Yesterday I watched a political speech advocating that the United States raise taxes to make a massive investment in infrastructure.
The system where the government is the primary source of investment and ownership is called socialism. Preferring a free society, I collapsed into my thought cave and asked if it was even possible for a free people to own portions of "the infrastructure."
The term infrastructure refers to the basic structure on which businesses and society build. The infrastructure is extremely valuable to businesses, but it is hard to package and bill.
Infrastructure is too big for one person to own. Society needs a form of shared ownership to develop and own infrastructure.
Corporations are a form of shared ownership. So, what would happen if one took a billion dollars in infrastructure wrapped it in a corporate structure and sold stock.
So, let's say a group took infrastructure with an assessed value of a billion dollars wrapped it up in a corporation and sold stock. For argument sake, imagine the group issued ten million shares of stock with an expected face value of $100 per share.
Since infrastructure investments are valuable but don't directly generate income.
Hedge funds would look at the balance sheet for the infrastructure company and immediately slam it with hundreds of millions in short sales.
Because of the regulations that allow short selling, each share of infrastructure stock would immediately lose 30% to 50% of its value the moment the stock hit the market. The people holding this infrastructure stock would be wiped out.
Proponents of short selling claim they have a God-given right to short any publicly traded stock with the simple promise that someone in the future repurchases the stock.
The fact that hedge funds aggressively short all publicly traded equities creates an absolutely insane economy where people wanting to share ownership in equities are forced to develop a hyper-growth strategy or perish.
Common sense ideas, like investing capital in infrastructure, get punished viciously by hedge funds and market makers that place trillions of dollars in shorts against such firms.
The idea that people must be allowed to short any given publicly traded equity forces all publicly traded equities into the same business mold. It creates an artificial centralization that systematically impoverishes the people of the world.
Short selling is not a right. Short selling was the creation of centralized exchanges for the expressed purpose of regulating stocks.
Allowing people to sell stock in companies that they do not own is a violation of the property rights of the people who built the equity. Short selling does direct harm to the productive segments of the economy. Short selling is a regulatory regime that has proven itself, time and time again, to be a net negative for society as a whole. It is a regulatory mechanism that should be abolished.