Those were the words spoken by John M. Youngdahl, senior economist at Goldman Sachs, after he was tipped off before the official announcement that the US Treasury would stop selling 30-year bonds. Those words could mean a penalty of a quarter million dollars and 33-41 months in jail. After Youngdahl’s words, Goldman Sachs bought almost $318 million in bonds in eight minutes. The man who tipped off Youngdahl (and had been doing so for years) pleaded guilty back in September to felony charges of insider trading of goverment property and conspiracy.
This is a very clean case that nicely illustrates how hopeless and arbitrary it is to attempt to criminalize knowledge and speculative actions based in part on such knowledge. What the government is calling a felony is really a victimless crime. That traders at Goldman Sachs correctly anticipated an event 20 minutes in advance of an official annoucement harmed no one; it only brings about a market clearing sooner than would otherwise be the case. The only conceivable wrong-doing here was that of the person who attended the Treasury briefing and spilled the beans after, but even this would be contract violation, not a felony. As Rothbard wrote, the laws merely give the government a hunting license to go after anyone it doesn’t like. See Mises.org on Insider Trading.
