The GameStop Bubble has dominated the news cycle this week, as stock prices for what has been a declining retail outlet ballooned from $19.85 on January 12 to $339 on January 27. As of this writing, the stock has dropped to $193, which still is a tenfold increase over its price about a month ago. The astronomical rise in price came from heightened interest in the stock after a number of Internet groups, most notably subgroups on Reddit and Discord, realized the stock was soon to be shorted by the giant hedge funds. Shorting is a common money-making strategy used on Wall Street in which financiers make money by betting on failure. It is part and parcel of the “fictitious capital” game in the market — where capital that has no material basis in commodities or productive activity, and is entirely divorced from labor, typically changes hands among the wealthy.
To put it simply: major Wall Street traders made a bet that GameStop stock would fall in value and then borrowed against that bet. Amateur investors in different finance-adjacent online groups wanted to prove Wall Street wrong and began to purchase the stock, driving up demand and thereby increasing the price. As the hedge fund traders tried to purchase the stock to close out their bets, GameStop’s stock value only continued to soar. All the hype and continual buying made GameStop the most traded stock on Wall Street this week, outperforming typical market leaders such as Tesla and Amazon.
The amateur investors who bought GameStop stock — including high school students, restaurant workers, small real estate agents, and others — have seen incredible profits, leading reporters to draw parallels to the profits generally made by institutional investors and hedge funds. While financial institutions and wealthy investors — who have long treated the stock market as their personal casino — have drummed up a storm about the unfairness of individual investors skyrocketing GameStop’s value, bourgeois politicians —even some “progressive”— have lent their voices to validating fictitious profiteering. Senator Elizabeth Warren Tweeted a statement demanding more financial regulation: “It’s long past time that the SEC and other financial regulators wake up and do their jobs — and with a new administration and Democrats running Congress, I intend to make sure they do.” She cynically complained that the hedge funds were treating the stock market like their own casino, as if that was something new with respect to GameStop.
Increased financial regulation has never been enough to curtail shareholder greed, something Warren knows but doesn’t acknowledge. What impetus is there for Joe Biden, the candidate backed by Wall Street, or other Democrats to regulate their huge donors?
Once individual investors began to profit from GameStop stock, even if only briefly, the bourgeoisie took action. Almost with simultaneous coordination, the past 24 hours have seen the Discord and Reddit subgroups get shut down. Robinhood, an online brokerage firm that claims as its mission “to democratize finance for all,” made it impossible to buy GameStop, thereby depriving individual investors of the ability to invest in what is touted as a “free market.” In truth, Robinhood’s biggest customer is not its base of individuals, but hedge funds that buy data about Robinhood users to make inferences regarding where they should invest next. On January 28, a class action lawsuit was filed against Robinhood for removing the GameStop stock from its platform. As per the filing, “Robinhood purposefully, willfully and knowingly removed the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise thereby … manipulating the open-market.”
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It seems likely that the federal Securities and Exchange Commission, charged with regulating stock markets, is behind these separate actions, as the SEC put out a statement about increased volatility in the markets and needing to assess the situation and review investor activities.
While the GameStop bubble has been an interesting story to follow, what the individual investors have done offers no real approach to fighting finance capital. Financial entities use speculation to invest all the time — and knowingly create bubbles, all to turn a profit. Inflating stock prices is also common across Wall Street: stock buybacks are one of the main ways corporations artificially inflate prices to keep C-suite salaries high and shareholders content. If anything, the GameStop bubble shows socialists that even when workers use the tools of capitalism’s beloved financial system to their own advantage, they will be shut down and punished. The system exists for the wealthy few; for the rest of us, the current system offers nothing. It’s not even something we should aspire to “reclaim.”
The Associated Press reported that GameStop has become “a battleground where swarms of smaller investors see themselves making an epic stand against the 1%.” This couldn’t be further from the truth: what happened with GameStop isn’t the sort of rebellion we need against the rich, nor does it represent a step closer to socialism. Yes, small investors made some money at the expense of big traders, but finance capital as a whole remains strong, and banks and hedge funds control the reins of our economy. A centralized financial system, especially one that validates fictitious capital and casino-like methods of profit-making such as shorting will never be pro-worker.
Engaging in financial warfare or stock market terrorism, no matter how adeptly, is not a revolutionary act. As we saw this week, if it has taught the capitalists any lesson, it’s that they should curtail free speech and shut down exchanges as soon as needed to protect their profit-making schemes. As socialists, we must organize the masses and demand the only thing that can set us free: abolishing this rotten financial system.