Stabilising markets

YESTERDAY’S news that American consumer sentiment has dropped to its lowest point in more than three decades will do little to lift spirits across a western world battered and bruised by seemingly incessant bad economic news.

However, it is not all doom and gloom. Yesterday’s decision by four European governments — France, Italy, Spain and Belgium — to ban short-selling to try to stabilise markets is not by any means unprecedented but it is unusual.

Allied to German calls for a ban on naked short-selling of stocks, government bonds and credit default swaps, it suggests that the dog might be about to reassert control over its tail.

For the last three years, we’ve been told that governments could not intervene to influence or control the markets. Their only role, it seemed, was to pick up the tab when things went wrong.

A German spokesman was clear yesterday: “We are advocating a wide-reaching ban on naked short-selling of stocks, sovereign bonds, and credit default swaps. Only this way can destructive speculation be countered convincingly.”

For too long now, governments have been far too tolerant and subservient to the market and all its misdeeds. Markets, in their current form, have failed us, and it is time this was reflected in governments’ policies.