Lessons from Wall Street

“‘Diamond’ handed internet people have exposed the ridiculousness of the modern free market system and how it is abused routinely by the rich and powerful.”

The ongoing war between the mass of random private and big hedge funds has been one of the strangest economic stories of the 21st century. Here a bunch of young, unskilled and inexperienced members of an online community decides to, as the name suggests, bet on the losing horse of Gamestop, a very obviously failing brick and mortar games company. Why did this happen, and how did this cause the collapse of multi billion dollar hedge funds?

In a move that shredded through the last piece of dignity that neo-liberals never thought they had, a bunch of ‘tendie’ wielding, ‘diamond’ handed internet people have exposed the ridiculousness of the modern free market system and how it is abused routinely by the rich and powerful.

When hedge funds borrowed stock from Gamestop, and allegedly they borrowed more than actually existed, the plan was to sell it on the market and then drive down the price of the stock to buy it and return it while pocketing the difference.

Gamestop was a failing company before the pandemic, so now surely with a bit of a nudge from the help of their journalist friends shareholders would panic sell and allow their scam to work as intended; and in the best scenario it would be done so quietly that no one would even notice their soft market manipulation.

However, the plebeians had other ideas and in a show of solidarity not seen since the Pullman Strike of 1894 the mob decided that they didn’t like these hedge funds, but they did in fact very much love to buy the stock of failing retailers. So hardly anybody sold, and even more people started buying Gamestop shares and soon hedge funds had to buy back shares at a loss and thus many were driven into bankruptcy. As well as demonstrating the effectiveness of collective action, it was also an intensely funny event; although I’m sure that few economists can share the joke.

So what can we learn from this incident? In my opinion, the greatest takeaway is that very little, no matter how ridiculous, will not happen when a large enough group of trepanned individuals get together to do something.