John Tamny.  This particular passage by Murphy points out the sheer absurdity of insider trading laws:

For example, suppose a Wall Street trader is at the bar and overhears an executive on his cell phone discussing some good news for the Acme Corporation. The trader then rushes to buy 1,000 shares of the stock, which is currently selling for $10. When the news becomes public, the stock jumps to $15, and the trader closes out his position for a handsome gain of $5,000. Who is the supposed victim in all of this? From whom was this $5,000 profit taken?

The $5,000 wasn't taken from the people who sold the shares to the trader. They were trying to sell anyway, and would have sold it to somebody else had the trader not entered the market. In fact, by snatching the 1,000 shares at the current price of $10, the trader's demand may have held the price higher than it otherwise would have been. In other words, had the trader not entered the market, the people trying to sell 1,000 shares may have had to settle for, say, $9.75 per share rather than the $10.00 they actually received. So we see that the people dumping their stock either were not hurt or actually benefited from the action of the trader.

When it comes to Congressional insider trading however, the dynamics drastically change.  Congress members have unique access to information by the very fact that they dictate much of how the economy behaves and reacts to regulations and legislation.  And, if you can imagine, Congressional members have exempted themselves from prosecution for insider trading activity.  How convenient.

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So it looks like I am Mr. Popular today as I have one piece published at the Ludwig von Mises Institute and LvMI of Canada including a blog post.  From "State of Incarceration: Spontaneous Order Behind Bars":

Like the system of private law and property that developed during the settlement of the American West, the Mexican Mafia's creation of governance is demonstrative of man's ability to develop protective services among the failures of existing governments. In the case of the "not-so-wild" American West, property protection and order were developed to ease the living conditions of settlers in the absence of any governmental structure. In the Mexican Mafia's case, protection and arbitration were not only responses to a lapse of government enforcement but also mechanisms for violent exploitation. The two instances, though similar as emerging orders, yielded two different outcomes: one that decreased the amount of violence through volunteerism and one that utilized state-like force to maintain control.

Though it's a shame the Mexican Mafia's system of law and order devolved into coercion, Skarbek's case study is an important tool to analyze an instance of spontaneous order, as mankind, possessing infinite desire, continues to transform and adapt to changing circumstances.

Now if only our elected leaders appeared as the tattoo-laden thugs whose behavior they inspire, perhaps the public would be more reluctant to endorse their wielding of coercive power and authority. After all, skin-deep appearances are the only thing separating our friend pictured above from those who legislate in the confines of Congress, state capital buildings, or city hall.

From "The Federal Reserve A Populist Movement? Puhhhlease":

The Federal Reserve bill was not a product of populism but of a coordinated effort between members of the Rockefeller, Morgan, and Kuhn, Loeb interests along with the backing of academia and government proponents.  Though the inflationary populism that destroyed the Democratic Party of old during the 1896 presidential election raised the veil of public endorsement for central banking, it was ultimately a back room deal between the Morgan and Rockefeller family to endorse candidate and supposed gold standard-backer William McKinley.  Once McKinley secured the White House, the faux-grassroots campaign began to reform the inelasticity of the gold standard to one controlled by the Morgan-Rockefeller alliance. Success came as the Federal Reserve, a government sanctioned cartel which garners the benefit of coordinated inflation while offsetting the disastrous consequences to the lower and middle class, was established and has since reigned supreme with the guns of Washington always at its backing.

And my blog post "Delong Attacks Mises and Gold Standard":

Holy strawman! Check out Berkley economist/Keynesian heartthrob Brad Delong’s attempt at equivocating Mises’ criticism of fiat currency with the labor theory of value:

The point of view underlying von Mises’s–and von Hayek, and Marx, and Ron Paul–complaint against fiat money in general and monetary management of the business cycle in particular is this: that value comes from human sweat and toil, not from being clever. Thus it is fine for money to have value if it is 100% backed by gold dug from the earth by sweat and machines and muscles (even if there is no state of the possible future world in which people actually want to exchange their pieces of paper for the gold that supposedly backs it).

So how does Delong come to this delusional conclusion?  From a lone quote via The Theory of Money and Credit:

Attempts to carry out economic reforms from the monetary side can never amount to anything but an artificial stimulation of economic activity by an expansion of the circulation, and this, as must constantly be emphasized, must necessarily lead to crisis and depression. Recurring economic crises are nothing but the consequence of attempts, despite all the teachings of experience and all the warnings of the economists, to stimulate economic activity by means of additional credit…

Funny, I am not making the connection between being against fiat currency regimes and being for the labor theory of value.  What I see is simple explanation of Mises’ groundbreaking Austrian Business Cycle Theory in that fiat driven credit booms shouldn’t be countered with more cheap credit come the inevitable bust.  Such prolongs the downturn and prevents the necessary market correction.
Mises did not push for a gold standard, or any government imposed currency standard, but merely recognized that the precious metal had been the market’s chosen currency for thousands of years.  From Human Action:

Men have chosen the precious metals gold and silver for the money service on account of their mineralogical, physical, and chemical features. The use of money in a market economy is a praxeologically necessary fact. That gold — and not something else — is used as money is merely a historical fact and as such cannot be conceived by catallactics.

In regard to value, Mises wrote:

Value is not intrinsic, it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment. Neither is value in words and doctrines, it is reflected in human conduct. It is not what a man or groups of men say about value that counts, but how they act.

I will end by pointing out this hilariously ironic video of the old G.I. Joe television show that eerily predicts the kind of monetary policy fiat, central bank driven economies are facing:

At least we now know where Bernanke gets his primary influence.