All the news seems to have at the heart of it credit deflation, this from China:
Every article, if you will note, on market rise or fall, has an assuring reason stated. This is to assure you, the target, that what happens is completely rational, plus people in the know have a handle on it all. Neither is true, and if you understood this, you'd get your money elsewhere, like into your own business.
But now to the point: This is two good things at once - the destruction of deleterious credit and the creation of beneficial credit. Margin lending is usurious and backed by no assets. The lender gives nothing up, and if the bet goes bad, the borrower has to give the lender something real. It is like when a casino gives you "$1000" in chips to play with, and you lose, you owe the casino $1000. The chips are not $1000, and cost the casino nothing (maybe $2.) This is why gambling debts are not enforceable in law. So cracking down on margin trading is destruction of deleterious credit.
Now shorting is actually a trade that is asset backed, plus no interest attached, so generate credit. Real shares are loaned to someone who then sells 1000 shares at todays price at say $1.00, and then puts the $1000.00 to work. In six months, say, when it is time to return the shares to he who lent them, the borrower goes into the market and buys 1000 shares to return the loan amount.
Why would the lender is do this? All loans are charitable events in Islam and Chrsitianity.
Now if the shares dropped in price to 90 cents, then it only costs $900 to replace the loaned shares. If the price is now $1.10, then it costs $1100 to replace the shares.
This is a generate use of credit, asset-backed, non-usurious.
Where it can go bad, under Islamic finance, is if it is a speculative play (which shorting usually is in Christendom) and to the degree it is concomitantly risky.
So technically we can say the Chinese are at once destroying deleterious credit and expanding beneficial credit. This is net good.
Feel free to forward this by email to three of your friends.
(Reuters) - Global equity markets fell on Friday on reports about a crackdown on margin lending in China, while the dollar retreated on views that stronger U.S. consumer prices were not enough to offset recent weak data that could slow a Federal Reserve interest rate hike.Let me criticize the writing first: the fact is global equity markets fell, the fact there are reports of margin crackdown, and then the speculation is the two events are related. There is no possible way the reporter can warrant that purely speculative claim the two are related, so why make it?
China's securities regulator warned investors to be cautious as Chinese shares hit seven-year highs after seven weeks of gains. Retail investors are borrowing record amounts of money to buy stocks, pushing trading volumes to new highs.
China on Friday also allowed fund managers to lend stocks for short-selling and expanded the number of stocks investors can short to increase the supply of securities in the market.
Every article, if you will note, on market rise or fall, has an assuring reason stated. This is to assure you, the target, that what happens is completely rational, plus people in the know have a handle on it all. Neither is true, and if you understood this, you'd get your money elsewhere, like into your own business.
But now to the point: This is two good things at once - the destruction of deleterious credit and the creation of beneficial credit. Margin lending is usurious and backed by no assets. The lender gives nothing up, and if the bet goes bad, the borrower has to give the lender something real. It is like when a casino gives you "$1000" in chips to play with, and you lose, you owe the casino $1000. The chips are not $1000, and cost the casino nothing (maybe $2.) This is why gambling debts are not enforceable in law. So cracking down on margin trading is destruction of deleterious credit.
Now shorting is actually a trade that is asset backed, plus no interest attached, so generate credit. Real shares are loaned to someone who then sells 1000 shares at todays price at say $1.00, and then puts the $1000.00 to work. In six months, say, when it is time to return the shares to he who lent them, the borrower goes into the market and buys 1000 shares to return the loan amount.
Why would the lender is do this? All loans are charitable events in Islam and Chrsitianity.
Now if the shares dropped in price to 90 cents, then it only costs $900 to replace the loaned shares. If the price is now $1.10, then it costs $1100 to replace the shares.
This is a generate use of credit, asset-backed, non-usurious.
Where it can go bad, under Islamic finance, is if it is a speculative play (which shorting usually is in Christendom) and to the degree it is concomitantly risky.
So technically we can say the Chinese are at once destroying deleterious credit and expanding beneficial credit. This is net good.
Feel free to forward this by email to three of your friends.
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