"So we see that the government's ban on shorting is counterproductive, and will only make the financial markets more volatile, and make it harder for the most at-risk institutions to raise capital. Unfortunately the same is true for the other shenanigans that Paulson and Bernanke have been up to. These actions too are causing the very financial crisis they are supposedly trying to calm. Just stop and reflect on what the government has done, even in the last few weeks. It has literally seized (the press' word, not mine) companies tied to trillions of dollars in assets. Furthermore, these seizures were truly a "hostile takeover." For example, the common shareholders of Fannie and Freddie were quite simply robbed. The government came in and assured injections of capital to keep the firms afloat. In exchange, it acquired "senior preferred equity" shares, placing it higher on the totem pole vis-à-vis the original preferred equity shareholders, in the case of losses. However, if the real estate market turns around and the share prices of Fannie and Freddie start rising, then the government will exercise its warrants giving it ownership of 79.9% of the common stock. (Note how people are speculating that the government might make money on the deal.) Before, shareholders of Fannie and Freddie knew they were probably going to lose everything, but there was still a sliver of hope. Now there is no hope. And yet, there is no rhyme or reason to the government's decisions. Lehman Brothers was allowed to fail. In essence, you've got a massive beast stalking the financial markets. This creature has many trillions of dollars ultimately at its disposal, and oh yes, I should add: It is not afraid to send armed men to your house if you should ever really cross it. In this environment, is it any wonder that the credit markets are "frozen"? When the SWAT team bursts into your kitchen window, you freeze up, right? Why should things be so different on Wall Street? There are many horrible implications of what Henry Paulson and Ben Bernanke have unleashed over the last few weeks. What is truly depressing is that these costs are balanced by nonexistent "benefits." As in other arenas, so too in the financial markets we see that the government's trampling of property rights exacerbates the very insecurity and fear that prompted the power grab in the first place. I don't want to sound like an alarmist, but folks things are moving fast. If the financial system should collapse, it will happen very quickly. Even if the basic infrastructure remains, nonetheless I expect double-digit price inflation. (If people are telling you the bond markets aren't forecasting inflation, don't believe it.) If you agree, then you should seriously consider acquiring several weeks' of gold and silver coins - and don't store them in your safe deposit box, because if the banks are closed, you might not have access to them. Yes it would be awful if things came to that, but by the same token it's awful if your spouse dies. You still buy life insurance, right? So people should seriously consider stocking up on failed-fiat-currency insurance, i.e. gold and silver coins that other Americans will recognize." http://www.lewrockwell.com/murphy/murphy137.html [Non-text portions of this message have been removed]
