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Initial Thoughts on Real Significance of GameStop Short-Sell Squeeze

January 28, 2021 19 comments

In the past few days the intertubes have been full of news and opinion about the GameStop short-sell squeeze. The very short version is that a lot of normal people who spend too much time on the internet have decided to buy shares of that corporation to raise its price thereby squeezing a couple of large hedge funds who were shorting that particular stock. While this series of events would, as late as 2014, might not have had any long-term significance- we live in 2021. As I have mentioned in more than one of my previous posts, the context and background of events matters far more than the event itself.

Consider the fact that there were many attempts at political assassinations of royals in late 19th century Europe, with more than a few being successful. However only one, in the early 20th century, set off WW1. The key to understanding why all those other royal assassinations did not start a world war while that one did is to appreciate that the later occurred against the background of a peculiar set and mixture of social, economic, political, ideological, geopolitical and technological conditions which did not exist for all those other ones. Or think about how all of numerous revolts within east-European countries in the late- 1940s, 50s and 60s were easily put down by USSR but they were unable to do so in the late-1980s.

My point is that the background against which seemingly a insignificant event plays out make all the difference if it turns out to be a proverbial flash in the pan or presages something much larger. AS many of you know, I have long held the opinion that GFC of 2008 was the official beginning of the end for West. To quickly recap, that event destroyed the faith of people in meritocracy and competence of western ‘elites’ as well as making it impossible for them to return back to their pre-2008 view of how the world worked. The immediate aftermath of that event also marked the point when China’s economy (in real terms) finally surpassed USA.

It is no exaggeration to say that many events which have occurred all over the world since then, including Brexit vote of 2015 and Trump’s election in 2016, would not have occurred without the background of GFC and its persistent second and third order effects. But what does any of this have to do with people on social media banding together to short-squeeze hedge funds trying to make money by shorting shares of GameStop? For starters, consider the background against which this event is occurring and the reaction by ‘elites’ thus far. As most of you know, the background for this event is even darker than the GFC of 2008.

Over the past ten, or so, months a ever-expanding series of very inappropriate reactions by western governments and ‘elites’ to the COVID-19 pandemic have caused unprecedented levels of job and livelihood loss in addition to massive social disruption without any worthwhile effect on the spread of that disease. I would go so far as to say that overreaction and mal-reaction to this pandemic has caused many times the damage caused by it. An increasing percentage of the population of many Western countries has lost all residual trust in the governments that which rule those countries and, far more importantly, the institutions which support them. In this country, there is the additional issue of the 2020 presidential election.

It is no secret than only a minority of republican voters believe the “official” results of 2020 election- and for good reason. Not only did the MSM manufacture an endless parade of fake scandals to damage Trump from the moment he was elected in 2016 but it is now clear that the deep state and large corporations went out of their way to sabotage Trump- even when he tried to do stuff that was actually good. The way internet monopolies conspired with each other to de-platform Trump after January 6 have not helped either and let us not forget that he received almost 75 million votes in 2020. Between that and the government’s extremely ineffectual and disjointed response to the pandemic, it is no surprise that any residual legitimacy of institutions has taken a even larger hit in USA than other western countries.

And let us not even go into how the obvious lies and bullshit peddled by ‘liberal’ institutions from the FDA, CDC, MSM to teacher unions and democrat-led local governments in many states have screwed up things much more than Trump. Long story short, there is a massive and rapidly growing trust deficit among the majority of people in this country towards pretty much every single major institution and all of this is occurring against the background of depression-like economic conditions. Which brings us to the performance of stock market over the past 10 months in contrast to the rest of economy.

As you all know, the trillions of dollars pumped by government into the financial sector and large corporations over past 10 months has caused a massive increase in both their stock prices and wealth. It does not help that this is occurring at same time as the unwillingness of government to do anything worthwhile to help most people. In a previous post, I wrote about how financialization is the cause of brick-and-mortar retail in this country. Now put all of this together and you will understand why hedge-funds trying to short the shares of GameStop, a company which represented the old way of doing business, elicited the response it did. It is not a coincidence that the internet mob went after hedge-funds trying to short shares of AMC- another business representing the older way of doing things.

In my opinion, what we are seeing right now (everything from Brexit 2015 and Trump 2016 to ongoing anti-lockdown protests and riots in many countries +internet driven short-squeezing of hedge funds) represent steps towards a final and irreversible collapse of public belief in, and legitimacy of, institutions in Western countries. All of this is very reminiscent of what happened within east-European countries in the 1970s and 1980s. Think about it.. this country now has a visibly senile leader leading a bunch of equally senile people supported by small army of careerist apparatchiks who have no talent beyond being parasites and hiding their incompetence behind a facade of bullshit wordiness.

What do you think? Comments?