Thursday, September 18, 2008

Taking it in the shorts

It's about time that this whole economic mess just played itself out. Another billion dollar bailout for irresponsible business practices. A loan, but still a bailout.

Just how big is too big to fail? How many companies are that crucial to our economy? How much money do we have to keep doing this?

There is a now a ban on the short selling of several financial stocks. For those unfamiliar with the concept of short selling it involves borrowing money on the margin and selling stocks with the anticipation that the price will drop. If executed properly the trader will buy the stock back after the price has dropped.

There is nothing particularly wrong with this. It is speculative, but then again it's the stock market. The problem arises when if the price of stock is manipulated by said regulation. Whenever a price is artificially high or low it will inevitably create problems and will eventually seek a new equilibrium.

We have essentially socialized the stock market. The largest capitalist institution in the world is now passing its risk on to the American taxpayer.

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