The practice of short selling has been sanctioned by economists from the first Napoleon's Minister of Finance to Horace White in our day. While laws have at various times been enacted to prohibit that operation, it is a noteworthy fact that in every instance I know of these laws have been repealed after a short experience of their effects.
I am informed on good authority—though I cannot personally vouch for the correctness of the information—that there is no short selling onShort selling Is it justifiable? one nowadays fairly important Stock Exchange,—that of Tokyo, Japan. You will have seen in the papers that when President Wilson's peace message (or was it the German Chancellor's peace speech?) became known in Tokyo, the Stock Exchange there was thrown into a panic of such violence that it had to close its doors. It attempted to reopen a couple of days later, but after a short while of trading was again compelled to suspend.
Assuming my information to be correct, you have here an illuminating instance of cause and effect.
Short selling does become a wrong when and to the extent that the methods and intent of the short seller are wrong.
The short seller who goes about like a raging lion [or bear] seeking whom he may devour; he who deliberately smashes values by dint of manipulation or artificially intensified selling amounting in effect to manipulation, or by spreading alarm through untrue reports or even through merely unverified rumors, does wrong and ought to be punished.
Perhaps the Stock Exchange authorities are not always alert enough and thorough enough in running down and punishing deliberate wreckers of values and spreaders of evil omen; perhaps there is altogether not enough energy and determination in dealing with the grave and dangerousShort selling Is it justifiable? evil of rumor mongering on the Stock Exchange and in brokers' offices. But after all even Congress, with the machinery of almost unlimited power at its hand, does not always seem to find it quite easy to hunt the wicked rumor-mongers to their lairs and subject them to adequate punishment.
Yet the unwarranted assailing of a man's good name is a more grievous and heinous offence than the assailing, by dint even of false reports, of the market prices of his possessions.
I need hardly add that the practices to which I have above referred are equally wrong and punishable when they aim at and are applied to the artificial boosting of prices as when the object is the artificial depression of prices.
Does the Public Get "Fleeced"?
Question: