Let's ban short selling of everything!
Posted by Christie Malry on September 27, 2011 at 7:31 pm
Via Worstall, we learn of Ritchie's cunning plan to ban short selling.
We could require settlement of all trading every hour – instead of every fortnight or so – making short selling nigh on impossible. I especially like this idea which is why I expect lots of opposition to it.
Why stop at shares? Shouldn't we ban everyone from selling something they don't have in the hope that, by the time it comes to deliver the product, they've been able to fulfil it more cheaply? Well, that would basically screw up all bespoke sales, like Dell's computer business or most car sales. It would destroy the concept of "just in time" manufacturing, thereby requiring companies to hold more stock, pushing up obsolescence losses and thus prices.
It would have a profound impact on some niche businesses, such as publishing. Is it really sensible to require authors to complete their manuscript before seeking a publisher?
Short selling increases efficiency in a whole range of industries. Unless Ritchie has hastily finished his magnum opus, he's in no position to seek to outlaw its use in financial markets.
[...] And, indeed, plenty of businesses sell stuff they don't own. At the risk of reiterating material I already wrote in an earlier blog post, here are some instances of short-selling in [...]