For most speculators, the notion that ‘short squeezes’ should be banned is utterly preposterous. Why then, do we embrace this absurd postulate in the sphere of money?

 

I always reiterate the simple (but perhaps backward) idea that debt is a short on money. It helps us see the folly of certain public policies by exploding the flaws of unintegrated and compartmentalized thought.  Let me make this concept clear:

 

What does shorting a stock entail? One borrows a stock, sells it on the market for money, and buys it back at a later date. If one sells the stock higher than one buys it, one can keep the difference. Otherwise, one pays the difference. What is debt then? Well, one borrows money, ‘sells’ it for something (e.g. a house) and ‘buys’ that money back at a later date. If one ‘sells money’ higher than one ‘buys money’, one can keep the difference. Otherwise, one pays the difference. The symmetry should be clear. In normal, everyday language; ‘selling money’ consists of buying things and ‘buying money’ consists of selling things. In everyday life, we happen to think of prices in terms of money; this doesn’t change the principle that debt is a short on money.

 

‘Hey, we don’t like this short squeeze, we’re going to ban it!’

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