It is difficult not to cheer for the group of amateur investors on a Reddit messageboard who began buying stock in a video games retailer (Gamestop) to purposefully force significant financial losses on Wall Street hedge funds. The idea of an online community-driven stock market is a profound threat to the present one run by a cabal of elite financiers who laugh off regulations and fraudulently game the system in their favour—often at the expense of the larger public.
The Reddit investors used a company (Gamestop) to send a message to the short-sellers: these are the wall street gamblers and hedge funders that make a fortune by betting that a company’s share price will fall. They do this by selling more stock in a company than what actually exists—so if a company has 1000 shares, the hedge fund sells 2000. Selling shares that don’t exist is called ‘naked short selling’ the purpose of which is to drive the company out of business. Short sellers are betting that the stock they sell will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the profit. And it can be huge.
Another word for short selling is, of course, fraud—a structural feature of unregulated casino capitalism. These hedge fund short sellers are the same people who crashed the market in 2008 through high risk gambling that cost ordinary people their jobs, their life savings and their homes.
So, how were short sellers ‘short-circuited’ by the Reddit group? The latter basically worked together to raid the game by buying stock in Gamestop forcing the price up! So, they employed a predatory practice against the predatory short-selling hedge fund people, exposing their fraud. The Reddit people believe (rightly) that governments will likely never enforce existing regulations or create new ones designed to take break up banks—instead they will continue to bail out banks and refuse to prosecute fraudsters.
Now that the Reddit movement has won one, you can be sure they will to go after other stocks. Predictably, they will be excoriated by the mainstream media, the financial press and some politicians. Why? Well, one very good reason: media and politics are funded by hedge funds! Hedge funds are a huge source of election income for both Democrats and Republicans, and the Reddit Raiders likely pissed off some powerful people—you can be sure that the latter are gathering together to find ways to prosecute them for exposing the truth about a deeply flawed financial system.
My own takeaway is that the Reddit crowd have shown the stock market to be an absolutely worthless and exclusive club that has no redeeming public value. It is owned by, and in the interest of, an elite class of kleptocrats and sell-out politicians.
If you want to build a genuinely healthy economy, you don’t do it through casino capitalism, but through antitrust bank and corporate regulation in the public interest, by creating well-paid jobs and by instituting a tax system that ensures everyone pays their fair share.
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