Lent out shares

Except that shorting has provably been healthy for markets.

Heck, the GME’s events that lead to many retail investors losing quite a decent amount of money only have been so devastating because of lack of shorting :person_shrugging:

Sources

https://www.investopedia.com/ask/answers/012815/how-does-short-selling-help-market-and-investors.asp

More explanation

A short seller is going to act exactly as a long buyer.

He is going to sell a market top, and buy a market bottom, and pretty much at the same moments a long buyer would do it.

These operations help smoothen out securities’ prices.

The main difference resides in the incentive.

Incentives of long buyer, governments, investment funds, stock brokers, stock article publisher’s, exchanges, and everyone else, is for prices to go up and up and up. More money flowing, more bonds issued, more commissions, more advertisment money.

Those incentives have been proven to render markets extremely toxics and unhealthy. Finances disconnect from the real economy, bubbles are created, and systemic risks propagate throughout the economy.

The repercussions of which result in destruction of value, not only in the financial markets, but in the rest of the economy as well. People lose their jobs, their pension, their appartement, or even die.

Short sellers are the only players in the market with an opposed incentive. So much so, that on top of selling bubbles in formation, and buying markets dips, they tend to have to produce research paper of their thesis if they have any hope of not being liquidated.

Those are not to destroy a market, or steal anybody’s money.
These are to maintain a healthy link between pricing of financial assets and underlying real assets.

Without short sellers, the Stock Market is but a Ponzi.

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