Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

Agreed. People should be able to take the pessimistic side of a trade.

The one problem I could see with short selling is not the technical act of selling short, but the (dis)information campaign around a company that appears to follow. But, this happens both ways good and bad so it's probably a wash.

> Most of Wall Street hates short sellers, because they drive down the prices of companies and confidence in markets

There's also an emotional dislike of the person who wins when you lose. Short sellers are like the person playing 'don't pass' in craps.

The key difference in your estimates of supply is that you include the future repayments of current lending, but ignore future lending. The general assumption in macroecomics is that we don't treat such lending as isolated one-off events, but as a sum of ongoing activity by many people, continuing forever at a stable level unless some event affects it.

Assuming that the principles governing lending don't change, the future repayments are balanced by payouts of new loans at that point of time, and the current payouts (if they are greater than current repayments of past debt, i.e. there's a net increase) are not balanced and thus increase the supply. If at some point the fundamentals change so that the lending decreases or stops then that event would decrease supply back to where it was.

I.e. if you often lend money to your friends so that usually someone or someone else owes you $10, then this lending is not a change and does not affect supply, but if you did not loan money and now you start lending, then that $10 is an increase in money supply.

The author does not complain about short sellers per se or about the fact that more than 100% of a stock's float can be shorted. That is all nice and fine. Instead what the author does complain about is that fact that the (supposedly regulated) mechanisms for shorting a stock are fraught with loopholes and exceptions that make it possible for brokers and the DTC to create stocks "out of thin air" for the short sellers and never neutralize. This dilutes the company's stock in the process and thereby damages the company's shareholders.

It is an issue that, if true, should absolutely be brought to public and regulator's attention.

No, fungibility is whether an asset (ie. individual assets within a particular class of asset) is interchangeable with one another.

It means when you deposit banknotes into your bank, whether the bank has to give you the same banknotes with the same serial number, or whether they can give you equivalent instruments to satisfy their obligation to you. What they owe you aren't the banknotes, but instead the money.

Also note when you deposit money into a bank, it's not treated the same way as if you put banknotes in a safe deposit box. The way you made your argument on stock brokers is as if it is, and fundamentally misrepresents this relationship. They don't owe you 'your' shares, they owe you a number of shares. Your shares become their asset, in exchange for their liability to you. You don't get to control what they do with their assets.

That's also the reason you don't get to control what the bank does with 'your' money you hold with them, because legally, it's their money with an obligation to pay you when requested. Hence the central bank steps in to regulate and guarantee fractional reserve banking in order to prevent bank runs.

You are talking about lending by banks, and/or the central bank, which is quite clearly money creation.

New lending of your money to your friend does not create additional money.

There's also a word game going on here. What you are describing is a situation where I lend money to my friend, and for the purpose of your analysis, you assume that I will always have lent out a similar amount of money forever starting now.

That's fine if that's what you want to analyse. But that isn't the situation I described.