That Democratic economic policy is bad can be argued at that macroeconomic level. But at the microeconomic level I’m afraid that, yes, it is actually bad. The thing we’ve got to try and work out is why is it so. A useful example being this about GameStop.
Certain parts of the analysis could be interesting. The assertion that naked short selling was going on for example. That’s not actually necessary, it’s entirely possible for a hedge fund – or whatever – to double short and further multiples. Borrow the same stock again after they’ve shorted it that is. Equally, the idea that most of the trading was in large blocks, far too large for retail investors, meaning that it must have been big players moving the price around.
But after those interesting details there’s a certain hole in the analysis here:
Consider again a manipulator who bought 500,000 blocks of GameStop shares when the market closed last January 26 (at $148 per share) and sold them as the market closed on January 27 (at $347 per share). He or she walked away with nearly $100 million in profits. If another manipulator pulled the same trick from the market close on January 28 (at $194 per share) to the market close on the 29th (at $325 per share), he or she pocketed $65.5 million in profits. And all of the trading in this period appears to involve a relative handful of large buyers and sellers carrying out trades so large that they drive the price up or down.
Well, the use of the word “manipulator” there is rather begging the question, isn’t it? Further, there’s an assumption there that the baddies were getting away with the money. But this is speculation, all of it. So, losses equal profits, by definition. Even if we assume that all of them are attempted manipulators then what has happened is that some manipulators have made profits and other manipulators have made losses.
But even that’s not all of it:
In effect, hedge funds may have manipulated GameStop in opposite directions, wringing out profits daily or even two or three times a day. If this is correct, the GameStop saga is not some populist uprising but a rolling version of “pump and dump,” a classic form of manipulation and naked shorting. At a minimum, the facts already known call for an SEC investigation with subpoena power focused on the broker-dealers’ handling of these transactions.
The definition of manipulation being used here is “buying and selling”. Which seems a bit extreme really.
The connection with Democratic policy?
Robert J. Shapiro, a Washington Monthly contributing writer, is the chairman of Sonecon and a Senior Fellow at the McDonough School of Business at Georgetown University. He previously served as Under Secretary of Commerce for Economic Affairs under Bill Clinton and advised senior members of the Obama administration on economic policy.
Well, yeah Bob.