UK+Ireland ban short selling!

[Irish Liberty Forum]

The ideas about rumours applies whether you are talking about individual banks or the system as a whole. False positive rumours about an individual bank provide an unfair advantage to that bank, while false positive rumours about the system provide an unfair advantage to the system.

There's abig difference. A false positive rumour about a bank isn't going to make you rush to take your money out of one bank and put into that bank. We know what the effect of false negative rumours is though.
[quote:2setuuve]
What is not understod about FRB/gold standard? You blamed the fractional reserve system for making the circumstances of a run very damaging to the losers of a bank run. I'm saying that you have an obvious solution in deregulating the banking system so that fractional reserve banks have to compete with harder, higher-reserve, perhaps commodity-backed bank deposits. Runs on those banks would be less likely to leave people much worse off (which obviously also makes the run less likely).

Ok, but that kind of "cure" looks worse than the disease imo.[/quote:2setuuve]

That cure would work, though. We can discuss it if you like. But what point are you making re:rumours? It is true that false positive rumours about individual banks would change the distribution of deposits. What exactly are you getting at? It seems like you're basically just saying that negative rumours are bad for banks. I'm not disagreeing with you if that's all you're saying. If you're saying that that point is sufficient reason to give them special protection then I am open to hearing your arguments.

[michael1965]

The ideas about rumours applies whether you are talking about individual banks or the system as a whole. False positive rumours about an individual bank provide an unfair advantage to that bank, while false positive rumours about the system provide an unfair advantage to the system.

There's abig difference. A false positive rumour about a bank isn't going to make you rush to take your money out of one bank and put into that bank. We know what the effect of false negative rumours is though.
[quote:30yc6xo2]
What is not understod about FRB/gold standard? You blamed the fractional reserve system for making the circumstances of a run very damaging to the losers of a bank run. I'm saying that you have an obvious solution in deregulating the banking system so that fractional reserve banks have to compete with harder, higher-reserve, perhaps commodity-backed bank deposits. Runs on those banks would be less likely to leave people much worse off (which obviously also makes the run less likely).

Ok, but that kind of "cure" looks worse than the disease imo.

That cure would work, though. We can discuss it if you like. But what point are you making re:rumours? It is true that false positive rumours about individual banks would change the distribution of deposits. What exactly are you getting at? It seems like you're basically just saying that negative rumours are bad for banks. I'm not disagreeing with you if that's all you're saying. If you're saying that that point is sufficient reason to give them special protection then I am open to hearing your arguments.[/quote:30yc6xo2]
Fractional reserve banking depends on confidence and also on statistically "normal" trading patterns (ie. not all depositors looking for their money at the same time). The kind of rumours that would upset that situation are ones that relate to the solvency of the bank. A false positive rumour in this context (eg. "Psst. I hear bank X is massively over-capitalised") would not make you deposit money with the bank because what would you gain from it? Nothing. If you can construct some kind of hypothetical rumour (that is hard to contradict) which would make people shift their money, I'd like to hear it.

[edit]The reason why banks (may somtimes) need protection from this, but other businesses don't is because other businesses don't operate in this (fractional) kind of way.

Your answer to this, is to do away with fractional reserve banking, which is fair enough at one level. But that would remove the ability of banks to lend money, which is why I think the cure is rather worse than the disease.

[zakalwe]

scaremongering as advertised by the ad on the top of this thread featuring an ATM and the line "Have a look* see if your bank is going to fail" *for a small fee and the sale of your details to unscrupulous/nefarious persons!

[Irish Liberty Forum]

Fractional reserve banking depends on confidence and also on statistically "normal" trading patterns (ie. not all depositors looking for their money at the same time). The kind of rumours that would upset that situation are ones that relate to the solvency of the bank. A false positive rumour in this context (eg. "Psst. I hear bank X is massively over-capitalised") would not make you deposit money with the bank because what would you gain from it? Nothing. If you can construct some kind of hypothetical rumour (that is hard to contradict) which would make people shift their money, I'd like to hear it.

[edit]The reason why banks (may somtimes) need protection from this, but other businesses don't is because other businesses don't operate in this (fractional) kind of way.

Your answer to this, is to do away with fractional reserve banking, which is fair enough at one level. But that would remove the ability of banks to lend money, which is why I think the cure is rather worse than the disease.

I think you're quite right about how fractional reserve banking works. That's really a debate for another thread, though, so I'll leave it to one side for the moment. I think I've made the point I wanted to make about it. Suffice to say that banks don't need to work the way that they do; there is an alternative scenario whereby they would not need protection from runs.

As for rumours, a false rumour "Psst. I hear bank X is massively over-capitalised" would suggest that the risk of bank X failing was extremely low and it offered a safer environment for your funds.

[Irish Liberty Forum]

I've written an article about short-selling which some of you will hopefully find useful:

How Short-Selling Reduces Volatility

[SPN]

Here's the (boIIoxology filled) Press Release from the SEC.

SEC Halts Short Selling of Financial Stocks to Protect Investors and Markets

Under normal market conditions, short selling contributes to price efficiency and adds liquidity to the markets. At present, it appears that unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation. Financial institutions are particularly vulnerable to this crisis of confidence and panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business.

I've a funny feeling that the "unbridled short selling" is in FACT related to the true price valuation of the complete and utter shyte that these Financial Houses have on their Balance Sheets at ridiculously high valuations.

[Squire Allworthy]

Short selling, for all its sins, is not the cause of this problem. The ban is clearly both interference and is also an attempt to find a scapegoat.

There is no confidence because no one believe the assets claimed by the various financial institutions reflect reality. Therefore there is a reluctance to invest in these institutions or lodge money in them. A ban on short selling won't make a blind bit of difference to that sentiment.

What is really sad about this crisis is the complete lack of political leadership, direction and sense of purpose. Clearly there are major problems with our financial structures. In many ways the system and practices that have built up are the problem.