Naked short selling
===================

Saturday 29 May 2010 17:57

The blog freiheitdenken.org usually has good stuff,
but I'm not buying Robert P. Murphy's crap.

The economic theory is all OK, I'm not arguing with
that. But what we're dealing with here is the
reality of a financial industry that somehow
translates that theory to the right to make a
living out of how the economy organizes itself.
Traders aren't people who are willing to get
another job when there isn't enough trading to do
to make a living, they will just keep on trading to
make more money even if the economy doesn't even
need that trading to function properly. In theory
the economy needs traders to determine the price of
stuff, but do we really need to support a whole
industry of traders to determine the price of stuff
hundreds of times per second with the accuracy of
fractions of a cent? No, only other traders need
that so they can make more money using that data.
The transparency of the system has gotten to the
point where depending on the scale you're operating
at you're looking at a brick wall or through
intermolecular space. For those who can afford to
monitor the markets on the level of intermolecular
space it's all transparent, while for the rest of
the world it's about as transparent as a brick
wall. It's hard to justify what's happening when
only a couple of organizations can see through the
brick wall, and call that transparency.

"Bill Gates could spread rumors about Microsoft and
begin unloading his huge position." I hate Bill
Gates as much as the next man, but compared to
price manipulating traders he's a decent guy. And
what strikes me is that this example shows Robert
P. Murphy's total lack of ethics in this. Can't we
assume Bill Gates values the little trust people
have in him more than a couple of hundred million
dollars? Are traders really sociopaths that lie and
cheat whenever they think they can get away with it
and make a quick buck? Just because decent people
don't do bad things doesn't mean the government
shouldn't be involved in regulating those bad
things and let a couple of sociopaths ruin society.

"Going the other way, why don’t manipulative
speculators spread positive rumors about
companies?" Well, because it's for example a bit
easier to spread the rumor Steve Jobs has died than
to spread the rumor he is alive again - even when
it's Steve Jobs. And there is of course the
psychological effect that fear caused by a negative
rumor results in a much more emotional response
than a positive rumor provokes. Robert P. Murphy's
point just makes no sense, it only emphasizes he's
just spreading capitalist propaganda the sheeple
that buy his books like to hear. They probably also
like to hear they are not stupid. But if they are
all not stupid, who are they trading with? Either
you're smarter than the trader you buy from, or
you're more stupid than the seller. You can't be
both not stupid and do the right thing.

"Short-selling vastly broadens the number of
people, and thus the perspectives and information,
involved in the pricing process." And all those
people expect to make a profit to make a living
from being involved in the pricing process? If I as
an individual won't ever need massive amounts of
for example rubber, how do I contribute to society
by spending my life gathering huge amounts of
information and have a perspective about the rubber
market when my only goal is to trade in it to make
a profit so I don't have to get a proper job? At
some point it just gets cheaper to employ all those
"not stupid" people in a central planning bureau
and go for communism as the pricing process. Warren
Meyer doesn't like to see anyone who has a career
as a trader has a personal incentive to keep that
career going, whether the world needs it or not,
trying to make money for no good reason in the big
picture.

Banning naked short selling isn't the right
solution, but if the financial industry doesn't see
how it's involved in an arms race that is going to
cost more than the planet is worth they shouldn't
be surprised someone starts to get in their way in
a manner they don't like or understand. And then
having naked short selling banned is probably a
better option than being burned alive in your
office by some revolutionary forces.

Soulless boring dorks…

by Roland van Ipenburg
http://www.xs4all.nl/~ipenburg/blog/posts/dull/2010/05/29/naked-short-selling/