I was surprised to find myself reading all about the role of ‘short selling’ in the global financial meltdown instead of heading out with my workmates to enjoy the lunchtime sunshine.
‘Short selling’ is basically this: I see an item at the shops. I say to you ‘hey, I just saw that thing you wanted at the shops—did you want me to get it for you next time I’m there?’ You say ‘sure, how much was it?’ I say, ‘$50’ and you hand over the cash.
So the next day I go to the shops, only they’re having a 20% off sale. I buy the item for you, but I have $10 spare. Should I keep the money or give it back to you? You were happy to pay $50 for the item, so it doesn’t matter to you whether you get the $10 change or not. But neither the item, nor the money you gave me, was actually mine, so I really shouldn’t have any claim to anything.
Short selling is making money from the fall in stock price with money that isn’t yours (excluding fees etc). It was also perfectly legal in Australia until last month. The part that people have a problem with is the deliberate preying on the fall in stock price. If I knew, for example, that the store was having a 20% off sale but still took $50 from you and pocketed $10, that would make my actions less ethical.
The up side of being a business journalist and learning all these things is now I think I actually understand the machinations of the enterprise that Milo Minderbinder sets up in Catch 22, which I’ve always skimmed over despite having read the novel several times. Milo buys eggs for six cents apiece and sells them for four cents and still makes a profit, and Yossarian wonders how. Milo, you capitalist bastard.
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