“Shorting” is a tactic well known among the financial cognoscenti. It means betting against an asset with borrowed money in the expectation of making a profit when its value goes down.
A speculator can “short” a government by borrowing its debt at its current price, in the hope of selling it later at a lower price and pocketing the difference. For example: on January 1, 2010, I think to myself that the game will soon be up for the Greeks. I borrow, at face value, €10 million of the Greek government’s 2016 bond, which is then trading at €0.91, from Goldman Sachs for six months. For this, I have to pay Goldman Sachs the yield that it would receive from the bond – around 5% annually at that price, so about 2.5%, or €250,000 – during the six-month term.
Πηγή: Project Syndicate