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It feels like its part of the broader, somewhat global, rebellion against the financial economy; all the domains of finance which have become disconnected from
by 015a 6y ago
It feels like its part of the broader, somewhat global, rebellion against the financial economy; all the domains of finance which have become disconnected from the real markets and real economy, which more-often-than-not only exist for banks to make money off each other, and to crash both the real and financial economies when they screw up.
Arguably, it started back in 2008 with the global recession, which was, again arguably, totally the result of missteps and corruption in the financial economy. By the end of that, practically no one was held accountable for what happened. and we entered an insane decade+ long bull market inflated by our sovereigns printing money rarely to support Americans, but rather American companies and our financial markets. This bull market coincides with a massive rise in cryptocurrency, which also represents a rebellion against established financial markets and the meddling of both sovereigns and financial corporations in the financial stability of the average citizen.
Then, you reach short-interest, which historically serves some minuscule, though non-zero, amount of utility for the real economy, and has come under legitimate fire as being another tool which puts our economy at risk. I think the problem with short selling is best summed up by the end of the Big Short, as the main characters are sitting on steps of an abandoned bank, having made billions of dollars profiting off of the destruction of the American economy. The strange thing about markets, and economics in general, is that they are self-fulfilling prophesies. If enough people want a stock to drop, if they want a company to suffer by having a financial interest in it suffering; it will. This is different from simply selling a stock, which in-some-way causes the price to drop, because it changes the narrative from "I don't think it will go up" to "I think it will go down". By selling a stock, you're removing your stake; by short-selling, you're increasing your stake in a negative direction (and moreover, short interest is almost always leveraged, which compounds the problem).
In other words, I think the increasing zeitgeist surrounding the perception of our financial markets as being unable to serve the interests of the real economy, and more importantly the average American, is an unusually accurate response to a real problem, and it follows that it would become a social justice issue. The government needs to take this seriously; again, economies are self-fulfilling prophesies. Crisis often start not because there is a crisis, but because people believe there's a crisis.
- michaelbrave 6y agoThis is correct I feel. The other part of the attitude is that the financial sector doesn't actually provide any value to anyone except the financial sector, it's seen a wealth horde for those who manipulate systems causing far reaching consequences. It's not respected and often not understood by the people. Short selling is seen as especially malicious as it causes a preemptive destruction of something in a time when everything is getting destroyed anyway, and doing so to make those who are already rich richer when people are literally starving due to unemployment isn't a good look.
- calyth2018 6y ago> I think the problem with short selling is best summed up by the end of the Big Short, as the main characters are sitting on steps of an abandoned bank, having made billions of dollars profiting off of the destruction of the American economy. That frankly is the wrong takeaway, or at least completely missing the original sin IMO. The original sin is banks that wrote mortgages to people who shouldn't have them, with terms that basically fucks them over. In the absence of the short side, someone might not have profited, some FI may not have keeled over, but the people, who were sold those mortgages, were still fucked just the same. The short side, calling bullshit on the long side, would not have existed, or at least be very foolish to do so, if the long side weren't doing something so stupid at such a scale that actually threatened the day to day lives of people.
- big_curses 6y agoI would argue that the original original sin is the fact that the government would bail out the banks writing these mortgages. The fact that the banks knew this encourages them to do take reckless actions in the name of profit. Why wouldn't they? There's no downside for them. It's another case of the government attempting to help the economy, but only hurting it.
- calyth2018 6y agoOk, that's fair. My point being that it's the wrong takeaway to get mad at shorts for calling something bullshit and getting reward for it, and it sound rather irrational to me. The dog / cat shit pile was junk mortgage bundled into a CDO and getting a AAA rating, in which pension funds buys it thinking it's safe. In the absence of the shorts, those mortgage would have gone into default, the CDOs would have become worthless, or downgraded, forcing pension funds to sell. It's still the people holding the bag. The shorts weren't the ones initiating the bad behaviour, they made money on someone else's bad behaviour. And of course, the government bailed the FIs out just the same.