Do goverments do this? If so, why not?

[Eukaryote]

I was thinking about this today. Before goverments make a major purchase from a company they should buy some of the company's stock, then when they make the purchase the stock would go up, then the goverment would sell the stock to make money.

Example: Let's say Britian wanted new submarines for its navy. The British goverment should buy stock from the submarine company. Then they should buy the submarines causing the value of the submarine company's stock to rise. Britain would then sell their stock from this company.

So do goverments do this? If not, then why?

 

[ArneHD]

I think it's called inside trading, but I'm not 100% sure about that. Essentially it would mean that they break their own laws.

 

[Eukaryote]

Oh. That would make sense, but why is it illegal.

 

[Gainy]

Im not an economist but I guess they don't do it because they value economic stability, 'money doesnt just grow on trees' etc

 

[ArneHD]

Oh. That would make sense, but why is it illegal.

It's because if you have information about a think which your company is about to do, you can capitalize on this to gain an unfair advantage in the market, or something. You had better read the wikipage on it.

 

[neviden]

It's illegal because it destroys market credibility. And you need credibility in the market for it to actually function.

 

[NKVD]

Not all countries buy shares...and those who do are usually bought by a government organization. its not like its only one guy.

Also it could lead to serious lobbying and corruption.

 

[Che Guava]

Do goverments do this? If so, why not?

I'm still scratching my head over the thread title.....

 

[Godwynn]

Oh. That would make sense, but why is it illegal.

It is rather easy to manipulate the market in that way, especially by the government. Who would the government answer to?

 

[ArneHD]

It is rather easy to manipulate the market in that way, especially by the government. Who would the government answer to?

The people (wasn't that the idea in the first place?)

 

[Godwynn]

The people (wasn't that the idea in the first place?)

The United States government keeps breaking its own laws daily, and yet nothing is done. This wouldn't change a thing.

 

[Godwynn]

Also, buy the stock with what money?

The Federal Government has to continually issue new securities to pay for its daily operations. They would issue T-Bills and T-Notes to finance a socialist act that would cost 5% a year to do? The idea is fundamentally flawed.

 

[Bill3000]

It is rather easy to manipulate the market in that way, especially by the government. Who would the government answer to?

The market!

 

[CIVPhilzilla]

The government toys with the markets enough as it is, we don't need to add insider trading to the mix.

 

[amadeus]

It could lead to a coup in Thailand.

 

[Fifty]

I'm still scratching my head over the thread title.....

DUH, he's subtly alluding to the paradoxically contradictory nature of many government policies.

 

[EdwardTking]

Actually it was not uncommon practice for major Japanese corporates to buy a share in a sub-contractor they were about to give a big contract to.

 

[The Yankee]

It's also not a proper use of government funds. But that hasn't stopped them.

 

[Steph]

Does buying stocks of the Airbus company just before the company announced delays and the stocks go down count?

 

[Eukaryote]

Does buying stocks of the Airbus company just before the company announced delays and the stocks go down count?

I don't see why it would if the stocks went down.