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Posted by on Jul 13, 2011 in Markets, TG Roundup

Blame Them Shorts, You Morons!

Do you ever wonder, the western press was quick to brand debt trouble faced by Malaysia, Thailand and Indonesia in 1997 as “Asian contagion” as if it were akin to a contagious disease, has avoided using the same term to refer to identical troubles in Europe? This European crisis is now often referred to as  “Europe’s debt crisis” – a milder way to portray. Heck, I will call a spade a spade… The European contagion which started with Iceland about 3 years ago, has resurfaced in Greece and now spreading to Italy and Spain. Two things that are common to  troubles faced by all these countries. 1) debt beyond means by nations, and 2) deceptive, predatory and irresponsible practices by money center banks.

For as long as short selling existed in capital markets, irresponsible regulators, companies with deceptive practices, crook-executives and punch-drunk bulls have conveniently blamed all the troubles on short sellers. Just as the Malaysian Prime Minister did in 1997, Pakistan regulators did in mid 2000s, now an Italian goon regulator calls for the blood of short-sellers. Via Zero Hedge:

Frequent Zero Hedge readers may recall that back in the spring of 2009, when the market needed a desperate boost by any and all insivible hands, we exposed one of the methods of ramping stocks as being stock custodians, in this case State Street and Bank of New York, generating a wholesale squeeze by pulling borrow, or in other words retrieving lent out shares so those who are short are forced to cover. Many laughed assuming this was merely yet another deranged rant. It wasn’t. Fast forward to today, when we learn that the Consob, Italy’s market regulator and SEC equivalent, has “recommended to stakeholders who have lent shares in Italian companies to retrieve them” – i.e., playbook artificial short squeeze 101. This is two days after the Consob banned naked short selling: a move which had disastrous consequences after the market continued plunging and would have collapsed entirely had it not been for the ECB and/or China buying Italy bonds before yesterday’s Bill auction. “”Yes, we’ve exercised moral suasion by asking all those who have lent shares to retrieve them,” Consob Chairman Giuseppe Vegas told journalists on the sideline of a conference.” And now you know how to generate a market-wide short squeeze.