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Comment by ramblerman | Hacker News Reader

I also don't care about a hedge fund losing out but Id hardly call the current value of Gamestop to be "real" Economics.

And for the few /r/wsb guys and girls making a killing there are a lot more late comers who will lose big, and can't afford to.

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Parent isn't claiming GME is "real" economics. Parent is claiming GME will help pull down our current fake system, and help the middle and lower classes receive fair compensation from the system. Whether this approach works or not, I don't know. But the status quo isn't tenable for a democratic society.

This chart says it all:

https://www.epi.org/productivity-pay-gap/

> GME will help pull down our current fake system, and help the middle and lower classes receive fair compensation from the system.

errr.... no? It won't. At all. How?

What will happen is that a few hedge funds will lose a bit, a few hedge funds will make a bit, lots of retail investors will lose a bit (maybe more than they can stomach, individually), and a few retail investors will make a lot.

For the middle and lower classes to receive fair compensation from the system, you need political action (and definitely not the "more tax cuts for the super rich" Trump type).

To be clear, I agree that by itself, a single stock won't make any systematic difference. I was explaining what the parent was claiming.

Regarding your proposed solution, I fear that thanks in part to Citizens United, the wealthy and powerful have such a strong hold on our government, that any increased taxes will only be funneled back to them through corruption, regulatory capture, and big gov contracts.

Ideally, a large wealth tax on the super-wealthy would simply result in a "citizen's dividend" where each of us would get X amount as a citizen. Using the benefits for government spending will just be used to build a larger federal apparatus that will be used against the middle and lower classes. This should be clear by now.

What did happen around 1979 to have such a clear change?

Visicalc was released in 1979 and with that the microcomputer revolution was underway. Productivity soared while labor costs remained relatively stagnant. Every job we eliminate with software is an increase in productivity and a downward pressure on labor costs. Fast-forward 40 years and here we are.

A lot of things happened. Reagan lowered taxes, increasing the incentive to move money out of your buisness and into other investments. Globalism startedly picking up, meaning a lot of wage growth for the lower classes was outsorced to other countries instead of kept in America. The graph doesn’t capture how total employee compensation has risen a bit more than in that graph due to the explosion of costs in the American Medical sector eating up a lot of the potential compensation increase. Perhaps most importantly, Reagan began the attack on unions, resulting in there being less ability on the employee side to argue for increased wages. You could argue the massive money printing starting with the Iraq wars and going through the 2008 crisis has led to a massive funneling of that created money to the upper class, further increasing the inequality, and further exacerbated again by the death on unions meaning workers had less advocates in washington arguing for the lower classes to get a piece of that pie.

This is a good summary of what happened. I'd add a few more: the wealthy invested more and more into the political system in the past 30-40 years, culiminating in the millions pouring in each year following Citizens United. They use their influence to co-opt government power, allowing them to use regulatory capture to fend off competitors, capture big government contracts from forever wars, and loosen regulations to benefit their own interests.

It's a vicious cycle, and if we just use the benefits of a wealth tax to build a larger federal government, that apparatus will only be used against the poor/middle class and for (most of) the wealthy. We have to redistribute this wealth back down to the individual and community level for it to have an effect, since it's harder for ultra-wealthy to co-opt thousands of communities and millions of free-thinking individuals than to co-opt centralized gov power (although manufacturing consent can come into play here).

> increasing the incentive to move money out of your buisness and into other investments

how does lower taxes incentivize moving money out of businesses? What investments were they moving into?

Higher taxes on income, dividends, and realized gains incentivize money being reinvested in the business instead of distributed to shareholders. If taking money out of a company creates taxable income, stockholders have an extra reason to press companies to find ways they can use that money to increase value instead.

Basically, an extra incentive for companies to hire more people and do more research instead of do things like stock buybacks.

A few things happened around that time that might of contributed. Movement to a fiat currency as opposed to the gold standard, women joined the workforce in larger numbers through the 70's and 80's, globalization as a concept was born and outsourcing boomed.

It's not at all clear to me that 1979 is even the best reference year to pick. It looks to me like the trend lines broke in 1973-1975, but by the nature of this type of chart, careful choice in starting year can provide a chart that suggests a different break point. (It's probably better to think of these as "fuzzy" lines, which are 10% starting in each of 1946, 1947...1955.)

Yeah, 1973 is a much better reference year. Both because that's what the data actually says, and because there was a very clear cause: inflation. 1973 was the year of the oil crisis, the year that fixed exchange rates under Bretton Woods became floating exchange rates, and the year that the 1970s inflation happened.

Inflation doesn't affect all professions equally. Differentiated professions (those where there's only a limited supply of workers, and a limited number of positions) can bargain for higher wages, because there's nobody else that can take the job if you don't. The common people can't, because that's what it means to be common: you are easily replaceable. Hence when inflation hits, the upper classes capture the vast majority of the new money and new wealth created, while the lower classes get stuck with the same nominal wage, which purchases far less.

seems to me 72 was when the divergence started, and 79 was just when it became permanent

A little bit earlier

Bretton Woods system collapsed between 1971 and 1977

It was more like 1971: http://wtfhappenedin1971.com

Ronald Reagan happened.

Neoliberalism happend.

https://wtfhappenedin1971.com/

Why do they care this time. No one cared in 2000 and the 2008 bubble. No one cared that new investors are bidding up worthless SPAC and new public companies. Why do they all a suddenly care that retail is going to lose a ton of money when retail always loses a ton of money. Retail always joins the bubble towards the end of the cycle.

What is "real economics" if law, contracts and supply/demand isn't real economics?

Stock price was never supposed to closely mirror company's financials, that's a meme pushed by socialists that want to portray the stock market as wrong ("out of reality"). The financials are merely a indicator. It's stock market and what matters are the dynamics of that market, and the company itself is only a small part of that.

It's hard to not read this as a pathological corner case.

Yes, that it surely is - but from the Wall Street side; shorting 140% of stock should've been caught by regulators as it's illegal and totally impossible for retail investors. I don't think it was missed by mistake, though. People rallying to make profit from their mistake is nothing wrong, just new - this is the first time the small boys (instead of other big boys - but you can just ping them on Bloomberg terminal and make a deal with them) were able to catch them and coordinate their capital (the same thing the Wall Street guys are doing together, just bigger scale). It won't happen again as long as the big boys play according to the rules.

> Id hardly call the current value of Gamestop to be "real" Economics.

Yeah that's the whole damn point. Some normies figured out how to play their fake little game.

No, it's not real economics. It's the little guys coming together to fight the big guys at their own game.

A lot of little guys are gonna be left holding the bag at the end, though. The stock was probably overvalued at $10. It's definitely overvalued at $400.

People were shorting this stock when it was an order of magnitude less expensive. Isn't it an even more attractive short target now?

Maybe. Part of the problem currently, is there are too many short positions compared to the total issued shares. It’s what makes this a short squeeze. If you try to short now you’ll help elleviate the squeeze, though you may have problems finding people to lend the stock to short. But what makes shorting even scarier right now is the price is based on the marginal willingness to sell right now, vs the marginal willingness to buy + the forced buying due to margin calls. There is a major assymmetry that is driving the stock to positive infinity. And while we both know the price can’t go to infinity, we can’t be sure that a short right now won’t have it’s margin called due to all the margin calls before triggering a margin call on the stock just shorted. So risk is very real for a short at the moment, and you need a lot of cash reserves to try to weather the current situation.

Yes, but there's a fairly hefty risk of it rocketing up again before collapsing, which could wipe out such short positions. (Again!)

Not a move I'd make with my retirement funds.

Not a move you should make highly leveraged. Perfectly legitimate move to make if you have a sufficient capital cushion. (yes, I now, shorts carry unlimited risk in theory, but in practice the risk is limited. Regulators will (correctly) step in when the market cap of some retailer during the pandemic eclipses the market cap of, dunno, Apple and Tesla or whatever.)

Based on how people acted during the pandemic, these people will be more than willing to be bagholders, constantly deny they are bagholders, and constantly deny anyone else is a bagholder.

And who’s responsibility is that? WSB has been rallying around GameStop for over a month. It has 2 million subscribers. GME shows up 10s of times per day. There have been endless squabbles over it. If some rubberneckers come in now and lose money they could just as easily lost it by doing a thousand other silly things. TSLA and other meme stocks show that value is relative and fickle. We used to think advertising and social media were just used to tell people to buy a company’s products, but it is obvious that they are just as good for directly raising capital. Is it a capitalist utopia or a populist dystopia? I think it’s both.

Nobody on wsb went out to make a 'killing', or at least not in the way you think. You don't know the half of it.

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