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UK Government abandons free market principles

In a move which is sure to raise eyebrows across the world, the UK government has announced that short selling is to be banned from midnight tonight until the 16 January 2008 when it will again be reviewed. The consequence of this action is the fact that the authorities are laying the blame of the demise of HBOS fairly and squarely at the door of the short sellers. The truth or an easy escape route?

The government are playing a very risky game by changing the whole idea of a free market and the principles to which these adhere. Short selling is not nice, it can cause havoc but it has and always will be part of the investment world. While there is no doubt that the shorters did cause problems with the HBOS share price and panic the market, the fact remains that the bank was facing a massive refinancing package which it looked unable to complete in the current market conditions. There was a problem there and the shorters brought out the sting.

We have already seen the government abandon the competition threat which an HBOS / Lloyds merger poses and now they are attacking the very principles of the free market. Have they not considered traded options which can give traders the same exposure?

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