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this is a blog from jeremy warner on the telegraph website.
I was on BBC Radio 4's Today programme this morning, ostensibly to put the case against further "quantitative easing", of which more later, but the conversation naturally focused instead on the overnight ban on short-selling of financial stocks in France, Italy, Belgium and Spain.
My fellow guest, James Bartholomew, described the ban as like shooting the messenger, or killing the canary down the mineshaft. He's absolutely right of course. In Britain, the Financial Services Authority imposed a similar ban on short-selling in the run up to the Lehman Brothers collapse. Little good did it do back then, and little good will it do now.
Thankfully, the FSA has stayed clear of the state of denial that exists among some eurozone regulators this time around, but the narrative is exactly the same as it was back then. There's nothing wrong with the big European banks which are perfectly solvent, regulators insist, but the short-sellers, by crunching the share price, threaten a self fulfilling prophecy by creating a panic which causes a run and thereby makes the banking system freeze over anew.
As I say, exactly the same arguments were used back in 2008, when the Financial Services Authority went so far as to put out a statement saying that HBOS was completely solvent and was the target of malicious scaremongering. A little while later, the Government admitted the bank was bust and recapitalised it with billions of pounds of taxpayers money.
The reality is that the downward spiral in European bank stocks has very little to do with short-selling, and everything to do with the fundamentals of the eurozone debt crisis, which European policy makers would prefer to deny rather than face up to. It's much easier to blame greedy Anglo Saxon hedge funds than to admit to harsh realities.
