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Speaker A: Foreign. Has the gentle and precise cadence you might expect from a guy who has won a Nobel Prize in economics. But every once in a while, his careful tone gives way to a sick burn. All the way back in 2016, he called Donald Trump’s economic policies completely incoherent. For instance, in the last week, he’s used a different descriptor for Trump world shenanigans, economic treason. I wanted Paul to talk about this allegation, but before we get into it, let me just explain what he’s talking about here. Last week, you might remember that the President did this funny two step on Iran. He began by threatening to obliterate Iranian power plants unless the Strait of Hormuz was opened back up again. He gave a 48 hour deadline. Then Trump pulled back on his threat. But a few minutes before he did, the oil markets saw a massive spike in activity. A spike so huge that it seems clear somebody knew something.

Speaker B: Yeah. So there were two places where there were sudden. We don’t know who, but we know that somebody did big trades because we do have volume measures in financial markets.

Speaker A: This is Paul.

Speaker B: There’s the oil futures market, which is where people buy and sell contracts on a barrel of oil in the future, usually just the not very distant future. And somebody sold. The Financial Times went and estimated it sold about $580 million worth of oil futures just at 6:49am and the announcement on Truth Social came at 705. So right there.

Speaker A: Is that a time when trades are usually happening like that?

Speaker B: Yeah, not much. I mean, the futures market is open, but it’s very sleepy. That’s why we know that this was not a normal thing. You look at the minute by minute transactions and it’s sort of a little bit of stuff bouncing along and then there’s a big spike. And at that minute, somebody made a big trade. So it’s obvious that it’s one person or a cabal of a group of people, but it’s essentially one actor, somehow or other is doing this. And they’re simultaneous trades in these two markets, in the S and P futures market for stocks and in the futures market for West Texas Intermediate Oil.

Speaker A: In other words, it sure looks like closely guarded national security information was being used to make a quick buck. Paul reasons if a spy was giving our adversaries this kind of info, we would certainly call it treason. So why not use the same language? Now, this is also not the first time White House moves have been tied to suspicious trading patterns. Back when the President rolled out and then clawed back liberation Day tariffs. A year ago, some wondered if Trump was putting the country on a financial rollercoaster so that his pals could buy the dips. In other words, everything is happening out in the open, including those weird market moves.

Speaker B: Last week I first saw the WOW charts and the numbers on CNBC and they immediately flagged as saying this is really weird.

Speaker A: Does it say something that this has not been a bigger scandal in real time, that it’s been like a page two story?

Speaker B: I kind of assume that eventually we will know who plays those trades because that has to be, that can’t be that well concealed. But everybody knows that this Justice Department is not going to investigate it. It’s a weird thing that given the pervasiveness of the corruption and the certainty that nothing will be done until someone else is in the White House, it becomes a one day page two story.

Speaker A: Today on the show, a deeper look at how is making a killing off the war in Iran. I’m Mary Harris. You’re listening to what Next? Stick around. I want to focus in on what happened with the Iran situation and the oil futures. First of all, we’ve talked about the trades and I kind of have a dumb question. How does someone make money on a trade like this? So like, okay, we see a lot of activity right before an announcement is made. What happens then that results in me getting a bunch of cash?

Speaker B: Theoretically, the basic story is that, well, think about oil futures. You could sell a bunch of oil futures at 6:30 in the morning. I guess at that point. I don’t have the exact prices now, but let’s say that the price was $98 a barrel for WTI futures. And actually you could even sell oil futures you don’t have. You could basically just borrow them and then buy them back at 707 after Trump has made his announcement for $90 a barrel. So you’re ahead. You’ve sold stuff at 98 and you bought it back at 90. So the actual amount of money you make is only not the entire volume of the trade, but it’s a lot of money. It’s sort of the opposite on stock futures. If you were able to buy stock futures and then sell them again after stock prices had jumped on the announcement again, you may get a lot. You’re basically arbitraging between the price just before and the price just after. And in the case of oil that meant it went down. In the case of stocks, it went up.

Speaker A: Do we have a sense of how much money some person or persons made here?

Speaker B: Well, I think we Ought to be able to do that. And I haven’t actually done the number, but if we say there was something like a 10% movement in oil prices, so there was something, if it was $580 million of transaction volume, then somebody collected 10% of that. So let’s say it was $58 million.

Speaker A: Wow.

Speaker B: Yeah. And probably, I mean, it’s a bigger amount, but slightly small but smaller price change.

Speaker A: But let’s, you know, add to it a bunch in, in this, in the stock futures market, how would we know the identities of these traders? It seems like that is something that is knowable. Does that just rely on a completely different administration, a completely different securities and Exchange Commission? Like what would be the typical play here if we were in normal world?

Speaker B: Good question. And I don’t do financial investigations, but I’m pretty sure that at some level these orders have to be placed with somebody and they might have been anonymized, but it’s not usually. I’m pretty sure that if you did an investigation with subpoena power to require the financial institutions that have to have acted as brokers or something to reveal information, there would be a pretty clear trail pointing to it. But of course we don’t know that. Ordinarily these things are not public knowledge. That’s kind of how financial markets work in many cases anyway.

Speaker A: Could the trail dry up? I mean, I understand that maybe something won’t be investigated now, but I just wonder if time means that the investigation becomes less possible.

Speaker B: It’s possible. I guess I’m assuming that given that in the end all of this involves people and the people who, who have to have known somebody knew. Not just the person who placed the trade, but some people knew and that they can be tracked down. I could be wrong about that. But the people who placed these trades almost certainly have to have reckoned on the possibility that they would detract, that eventually they would be found out and they’re just operating on the presumption that they will never be held accountable. And maybe they think that we are effectively a one party nation now, or they just think that by the time time has passed and there’ll enough people to protect them. But it’s, it’s pretty amazing. I mean, if somebody suggested to me, look here, you can make a million dollars by using this deeply classified national security information and trust us, you’ll never be found out, I wouldn’t do it. Leaving patriotism morality aside, I would say, gee, I don’t trust that. I think I might be in trouble. But somebody Obviously did.

Speaker A: Yeah. Yeah. I mean, I think I want you to really fully lay out your case for this being more than insider trading because you did it really well in your substack where you were like, listen, there are like three things you need to know here. Can you do that with me? Like lay out why you think it’s a step above?

Speaker B: First of all, insider trading of this kind would be illegal. If you were a corporate insider who knew stuff about, you know, XYZ corporations finances and traded on that basis, that would be illegal too. But in this case, three things. First, the nature of the information. There is hardly anything that is more sort of sensitive as national security information of the kind that we’re going to call off a bombing mission 15 minutes from now. I mean that’s extreme. That’s more than knowing that there’s some unrealized losses on a corporate balance sheet.

Speaker A: Do you really think that foreign governments are at this point, with a magnifying glass looking at our markets and being like, huh, something might be about to happen?

Speaker B: Of course they are. That’s the easiest thing that doesn’t require any deep undercover operations. Of course, put it this way, the fact that financial media was on this almost immediately, if CNBC and the Financial Times are watching these things, how can you imagine that the Russians and the Saudis and the, and the Chinese aren’t watching it?

Speaker A: The second thing is that as I said, this is a, this does reveal information, but it’s not specific. Right. It’s just sort of, it’s like a market. It’s not like specific, it’s not operational information. Right.

Speaker B: It’s pretty close to. If there’s suddenly a large transaction and we’re in the middle of a war with Iran and the transaction is somebody betting that things will look less dire, then this is clearly signaling that Trump is going to de. Escalate in a few minutes. Right. So yeah, specifically that he was going to offer a four day window or something of non bombing.

Speaker A: Now it’s ten days, but by the time this airs it may be more.

Speaker B: Right. It’s not clear that you wouldn’t have been able to figure out the details of the policy. But I don’t think that the President has figured out the details of the policy either. But I think this was pretty specific.

Speaker A: You’re really making the case there that this actually is maybe the most reliable signal you would get, right?

Speaker B: Well, yeah, because the, you know what they say. I mean, I did say that, you know, that Trump having announced that he’s engaged in productive negotiations with the Iranian government. And I said, and also with an invisible six foot rabbit, because there’s no reliability about his pronouncements about what’s happening.

Speaker A: But if you see insiders, what looks like an insider making a large financial transaction, that carries much more weight than a simple statement, because you’re putting your money on the line.

Speaker B: Yeah. The third was a little bit less conclusive. But as I see it, the morality, the general nature of essentially trading on or selling national secrets through financial transactions is not really different from just plain selling the national secrets. Somebody’s willing to place a $580 million bet in the futures market on the basis of national security. How different is that from just plain selling that information to a foreign power or a domestic power.

Speaker A: Right. It shows what you value. You value making the money off of it.

Speaker B: Yeah. And for what it’s worth, I mean, this is pure speculation. My guess is this was not actually somebody close to the White House directly making the trade. This was somebody close to the White House selling the information to some large financial operator to make the trade.

Speaker A: Wow. You know, ProPublica did a bit of an investigation into individual staffers, government staffers, who seem to have been making suspicious stock trades in this second Trump administration. Basically, they, they looked at like this happened on Liberation Day. You seem to have traded 20 grand or 50 grand worth of stocks. What happened? It was interesting because part of what stood out to me was how hard it was to prove that these trades were made with insider information. They had to have a line in there that was basically like, we don’t, we don’t know that this is proof. We just know the timing looks suspect. Is it possible that what looks very suspicious to you and me is sloppiness somehow?

Speaker B: Well, the. Ordinarily I would have said that. Well, this is really hard to prove. And we still, you know, proving that any, that someone putting the finger on any individual is going to be very difficult. But the fact that this is, this is not a series, a number of transactions made within a day or so, but it is actually just a large slug of money basically all at once. And just 15 minutes before the big announcement, that could be a coincidence, but it’s also possible that a meteor will come crashing through my window and hit me right now. I mean, it’s not very likely. And so the circumstantial evidence for some kind of wrongdoing is really strong here.

Speaker A: We’ll be right back after a quick break. Traditional financial markets are not the only way. People seem to be getting rich using Inside information from this White House. There’s also the big, ugly world of online prediction markets, where websites like Kalshi and polymarket, where you can bet on pretty much anything. One of the most glaring examples of potential insider trading happened in early January, just hours before President Trump ordered the military to seize Venezuelan President Nicolas Maduro. A Polymarket user placed a $32,000 bet that Maduro would be out of power by the end of the month after the Venezuelan president got nabbed. This user was looking at a payday of more than 400,000 bucks.

Speaker B: And it was odd. And you can actually see this in the prices because the poly market is much smaller. What do you mean when you say that the volume of transactions, whoever it was that sold oil futures, did not actually move the futures price, at least not visibly, because that’s a big market. And so even, even $580 million is not enough to really move the price. The price plunges 15 minutes later. But you could actually see that there was a visible uptick in the probability that Maduro would not be there before the special forces went in, as measured by the market, which said that somebody was placing a bet big enough to actually move the market price on polymarket.

Speaker A: It’s suddenly getting more or less expensive to make certain bets.

Speaker B: That’s right, yeah. The Polymarket at any given time, I mean, I use it to just kind of as a measure of conventional wisdom. You look at what is the price of yes, this will happen versus no, it won’t happen. And that gives you a kind of a market estimate of the conventional wisdom about the probability that this thing either will or won’t happen. But you can actually see those prices move in advance of policy decisions, which is saying that somebody is leaking. But in a way there was some misplaced. People have gotten all upset about the prediction markets and about the incentives and the possibility for profiting from insider government information that they offer. But I think that everyone who says that is missing what we’ve just seen, which is there are enormously bigger opportunities for malfeasance in conventional markets and futures markets. All financial markets are bets on the future. And somebody who knows the future a little bit can make a lot of money.

Speaker A: It’s interesting. It’s like you’re almost saying, like, this is not. This is just an indicator of something bigger. What’s happening with Calshi or polymarket?

Speaker B: Oh, yeah. I mean, I, I don’t like the fact that it’s become so frictionless to, To, to, to engage in malfeasance, but it’s relatively penny anti malfeasance compared with what just went down in futures markets.

Speaker A: Yeah. So interesting to me because it’s like, when I think about. I think what’s frustrating about these stories is the feeling of helplessness. Like. Like this is just happening and there’s nothing to be done about it. And with the polymarket and Kalshi stuff, you did see like a bipartisan group of senators get together, get some legislation together barring lawmakers, the president, congressional staffers from trading on insider information on these prediction markets, which is interesting, but in some ways what you’re saying is like, yeah, there’s so much else out there to address and this is really just like the small change.

Speaker B: Well, but this is a. Let me say this, this is a. Under any past administration, and I hope any future administration, this kind of thing would be inconceivable. I could imagine that under a, you know, name your president. But, you know, under the AOC administration or whatever, you know, that, or even a Republican not named Trump can. Trading based on national security information would be a good way to land yourself in prison. And you really would not expect to see that happening. Whereas bets on polymarket, they’re small change, but they’re also the kind of thing that probably can get away with. And therefore I can see that there’s a concern that there might be really bad incentives coming out of these prediction markets that don’t normally happen in futures markets. Just because of the enormity of it would make it not happen.

Speaker A: Yeah. I mean, Donald Trump did this interview with the New York Times where he talked about why he didn’t pull out of his business interests this time around.

Speaker B: Yeah.

Speaker A: And he basically said, I found out nobody cared. Which is notable because he’s making so much more money this time around. I think the New Yorker is tallying it up like $4 billion he’s made off of various things, whether it’s bitcoin or, you know, memberships at Mar a Lago. He’s raking it.

Speaker B: Yeah. I will say that’s. That’s first of all, I mean, that’s something we used to kind of ridicule, you know, Latin American polities where presidents would always come out of office immensely richer than they came in. And that doesn’t happen in America. Except now it does.

Speaker A: Yeah.

Speaker B: And that is incredible.

Speaker A: You were guaranteed a book deal as a former president.

Speaker B: That’s right.

Speaker A: Lobbying money, I don’t know. But not this.

Speaker B: I mean, I think Harry Truman was actually kind of poor afterwards. People had to sort of Step in to help him and us. Grant had to write his memoirs. Book deals easier if you’re actually a good author. But anyway, the sick bird. This is completely outside the realm of what we used to do, and yet it has become normalized. And it’s also worth pointing out, if you look into now, there’s a much more detailed reckoning the New York Times did of the Trump profiting from office. And it is worth asking, who is funneling this money to Trump and his family?

Speaker A: You’re saying, like, who are the enablers?

Speaker B: Well, not just the enablers, but who is actually buying Trump crypto? Who is actually making large gifts? And it turns out a lot of it we don’t know because we don’t exactly know who’s buying the crypto. But actually the biggest sort of visible shear and probably a substantial part of the stuff that we can’t pin down is actually Middle Eastern petro states. So if you want to ask, you know, if you want to worry about the national security implications, think about the fact that Saudi and Kuwaiti and United Arab Emirates interests are clearly shoveling substantial amounts of cash at the, at the family of the president.

Speaker A: Yeah, I mean, I was already worried because of the reports that, you know, Donald Trump was taking MBS’s call. Well, yeah, on it. For advice on the Iran war.

Speaker B: Yeah, well, and mbs, you know, controls the, the Saudi sovereign wealth fund that has invested $2 billion in Jared Kushner’s firm. So if you want to ask, you know, who is, who is paying the President, it’s not just as, you know, a lot of dubious money, but it looks like it’s a lot of dubious Middle Eastern money.

Speaker A: Well, they were also funding, for instance, the takeover of cnn. Yes, I know the whole like. So it becomes like you’re creating an atmosphere of corruption that really is everywhere. It’s not just in the White House.

Speaker B: Yeah. Sometimes I go back and read old John Kenneth Galbraith books about the corporate order and it seems incredibly naive because he talked about how, well, personal corruption is not an issue anymore. These are all corporate bureaucrats. And the ide idea that individuals are profiting from, that’s, that’s not. This is the corporate state. And no, actually we’re back into, into, you know, we make, we make the Gilded Age corrupt corruption look like it was trivial.

Speaker A: Paul Krugman, I’m so grateful for your time. Thanks for coming on the show.

Speaker B: Okay, thanks. Good luck.

Speaker A: Paul Krugman is a Nobel Prize winning economist. You can find his writing on Paul Krugman substack.com if you like what you’re hearing and you’re looking for a way to support us, the best way to do that is to subscribe to Slate Plus. Last week I spoke with Twitch streamer Hassan Piker about his trip to Cuba and the cult like tendencies of the Maga movement. That extended interview is available now, but only in our plus feed. Good reason to join. Log on to slate.com what next plus to sign up and and listen. All right, that’s the show. What Next is produced by Alana Schwartz, Rob Gunther, Anna Phillips and Madeline Ducharme. Paige Osborne is the Senior Supervising Producer of what Next and what Next tbd. Mia Lobel is the Executive Producer of podcasts here at Slate. Ben Richmond is our Senior Director of Podcast Operations and I’m Mary Harris. Go track me down on Blue Sky. I’m Ary Harris. Thanks for listening. Catch you back here next time.