If you're not scared, you're not paying attention.
Today we have news that on top of the U.K. and U.S. banning short sales of financial stocks, Australia and the Netherlands are banning short selling entirely.
Short-selling is a necessary component of hedge funds, the "alternative investments" that so many public and private pension funds increasingly use. Idiot bureaucrats may just cause the mother of all short squeezes and do irreparable damage to already underfunded pension funds.
And what about the hedge fund industry itself? It employs a hell of a lot of people in Greenwich, New York, Chicago, San Francisco, and in financial centers around the world. A broad-based ban on strategies that are central to hedge funds is going to cause a lot of job losses. Not to mention that now it is clear that the government will capriciously manipulate markets, many investors will choose to avoid playing an unpredictably rigged game.
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