Fearing predatory speculation upon its banks in particular, EU leaders have apparently indicated move to in unison curtail “short selling” at least for the duration of this crisis. While over the longer term such a “short-selling” ban may impede normal market activity, in panicked markets short-selling can and has been abused. Rumors & Predatory Raids: Regulators do perhaps see evidence of rumors and market driven assaults upon European financial institutions, where confidence in balance sheets, liquidity and particular ability to access capital markets is decisive to survival. In hindsight it has been shown that “Credit Default Swaps” in conjunction with rumors drove down liquidity, capital and market access to financial institutions in 2008 until the financial markets as a whole seized up. While some financial institutions probably deserved to face bankruptcy/liquidation in 2008, many others were the victims of rumors, stampedes, fear and self-fulfilling predictions – some of it purposefully promulgated to deliver predatory gains to speculators and/or short sellers. Cross Border Financial Raids: EU political leaders and regulators presumably would hope that short-selling ban will deter panicked and rumor driven selling. French Banks, in particular Credit Agricole had been subject of rumors of being frozen out of markets and access that is lifeline of modern international banking activity. Many raids upon the reputation and share prices from short sellers and speculators do come from across borders, thus making it even more difficult to oversee and discipline/penalize by national or even regional regulators (as EU). Nonetheless, banning short-selling makes it more difficult for speculators to get to the meal. After the indication of short-selling ban (perhaps during Merkel Sarkozy scheduled meeting), the European and US equity markets immediately rose sharply. While this may not resolve the risk of a revived global recession, it does allow for a more orderly response. (SEE our ARTICLE from 2 weeks earlier prior to stampede in financial markets - diplomaticallyincorrect.org/films/blog_post/cut-in-us-economic-growth-forecasts-by-ambassador-mo/32753 ). Panic, especially stampeded panic could dramatically exacerbate the situation for any individual bank, but it could also add to driving down normal economic activity and confidence necessary for continued growth. This helps but does not remedy the underlying considerations raising risks of recession in the global economy. It also does not address the overbearing Eurozone challenge - how to bring independent country fiscal policy in line with ECB coordinated monetary policy. (Read ARTICLE - "Death of Euro?" - diplomaticallyincorrect.org/films/blog_post/death-of-the-euro-by-ambassador-mo/29753 ) Related Reports at “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis








 By Ambassador Muhamed Sacirbey








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