I don't know if I would go so far as to say fragile and exploitable. If it was it would have been knocked over long ago. What should have been a pounding this last few decades and probably still beating inflation.
Now it serves rather well to show how big firms that are supposedly all about calculated risk and risk management are far from always good in that.
Anyway it seems some were struggling with the idea of short selling still.
Someone asks to borrow a widget.
Someone else says "sure, but you break it, you buy it, I will want it or one just like it back in 2 weeks".
You immediately turn around and sell it as you suspect it will be worth far less in said 2 weeks (might even spread some rumours to that effect, and as an added bonus you dumping a lot of widgets initially will in turn potentially drop the price owing to basic supply-demand and people wondering if someone else is onto something and offloading their widgets).
If at said 2 week mark the price had dropped you buy and return a widget to the original owner (possibly with a fee) and can pocket the difference in price as your profit.
If it turns out widgets cure cancer or something and that was released in the meantime the price shoots up as everybody wants a widget and will pay more than before to get one.
You have to return the widget (or pay a hefty fee) for the one you borrowed it off is rather unpleasant and will break your kneecaps if they don't have their stuff. You really don't want this to happen and thus "at any cost" almost ends up being the order of the day. If said one also knows what you did (which is fine) they might also come breathe down your neck and say "you can give it back now if you want" before it gets to that point, especially if they think you don't have the funds to buy one at this new rate or have to wait while you fill out loan paperwork.
To go one further then here then the borrower possibly borrowed an initial widget, went to another and said "I have this widget, can I also borrow yours?", repeat now with two widgets and as the owner of the third widget thinks well there is always those other two that the others guys own that can be bought if this one goes missing so why not. After a while you have people imagining there are more widgets in existence than there actually are. Someone realises this, grabs all the widgets put onto the market in step 2 from the initial stuff (even without the cure to cancer bit that probably bumping the price up). The borrower, rather valuing their kneecaps (not to mention rumour has it they are going to use the spiky bat to do it on this occasion), gets desperate and is all "10, 20, 30, 40... name your price just get them to me", possibly having to sell off other stuff they own to fund it.
If you are the owner of widgets you can either wait to see the borrower get their kneecaps smashed if that would amuse you, or can try to hold out to get the best price which is usually a function of how much money they have (including loans they can take out, and how quick they can sell their house), when others will cave and sell their widget supply, how many widgets they need to find (and if it is possibly more than actually exist... even better), and the cost of kneecap repair surgery or placating the one that originally had the widget (which might well be high as the widget's true owner could be all "if I had it then I could have sold it for a fortune, look at the price" even if that is a kind of circular logic) as well as potentially the shame you will feel when someone asks why you did not sell your widget when someone wanted to pay you silly money for it and now they are worth nothing again.
Replace widget with stocks and you have the 95% of the idea here.
Worse is it seems the borrower made a few friends along the way so is now whispering in the ear of market owners to say "don't allow anybody else to buy widgets, can sell them to me though" (and possibly the market owners are pocketing a few widgets as they said they will take care of it to the small time widget owners looking to sell as they can smell desperation on the part of the borrower and have no loyalty to them when it comes down to it, and widget owners now with very limited options looking to cash in before the bubble pops), possibly some politicians (that the borrower financed and promised a nice cushy job to after they are done), the friends of the borrowers that own the means by which the people that realised they had promised more widgets that exist happen to communicate just happening to drop their means of communication, and going on the news (owned by their friends too) to say "I'm just a poor boy from a poor family. All I wanted was some widgets, just some widgets, and they wouldn't give them to me (look how worthless they were two weeks ago)" (quite why I am mixing Queen with Suicidal Tendencies in my remix here we can leave for another day) and as people still trust the news for reasons I can never quite fathom then they are actually believing it.
Source
