WORLD NEWS TRUST: Pretend-O-Rama (James Kunstler)

[Tace]

July 20, 2008 (World News Trust) -- The comprehensive bankruptcy of the United States, at every level, in all corners, atop each hill and mole-hill, and down not a few rat-holes, is preceding like some kind of hideous multi-media, inter-dimensional cosmic grand opera as produced and directed by the Devil.

Every week, some bizarre new subplot is introduced by the stage managers, each turn and twist geared to produce maximum pain and carnage in the U.S. economy, as if to foreclose any possibility of redemption on the way down. Well, the absence of hope is, after all, the essential nature of Hell (setting aside, for the moment, J.P. Sartre's quaint notion that Hell is other people).

Among the many developments in the story last week was the solidifying consensus that the nation is in really serious trouble, and the noticeable slippage of legitimacy among those pretending to run financial affairs. The howler of the week was the Securities and Exchange Commission's edict that Wall Street sportsters would be prohibited from trafficking in so-called "naked short" sales against a cherry-picked bunch of 19 banks and financial companies for the next two weeks. A cute trick, naked shorting is done by pretending to borrow a bunch of stocks, pretending to sell them high just before the share-price falls, pretending to buy them back at a lower price when the share price has fallen, and then pretending to return exactly the same number of lower-priced shares to the lender, pocketing the difference. Real shorting is cute enough, and involves "clearing" the sales -- i.e. proving that real stocks were really lent and really returned. Shorting is helped along by generating rumors that a given company is in trouble, thus nudging share prices down. This works really well when a company already is known to be struggling, as many now are. In fact, it usually works best when a struggle turns into a feeding-frenzy -- as when a bleeding mullet attracts the swarming sharks. When this scam is run using odd-lots of millions and tens-of-millions of shares sharked up at many dollars each, the profits to be made in this sport is obviously huge.

With naked shorting, however, the stocks being shorted are basically non-existent, imaginary, made-up, fictional, registered only as pixels in a program. It's a racket, pure and simple, run by both the supposed borrower of the stocks and the supposed lender and, more to the point, was wholly and absolutely against the law before the SEC declared a selective holiday from it last week. So, what the SEC action really demonstrates is the utter lawlessness reigning on Wall Street, and the SEC's singular unfitness as an enforcer of the laws, not to mention the criminal irresponsibility of the clearing authorities who only pretend to go through the motions of certifying the sales. What's more, the companies cherry-picked for immunity against shorting were some of the very companies believed to be most active in profiting off naked short sales against other companies.

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http://www.worldnewstrust.com/wnt-reports/commentary/pretend-o-rama-james-kunstler.html

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