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Markets not manipulated?

May 22nd, 2010 · 3 Comments

Read this before you judge…

When Germany took measures against naked short-selling (you know, the kind which enables short-sellers to sell what they don’t own and haven’t even borrowed yet, rife with possibilities of abuse) we were watching the talking heads on Bloomberg putting an incredible negative spin on it. So much so that we could hardly believe it.

We mean, naked shorting is illegal in most places, although typically with the kind of regulation (and enforcement) that still leaves possibilities for abuse. Germany was merely catching up, and with the naked shorting in the more illiquid CDS markets whacking the bond markets of the more vulnerable euro country members like Greece and Portugal (a case of the tail wagging the dog), one can have sympathy for the Germans wanting to put an end to this, as they pick-up most of the tab.

Apparently, according to Phillip Davis, CNBC was far worse even. And really, he makes quite a convincing case (and certainly isn’t a nobody).

We think that there is a convincing case for reigning in the beast which has been created, under-regulated financial markets. We don’t think there is a net benefit to society from that, and the damage it can do is there for all to see (although there are those that don’t want to see because their ideology prevents it or they talk their own shop).

We once again refer you to that extraordinarily clear article from Simon Johnson, former chief economiest of the IMF for a wider perspective on these issues.

Tags: The Markets

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