The onward march towards an old-style command economy..

V. Anantha Nageswaran in this piece points how shortselling is being banned in quite a few parts of the world:

Elizabeth Warren, Bernie Sanders and James Corbyn must be fancying their chances in the forthcoming elections in their respective countries. Never mind that former US President Barack Obama cautioned against the Democratic Party turning too far left. Even if they heed his advice, the world’s capitalists and regulators seem united in turning voters and candidates leftwards.

I just saw a story (Return Of Short-Selling Bans: Market Protection Or “War Against Truth”?, 19 November 2019) put out by Reuters that Turkey has banned short-selling. Korea might do so, and so could Europe if Brexit creates market turbulence. Europe had resorted to banning short-selling between 2008 and 2012 as it battled the fallout of the global crisis and then the Greek crisis. Global economies, advanced and developing, now ride on asset prices. As leverage ratios have risen relentlessly both in the public and private sectors, the only way governments can prevent the unravelling of balance sheets is to place all policy tools at the service of underpinning asset prices.

The logic is clear. However, the question is whether its costs would exceed the benefits, and whether it would postpone real price discovery to a later date—only for it to manifest itself more uncontrollably than now.

The more things change, the more they remain the same!

2 Responses to “The onward march towards an old-style command economy..”

  1. Anantha Nageswaran Says:

    Thank you, Amol, for blogging on my column today.

  2. Amol Agrawal Says:

    Welcome. Thanks for writing an interesting piece. Had no idea about bans on shortselling…

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