Alejandro A. Tagliavini *
What happened with Reddit is remarkably interesting because it denies that the market, naturally, is made up of large capitals that drive the economy. On the contrary, it is the millions of individuals who decide the evolution of capital and the economy if the State does not impose regulations that favor the large, such as requiring a high level of capitalization to enable a bank.
There are those who believe that economic freedom – the absence of state repression – is a system where few corporations run the economy – what usually happens with the “establishment” associated with the State – when the natural market is the opposite: I insist, these are millions of people – “consumers” – who decide on the direction of companies and the economy.
Katherine Greifeld wrote that many see in what happened a rebellion “against Wall Street” and consider it an “online populist revolt.” It is true that it is a rebellion, but not “populist” since it was not started by a leader from the State but on the contrary, it is against the “establishment” associated with the State.
José Luis de Haro wrote that in “the era of stock market democratization” in the US, where retail investors already reach 19.5% of trading volume, the conservative Financial Times is not read neither the investment guru, Warren Buffet, leader among the “establishment”, but they consult the burrows of the social network Reddit.
They listen to Rogozinski, Musk, Tenev or Portnoy, founder of Barstool Sports, aka “the president,” who shouts of “stocks always go up” fueling the craving for great profitability. Which is partially true thanks to the outrageous monetary issue of the Federal Reserve, and the “stimuli” of the Government, which explains the divorce between the real economy that falls and the rise -inflation- of stocks.
The last week of January, the coordinated uprising on Wallstreetbets, within Reddit, by Keith Gill, aka “Roaring Kitty”, in his feat of pontificating GameStop (GE), a chain of video game stores, brought stark reality for Wall Street: the market, at the end, are the millions of people who move as they please, now powered by technology. So, GE shares, which started the year at $ 17.80, had an impressive rise reaching almost 350, although they then fell very strongly.
Thus, fortunes were lost due to “short sales”, those who borrow in shares estimating that they will go down as to return them by paying less, earning with the difference, but this time they rose so strongly that, by having to return them, they lost more than 19,750 million dollars, so far in 2021.
After the GE thing, the Reddit members set their sights on silver. “Think of the profits or of the banks like JP Morgan that you will be destroying along the way”, the author urged. It happens that banks, in the current system, are large representatives of the corporations associated with the State, particularly the Federal Reserve and organizations like the IMF.
The “establishment” shouted in the sky through its usual speakers, that is, politicians and bureaucrats who threatened more regulations and, as always, with demagogic speeches: “to protect retail investors” when, precisely, it is a question of a “rebellion” of retailers.
* Senior Advisor at The Cedar Portfolio and Member of the Advisory Council of the Center on Global Prosperity, de Oakland, California