Editorial – Shorting Everything

So this week my attention has been on the economic news coming out. The Bank of Canada has supposedly “shocked” investors by lowering the overnight rate a quarter of a percent. If you don’t already know, the overnight rate is the rate at which banks borrow money to lend to people like you and me when we buy things like houses or take out other loans. A result of which being that the stock market immediately started rising.

Yet interestingly, not one of the retail lending institutions has, as yet, decided to lower its rates in step with the Bank of Canada, with at least one bank outright declaring that they wouldn’t be doing so right now.

So where did the bump in the market come from? Usually lower interest rates mean a bump in the market because people can borrow money more cheaply and then turn around and invest it in hopes of making a profit from the banks’ money. But the banks aren’t giving the money out at a cheaper rate, so this market bump must be purely anticipatory?people trying to get in early so that when the “real” investors come along with their cheap loans, the early investors can take some profit on that and just get out. And as soon as we understand that, we understand what a fraud the marketplace really is.

We tend to be told that the markets are good for the economy, as they raise money for businesses. But aside from IPOs and other share offerings by the companies themselves, not a dime of the money made trading a company’s shares goes to that company. What’s worse, aside from those company offerings, every single trade is zero sum. That is, whatever one person gains another person is losing. When a trader buys shares it’s because they think they’ll be going up faster than any other alternative. Yet the trader selling those shares must think the exact opposite, otherwise why sell? What we know for sure, however, is that one of these traders must be wrong.

And yet we tend to look at markets, even though the very nature of it means that half of the decisions being made in it are wrong, as having some sort of value to determining the health of our economy, and thus our society. But what it really is is simply a system for moving money around for no productive reason. And we wonder why things seem to be screwed up. Now, I’m not a conspiracy theorist, and I have a difficult time with those that say the entire banking-stock-market set up is a huge Ponzi scheme that must one day come crashing down, as I understand that we, as people, can create things that have a greater value than the materials that went into them, and so the creation of money through debt does not automatically mean our system is unsustainable.

But sometimes I wonder.

At any rate, this week we have a number of articles, some on things that are short, some on about the troubles we go through trying to make money, and some on whether things need to exist in order to, well, exist. Don’t worry, you’ll understand when you get to them.
Enjoy the read!