In perhaps the boldest move yet, UK market regulators placed a temporary ban on short-selling. The ban is in place until January 16th, 2009, but will be reviewed in 30 days.

Legitimate short-selling (not naked short selling) is an important function of markets as it helps markets to cleanse. Banning it is an obvious attempt to try to make the markets go up without issuing more fiat money in order to do so. Intervention has now climbed to new levels. Will the next step be to force sales to occur only at a higher price than the past sale? Read the brief article on this below:

Britain bans short-selling, citing ‘extreme’ market climate

Think it won’t happen here? Within 5 minutes of the posting of the above notice from the UK, the following article appeared on several major US Financial websites:

It’s draconian, yes, but why not bar all shorts in U.S.?

Notice how the article seeks to now blame short-sellers for the failure of Lehman and AIG rather than the fundamental conditions. The powers that be clearly need a scapegoat for all the turmoil.