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Janet Yellen's Dismissal of Short Selling: Unearthing a Deeper Systemic Problem in Financial Markets

Unmasking the Flaws: The Broken Financial System and the Call for Change

By Jeremy FrommerPublished 12 months ago 3 min read
Top Story - May 2023
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As the CEO and Chairman of Creatd (OTCQB: VOCL) and a financial markets veteran of three decades, I was horrified as I watched Janet Yellen dismiss short-selling in an interview with CNBC’s Sara Eisen on ‘Closing Bell Overtime’.

My shareholders and a great deal of hard working Americans are beginning to lose confidence in a market system rigged to the advantage of a few at the expense of the many. It is sowing the seeds of social unrest and extreme class structures in society.

It is time to say goodbye to the Clinton-era apparatchiks who continue to trot the outdated theorems of their tired and irrelevant perspectives on the 21st-century financial world. Yellen is the most recent offender of my senses.

Yellen is — essentially — a career academic who never experienced the financial markets from within. Lacking practical experience, this type of person cannot and should not be in a position of power anywhere in this country. In 2023 the complexity of the financial system can only be understood by an individual who combines technological understanding with real-time execution skill sets. It’s only someone like that who can dedicate their time to consistently stay at the tip of the spear in the information age. Present-day officials — from Gary Gensler at the SEC to Janet Yellen at the Fed — are simply protecting legacy and collecting a paycheck as they aspire to their next position of power.

But let me give Janet Yellen a break for a moment, as she is not fully to blame. She is a symptom of a broader disease. As we have seen time and time again, the Fed is not proactive, it’s not intuitive, instead it is reactive and almost always the cause of its own problems. Even more importantly, the Fed doesn't innovate. It has followed the same playbook for decades. As such, we now face not only a crisis of confidence but also a crisis of structure. This threatens the confidence and trust the American people have placed in the financial system, and those charged with protecting it.

It's important to note — though this is not the place to discuss it at length — that this criss of structure threatens not just our financial system, but democracy itself and our Constitutional Republic.

Runs on banks and short selling are directly correlated and even worse, orchestrated by hedge funds and other organized groups of investors. Their intent is not to maintain a stable and fair market, but rather to exploit fear and behavioral psychology. This gives them the ability to bully weaker investors who will unwittingly enable their manipulative trading. That’s who Janet Yellen is up against. In that interview on CNBC she was asked whether regulations around short selling should be readdressed. Her response? To simply imply that “the bar is too high” to justify any movement on this front.

Who is Janet Yellen to make such a proclamation, when I can assure you that she could not coherently explain nuances related to borrowing stocks, tracking fail-to-delivers, checking market maker exemptions and the numerous other essential data points that I spent most of my career studying. She, however, just refused to engage with the issue. When further pressed by Sara Eislan she did what most politicians do — passed the buck. “This is a matter that’s up to the SEC,” she said.

The first step is to accept that the system is broken. And then, we must begin to cultivate a culture of education in the broader financial system. Short selling — which, let’s remember, essentially means betting against the success of a company — no longer provides the value it was intended to foster. Decades of advancement in technology and corporate transparency have rendered the mechanisms of short selling obsolete. Yellen and other talking heads who have found themselves in positions of power must stop perpetuating the myth that short selling as it currently exists is of benefit to the market. Clearly, it is not.

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About the Creator

Jeremy Frommer

Chairman & Co-Founder of Creatd ($CRTD) and Vocal. We have much work to do together.

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Comments (10)

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  • Freddie's Lost Treasures11 months ago

    Janet Yellen will eventually take her piece of the pie and quietly exit into the realm of other political millionaires that drape our landscape. How much damage will she do? Who knows.....Your article was informative. Thanks.

  • Paul Guadagno12 months ago

    Great job ! It's nice to see an article that's relevant to our economic outlook at the top for a change. I've also written about deception in our financial markets if anyone is interested.

  • Loryne Andawey12 months ago

    I look forward to asking you questions and hearing your answers tomorrow.

  • J. S. Wade12 months ago

    Thank you. This is a clear and well stated warning. The wolves are at the door and the Three little pigs, Fed, Treasury, and SEC are in denial and/or aiding and abetting. Creatd. has experienced this first hand.

  • Adegbenga Adeola12 months ago

    Good

  • Thank you. You are spot on.

  • Brent Tharp12 months ago

    Although I agree on your overall position, simple things like enforcing fail-to-delivers and preventing leveraged short positions, wherein short positions exceed a company's outstanding stock, would do much to alleviate the problem. The failure lies as much with complicit regulators as with incompetent ones like Yellen. And let's not forget the abandonment of any appearance of using public accounting standards in reported earnings since before 2000, a practice that continues to this day. Added to the lackadaisical (more like nonexistent) enforcement of insider trading laws against our national politicians, it's clear that as many problems exist on the long side as on the short one.

  • ARC12 months ago

    This is such an important conversation. Thank you for offering such a clear and constructive perspective. Many *many* people need to see, absorb, and understand this information.

  • Babs Iverson12 months ago

    "Decades of advancement in technology and corporate transparency have rendered the mechanisms of short selling obsolete." Agree!!! My opinion, back in the day it wasn't a good thing and it's definitely not

  • Judey Kalchik 12 months ago

    Thank you for breaking this down and providing context.

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