When under pressure, change the rules.

The headlines report today that "Four Euro Nations to Curtail Short-Selling".  Yes, that's right, the con men are so desperate to deflect blame for the global collapse of the fraudulent money supply (which is what is really at the heart of the recent stock market selloff, housing bust, defaulting pension payouts, global rioting and civil unrest and of course high unemployment) that they are back to blaming the short sellers for all the problems.

This comes straight out of laughably funny Ben Bernanke and Trichet playbook whereby bribing the market to stay engaged using promises of helicopter drops of money combined with having a big bazooka of government intervention in your pocket to scare off anyone who thinks the system is doomed is supposed to guarantee perpetual prosperity for the markets.  What a crock of $hit!!  The truth is that anything that is artificially supported in any way requires resources to do so.  Resources are never infinite, even for the government, and the herd is patient.  It will consume whatever the government gives it.  It will abandon the precious markets which the government is so keen to prop up (in order to save face) just as soon as it is convinced that government has nothing left to give.

This is why government intervention never has been able to make lasting changes to the market.  Oh sure, it can distort the market for years at a time, but not forever.  And while that distortion is happening, the pressure is building.  When the pressure builds so high that future distortion attempts cannot hold it back, then government stimulus will collapse into its own foot print faster than you can say "WTC7" with the markets following close behind.

Let me be 100% clear here:  banning short selling is not going to have any long term positive effect on the markets because it is not the shorts who are causing the turmoil.  The number and financial power of the short sellers is so small relative to the pension funds and insurance companies and 401ks that are on the buy side that short selling is pretty much a non-factor in market movement for the big indices.  Penny stocks?  Yeah - the shorts can control those.  But not the Dow or the S+P.  No way.  When the Dow loses 2,000 points in just a few weeks it is not short sellers selling but rather the so called "longs" bailing out.  Buying dries up and the prices have to go down to the point where the market becomes interested in buying again.

What the fedsters don't understand is that by changing the rules they are sending social signals to the herd that the governments are worried about collapse.  This does not create confidence and confidence is the only thing that keeps a con game alive.  These attempts to change the rules and to mandate prosperity are completely obvious to the smart money as being signs of weakness, not strength.  These are last ditch, "Hail Mary" desperation moves which will certainly speed up the collapse of the stock market Ponzi.

Bernanke is also in full retreat.  As the markets started tanking all he could say was "We will drive rates low for at least 2 more years".  This tells the markets that Bernanke is also desperate to prop things up.  He is willing to screw honest savers so that the leveraged gamblers in the stock market (i.e. the banks which have excess liquidity because they are afraid to loan money out) might get a small reprieve.  He has pulled all the control levers he possibly can and they are no longer having any real effect.  The levers have effectively broken off in his greasy little hands.  As a result I expect that increasingly large intervention attempts will begin producing negative economic gains.  It's the old concept of diminishing and negative returns.  Like Harry Dent says, "The Fed is checkmated here".  Damned if they do and damned if they don't.

The market is signaling that it knows the Fed is checkmated.  The herd is making significant signs that it is about to move south.  No amount of government theatrics can stop the herd once it has made up its mind.  As long as interest rates on US debt are contained, expect that the deflation is not over.  However, when US debt interest rates can no longer be controlled by Bernanke then expect that traitor to abandon ship because as interest rates rise our debt will become even more un-payable than it already is.  At that point, the great inflation will have arrived.  That could take some years or it could take months.  Nobody really knows.  But it is eventually coming because that is the only way to quietly default on our debt burdens.