A decade after the Occupy Wall Street protesters in New York and other cities took to the streets to condemn those responsible for the subprime mortgage crisis, a different kind of anti-Wall Street uprising is happening online — on comment threads and in trading apps — and these protesters are dumping equal parts money and defiance into their cause.
Amateur stock traders who are members of the Reddit community r/WallStreetBets have made international headlines by inflating the price of GameStop and other stocks to dangerously speculative levels. Some of the Reddit revolutionaries made enormous profits on their trades after the GameStop share price exploded. Others, such as those who bought at the high of $483 per share, may be preparing to share their “loss porn” as the share price has wildly fluctuated lower.
The traders are making clear their motives: if short-selling hedge funds — the Wall Street “masters of the universe” can earn billions by shorting stocks such as GameStop, they too should be able to game the system to pick up a few thousand bucks overnight. It worked. The hedge fund Melvin Capital lost a staggering 50 percent in January and was forced to close out its short position in GameStop.
Beyond the story’s immediate implications for Wall Street and the financial markets, the working stiffs on Reddit are airing other grievances about “the system.” In their view, the regular economy — not the Wall Street economy — has failed working people for too long.
In an echo of the populist anger following the Wall Street bailouts of 2008-09, the Redditers are pointing to an obvious double-standard: the big shots wanted to stop them from using the stock market as a casino even though, as they see it, hedge funds do it all the time.
In an interview for Episode 5 of History As It Happens, public policy expert Oren Cass, who worked as Mitt Romney’s domestic policy director when he ran for president in 2012, said the GameStop frenzy is revealing what is wrong with financial markets, resurrecting an issue conservatives have neglected to address.
“What ultimately is wrong with our financial markets is that they are entirely disconnected from reality. Our economy is obviously dependent on them. When they crash, we all suffer. And yet the behavior that is causing all these problems has nothing to do with what we actually need financial markets for,” said Cass, whose new organization, American Compass, is trying to “change the way conservatives think and talk about economics.”
“What’s so fascinating about the GameStop situation is instead of just the folks on Wall Street [gaming the system] themselves, you have other folks say, wait a minute, we can do this too.”
Cass said hedge funds engage in “coin flip” capitalism in which they gamble enormous sums — some bets win, some blow up — and then collect their lucrative fees. The GameStop craze is “holding up a mirror to everything that is ridiculous about Wall Street.”
While market manipulation proceeds apace, many ordinary Americans are treading water as they play by the rules.
“You can make a list of a lot of [consumer goods] that are cheap, but among the things that matter most — health care, education, housing — those things have gotten expensive most quickly. For the typical family, at best they have been treading water. But I think the fairest assessment of it is, it has actually gotten harder.”
Cass chides both Republican and Democratic officials for adhering to dogmatic, stale ideas when the problem of creating jobs for a modern economy requires fresh thinking.
“The table stakes for the discussion should be talking about the world as it is, but that doesn’t mean big government programs or a progressive social agenda is the way to solve it. Financial markets are a perfect example,” said Cass. “Conservatives should be appalled by the way our financial markets are behaving and they should be at the front of the line saying… we should do something about it.”
