The GameStop Saga and the Crisis of Capitalism



"Imperialism, or the domination of finance capital, is that highest stage of capitalism in which this separation reaches vast proportions. The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially “powerful” states stand out among all the rest. "
—V.I. Lenin, Imperialism, the Highest Stage of Capitalism. Ch. 3.

At the time of this writing, most people by now are probably aware of the news story surrounding the "controversy" of a Reddit-based community called 'WallStreetBets' buying stocks on GameStop (and AMC) [1], hurting Wall Street short-selling hedge fund managers' profits in the process and pushing Melvin Capital to the brink of bankruptcy. These short-selling [2] billionaire investors have lost a staggering $70.8 billion during the month of January, 2021 [3]; this was partly because of a very determined group of small, amateur investors (mostly 'Average Joes') helping to raise the value of GameStop [4] -- which was among a list of shorted companies, because hedge funds deemed it a failing business -- by buying its stocks. 

I don't have much to add in terms of commentary; Jason Unruhe does a fine job in summarizing the event, as well as explaining in layman's terms how short-selling works, in the video linked below for further reading. [5] Also, this screenshot image succinctly sums it up:



However, I will say this: this saga should absolutely be celebrated because it exposed the inherent contradictions of finance capital, as well as what a farce free market economics is, to a much wider audience. It should also be celebrated in light of billionaires being hurt, outraged, and throwing temper-tantrums like children after hilariously losing billions of dollars as a result of losing the bet that GameStop would go down, as exemplified in this highly entertaining and very funny video of the Melvin Capital office meltdown. Unsurprisingly, the emotionally triggered hedge fund managers scrambled to re-rig an already "rigged" stock market in order to ensure that it always works in their favour. Despite that, the fact that Wall Street took a significant hit this month (again, they lost $70.8 billion) and continues to be plunged into crisis [6] should indeed be seen as something that is very positive for the global masses. Not to mention, it would be a huge blessing for the world if it had the life snuffed out of it already. 

It is also a matter of time that more and more nations around the world ditch the U.S. Dollar -- a parasitic tool that has long overstayed its welcome -- which will surely help to accelerate the end of the American Empire and its economy. And imagine the added possibilities with Canada successfully exiting NATO.

More importantly, late stage Capitalism continues to be in a terminal, irreversible decline in 2021. Financial commentators and even the International Monetary Fund (IMF) have admitted that Capitalism is headed towards the worst slump since the 1930's. This will significantly affect the United States, a weakening Empire, as it becomes more desperate to hold onto its global hegemonic monopoly position. In fact, rates of profit in the U.S. have been significantly lower than they have ever been -- and have been declining well before 2020 -- with the period in between 2014 and 2019 being the longest period of contraction since 1946 as Michael Roberts points out here.

Thus, the GameStop saga is a significant stepping stone for ending the stranglehold of capital. 


Further reading

1. RT (2021, January 27). NASDAQ temporarily shuts down stock trading after internet trolls destroy hedge fund with GameStop stock. RT. Retrieved from: https://www.rt.com/usa/513819-gamestop-stock-trading-wall-street/

2. Sung, Oliver (2020, February 12). A Story of Short Squeezes and Market Corners. Junto. Retrieved from: https://junto.investments/short-squeezes-and-market-corners/

This was written last year in 2020; it is obviously written from a capitalist investor, Keynesian perspective. If you've been following me for some time, it should go without saying that, no, of course I do not endorse that ideology; and anyway, that is beside the point. However, it is an insight and a brief history of buying stocks and short-selling "straight from the horse's mouth," so to speak. 

3. RT (2021, January 28). Mega-investors punished with $70 BILLION LOSSES as GameStop and other shorted firms see stock surge – data analysts. RT. Retrieved from: https://www.rt.com/usa/513960-hedge-fund-losses-shorting-gamestop/

4. Winck, Ben (2021, January 25). GameStop short-sellers lost $1.6 billion in a single day as Reddit traders rebelled against them. Business Insider. Retrieved from: https://markets.businessinsider.com/news/stocks/gamestop-stock-short-seller-squeeze-losses-reddit-traders-citron-gme-2021-1-1030000080

5. Unruhe, Jason (2021, January 29). The Game Stop Crisis: What is Happening? [Video file]. Retrieved from: https://youtu.be/2GTXJtJ9H_Y

Not only does Jason Unruhe summarize the situation and describes the concept of short-selling, but he also touches on the legality of buying stocks, the two-faced nature of the capitalists, and the term "pump-and-dump" using Sears and its eventual 2018 file for bankruptcy as an example. In the last two minutes of the video, he comments on why this phenomenon became big headline news:

"...But because the big bourgeoisie -- the financial aristocracy -- got hit, they're throwing a fit. So you see more of the hypocrisy of this, that this is only news because the elite got hurt. It's not news when they do it to lower class people all the time. So I'm going to take a moment of Schadenfreude and laugh at these hedge fund guys who lost on this bet because other people invested in the thing that they said was going down, even if it was just for the lulz; it was still worth it."

6. Pisani, Bob (2021, January 26). Short sellers are down $91 billion in January as GameStop leads squeeze in stocks they bet against. CNBC. Retrieved from: https://www.cnbc.com/2021/01/26/short-sellers-are-down-91-billion-in-january-as-gamestop-leads-squeeze-in-stocks-they-bet-against.html


Other

Lenin, Vladimir Ilyich (1916). Finance Capital and the Financial Oligarchy. Imperialism, the Highest Stage of Capitalism. Retrieved from: https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm

Marx, Karl (1894). Credit and Fictitious Capital. Capital Vol. III. Retrieved from: https://www.marxists.org/archive/marx/works/1894-c3/ch25.htm 

Roberts, Michael (2021, January 28). Stop the game – I want to get off! Michael Roberts Blog: Blogging From a Marxist Economist. Retrieved from: https://thenextrecession.wordpress.com/2021/01/28/stop-the-game-i-want-to-get-off/

Comments

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