The Econitics
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The Econitics

Why the GameStop bubble attack is terrorism on terrorism

The 2 sides of the coin and the fire that burnt down Wall Street.

“Power to the players” is Gamestops famous slogan, but more recently is it more fitting to call it “empowering the players?” The finical controversy brew by GameStop or Redditors, explains just how psychology or herd mentality questions the fundamental functions of our stock market. Wether it should be constructed to make such markets more acessable and appealing to the public or moreover more excluded for the smart and the rich. But let’s start from the basics, what happened here to cause such riot?

The Gamestop scene, originated from the r/WallStreetBets subreddit, in which a group of ex-investors or semi-professionals collectively designed a plan in which they attempted to execute a professional and organized “short squeeze” by pushing up the cost of GameStop’s stock, by simply buying it. Entangling the large mutual funds and hedge funds that were shorted against it (by shorting something in finance simply means betting against it), causing large sums of money to be lost for already very rich brokers.

The technique worked. Inside two days, GameStop was the most vigorously exchanged stock the world, with famous representatives such as Elon Musk and Representative Alexandria Ocasio-Cortez behind the revolt. While wall street bankers are losing their minds being short squeezed, compelling dealers who had wagered that its cost would fall, to buy the stock itself in order to stall greater losses. Which just leads to upward pressure on the stock’s price.

Contingent upon whom you ask, the GameStop adventure is either a preventative tale about a lot of careless geeks destabilizing the stock exchange for nothing but laughs that may introduce a butterfly effect during an already vurnable economic state with coronavirus, or it may signal the injustice and unethical practices that needs to be investigated within the stock market.

The Redditors

Understanding how Reddit, a platform for which its users are stereotyped as being introverts, gamers and weird were able to pull off a massive success on the floor of the stock market, stems from 3 paramount factors and pieces of information that are essential to understanding philosophy of action behind the short squeeze. Which include (1) inclusivity, we get a say (2) ethics of short selling (backed by celebrities and politicians) (3)the psychology behind the movement (motivating factors)

  1. One of the fundamental arguments that “Redditors” justify for the GameStop incident is that people like you and me are part of the stock market too. They argue that often they are discouraged and hidden away from stocks, stressing the inequality in which for investors get rich and normal people are kept poor away from finical opportunities, confined to only doing their boring and mundane work. As NSBC explains that “the story is appealing because there is a lot of pent up anger and frustration around the power structure that the financial industry perpetuates, says Sarah Newcomb, director of behavioral science at investment research firm Morningstar.” While some take this as an opportunity to get back at investors for the 2008 financial crisis that caused such a beating to many families.
  2. However the primary concern or argument for the gamestop incident is based on the ethics of short selling, ethics is controversial as Stevenson argues it is essentially founded on the yay/boo mentality in which we deem something as ethical if it fits into our likings developed from our culture, upbringing and friends. Many and those who were the victim of short selling, negatively taint this practice perceiving it as being bullied as a target simultaneously, betting on your failure which they try to encourage and produce. Short selling usually occurs or in this case collectively to ensure or manufacturer a lack of trust in which causes your stock and shares fall, to get a definite paycheck many financial investors often influence their friend to short against a companies stocks, after maybe finding the smallest most minuscule detail as to reasons for one's companies decline. Eventually causing its failure, as no one wants to do business with one that is potentially going to default.
  3. Understanding the human mind and why this event occurred is as paramount to looking at the convincing components of this frenzy. This comes down to people’s desire for agency. The gamestop incident carries heavy nostalgia behind this incident, as GameStop was an essential part of many young American during young ages, bringing people good and fond memories, when they reflect on the good old days. But the GameStop frenzy was not just a combination of nostalgia but a collective nostalgic feeling as the downfall of blackberry, Blockbuster and Nokia all occurred from the notion of getting shorted out of business by rich and upcoming cooperation. Which in turn with collective nostalgia motivates people to take action. Salvaging the last parts of their identities, as Jamie Coben explains “you can’t save a GameStop, you can’t probably save Blockbuster, but what you could do is kind of play around with it before it expires.” Which is exactly what people are doing. Additionally, the selfish factor of society that runs our capitalistic society is why many people jumped on this bandwagon, simply because it looks like an opportunity to get rich, as “some people perceive it like winning the lottery, Newcomb says.” enforced by social media. Money to many is an opportunity that many people cannot pass on. The final reason we’re able to present is largely influenced by the covid climate, as boredom becomes increasingly prominent “People are looking for new things to do’’ beyond “doom scrolling’’ negative news about the pandemic, the election and the Capitol insurrection, Newcomb says. “Catching onto anything new that has an element of excitement to it may be contributing [to the frenzy] as well.”

Brokers and wall street bankers

Now let’s dive into the wallets and perspective of that of both brokers and the wall street bankers who were the leading population in shorting gameStop’s stocks. In short, Brokers have 3key perplexing arguments to ban the general public from coming together and performing a short squeeze. Which include (1) big financial loss, lost dignity and emotional damage (2) The stock market is not designed for irrational and dangerous people with a “bad intent” to create chaos and disruption(which they refer to as the redditors) (3) The butterfly effect.

  1. One of the rather subjective arguments that brokers have put out against that of the Redditors is the fact that there were big financial losses that may go on to affect unrelated companies and are especially damaging to many brokers who work solo and don’t have any sort of safety nets. Additionally, the sums of money lost, as some of them have claimed, massively disturbed their sense of dignity and pride (a pyscological need) which causes stress that could have compounded to depression or suicide in which they have referred to what occurred at the finical crisis of 2007.
  2. Additional they also argue that Redditors are a clear violation of agents in the stock market, which are argued as to be rational, self-serving but interested and invested in the greater good. The actions that the Redditors carried out during that day as they perceive was in no way rational, trying to create chaos and working against the common goal. Meaning that allowing such action to occur is like putting a bull in an office and expect it to work and contribute instead it will just simply destroy and cause a foul, simply saying that their presence no matter what intention will always be found and harmful.

Additionally, the intent on getting back at financial investors that a selective amount of Redditors displayed, was argued to create chaos and disruption, they take as being similar to that of bombing the twin towers as clearly their intention is to disrupt for some good that “is non-existent.” They claim that this is clearly a sign of domestic terrorism and is dangerous for society as a whole, to have people such as Redditors carrying out these actions that could have large ripple effects.

3. The butterfly effect is simply the repercussions and the volatile damages that the “irrational agents” (Reddit people) could have inflicted in an already weak and almost disabled economy. The butterfly effect simply explains a ripple effect that the sudden losses that big major cooperation has undertaken during the GameStop incident could have caused the next financial crisis even bigger than the 2008 crisis. Urging the finance committee and treasury to implement measures to prevent the next financial crisis restricting civilians from banning together and as they argue their irresponsible and negligent actions could have broken the whole economy causing the worst finical storm in the worst period for the best recovery as a pandemic and politically divide the country is in progress.

Summary

In short, as a regular blogger and article writer, I personally have a duty to inform my audience of the facts with the least amount of bias unless it is, of course, an op-ed which this article is not, leaving you to make your stance and opinions with an informed and better understanding of the topic. However personally for those interested in my position, I fall between the spectrum of the Redditors and neutral. Personally, I deeply agree with the unethical practices that shorting comes with, that billionaires and politicians such as Elon Musk and the A.O.C have stated. But just like how when we go to war we must ensure that the benefits outweigh the cost, we must also be sure that the Redditors initiative (which some may call reckless) does not become more harmful in an already unstable market.

About the author:

Eldon Tse — Hong Kong 🇭🇰 | Instagram

Always open to listen to new opinion and ground breaking ideas, to reach me please feel free to contact me through Instagram.

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A fresh new pair of lens into defining the world of finance, economics and politics.

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