By James Saft
(Reuters) – After four years of failure, Italy and Spain have opened yet another pointless front in Europe’s war against reality.
Spain and Italy both introduced short-selling bans on Monday, reacting to steep falls in their stock markets and as confidence slipped in their ability to repay their debts, prop up their banking systems and tend to their economies while remaining within the euro currency.
While only a fool could look on recent history and say that markets must always remain untrammeled, the instinctual urge to suppress reality by stopping investors from acting in their own perceived best interests is usually counterproductive.
It is also always a screaming sell signal, one that investors will put into action regardless of regulation.
Italy re-introduced a ban on short selling – bets that securities will fall in price – of financial stocks, this time for one week. Spain went further: banning for three months short selling for all Spanish shares, as well as index short bets, or any similar trade in derivatives on or off of established exchanges.