“ISRAELIS were 9-11 short sale stock buyers, betting on WTC terror strikes”

- http://portland.indymedia.org/en/2005/04/315296.shtml

It’s easier to blow things up rather than build things – and short selling makes it easier to profit from the misfortune of others.

a. mortgage loan standards were going down the drain because loan originators weren’t risking any of their own money
b. housing prices were rising at an unsustainable rate
c. the companies that sold insurance (i.e. credit default swaps) on those mortgage-backed securities couldn’t possibly pay off on claims if housing prices stopped rising and defaults occurred on a large scale,

none of which were exactly secret information. Is it Michael Lewis and Robin’s position that this happened mainly because the S.E.C. made some vague treats against short sellers and demanded to see their emails?

It seems like we have much better candidates to assign the blame:

- rationality: some people buying mortgage-backed securities knew what they were getting into, but didn’t care because they were playing with other people’s money and were in a “heads I win, tails someone else loses” situation
- irrationality: those playing with their own money failed to properly account for risks

Maybe short selling can be a cure for both of these problems, but if so we’d need to figure out how to encourage it to occur on a much bigger scale, because the natural market incentives don’t seem to be enough.

Alan Greenspan, mostly. Stock jobbing, manias, “episodes of greed”, asset bubbles, are effects that generally follow from excess monetary inflation.

This is mostly about lowering the interest rates to absurdly low levels, a history of bailouts, etc.

I’m going with the theories of those who predicted this finance mess prior to it happening. The William Fleckensteins of the world, the people over at mises.org. Austrian theory, not Monetarist theory or whatever the hell Greenspan specifically believes that lead him to pump and pump the money supply.

There were extreme booms and busts long before there was much governemnt regulation (as records prior to the 1930s clearly show). In fact, as James Hughes just pointed out, this was a clear weakness of unregulated markets. As more government regulations were implemented, the extremes were mitigated. This is clearly seen in the current big US government bail-outs, (nationalization of these business is good old fashioned socialism) without which world markets would have totally implored.

Yep. They’re basically printing inflation.