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Friday, February 26, 2021

Is the New Normal the Old Normal?

One month after President Biden’s inauguration, a crushing sense of déjà vu is settling in, an unsettling feeling that we have seen this all before. 

Key campaign issues that Biden stood by are now diluted, postponed, or simply neglected. The fate of once urgent issues like the minimum wage, student loan debt, immigrant rights, health care reform, etc. now seem less pressing, more subject to study, deliberation, bipartisanship, or revision. 

Democratic Party politicians are taking their priorities from the headlines: squeezing the last bit of Trump-distraction from a trial with no prospect of victory and scrutinizing a silly stock market prank billed as a rebellion against the rich and powerful.

Without Trump, the media is returning to the old, trusted practices of celebrity fetish and ‘gotcha’ politics-- Lady GaGa’s stolen dogs. 

Meanwhile, intense Democratic Party fundraising shamelessly continues with the last election barely settled.

While the Trump administration policies remain largely intact, there seems to be less outrage boiling. Things take time, we are told (except for bombing, killing, and maiming in Syria). The patronizing rebuke of impatience issues from Biden supporters. 

Where have we seen this before?

Recall the euphoria that sprung forth a little over twelve years ago with the defeat of John McCain and the election of Barack Obama. Liberals and the soft-headed left took the event as singular. One lefty famously wrote in a fit of gross exaggeration:

"...hundreds of millions-Black, Latino, Asian, Native-American and white, men and women, young and old, literally danced in the streets and wept with joy, celebrating an achievement of a dramatic milestone in a 400-year struggle, and anticipating a new period of hope and possibility."

In this space, I responded incredulously: “Hundreds of millions? Literally? A dramatic milestone? Of course, there were not hundreds of millions even voting, nearly half of which voted against Obama! And ‘dramatic milestones’ should be reserved for truly world shaking events like the Civil War, The Great Depression, and possibly the economic catastrophe now looming. This dramatic overstatement is precisely the kind of puffery that contributes to isolating the left from working people.”

But this unhinged faith in “a new period of hope and possibility” was not uncommon, though seldom so wildly exuberant. Zealotry for Obama ranged across the Democratic Party, infecting the “progressive” left even more deeply.

A month before Obama’s inauguration, disenchantment began to set in, as his cabinet and staff took shape and some policy positions became clear. 

I reminded readers of a statement once made by popular liberal columnist, Walter Lippmann, in response to a similar idolatry of Franklin Delano Roosevelt: "Franklin D. Roosevelt is an amiable man with many philanthropic impulses, but he is not the dangerous enemy of anything. He is too eager to please.... Franklin D. Roosevelt is no crusader. He is no tribune of the people. He is no enemy of entrenched privilege.” And what was attributed to him-- historically progressive and significant New Deal legislation-- was largely the result of pressure from mass movements of workers, farmers, the unemployed, African Americans (who got little), and small business people. 

And that proved to make all the difference. 

After the election, instead of holding Obama to the meager “progressive” agenda on which he campaigned and demanding even more, “the leadership of the broad left - much of the peace movement, liberals, environmental social justice activists, etc. - surrendered their critical judgment, independence, and influence to a blind trust in a fictitious movement for change. In the history of social change in the US, every real advance was spurred by independent organization and struggle unhampered by the niceties of bourgeois politics. From the Abolitionist movement to the Civil Rights movement, from the Populist movement to the Great Society, from the Anti-imperialist League to the Anti-Vietnam War movement, the initiative for change sprung from committed, independent activists who defied the caution and inertia of elected officials.

Even with a supermajority in the Senate and a majority in the House, Obama showed the “caution and inertia of elected officials.” And the euphoric left went to sleep, the antiwar movement waned, and labor leaders delighted in their access to White House social events. The fiction that social change can come from dangling the carrot of support and trust in front of Democratic Party elected officials failed the left once again. 

After two years, and the loss of the Senate supermajority and the House majority, Obama’s administration lost the initiative with little accomplished. 

Writing in December of 2010, I recalled an article that I posted in the fall of 2008 suggesting that Obama’s presidency might “reprise” the disappointing Carter term. I then asked the pertinent question: “The promise of 1976 was squandered by the Carter Administration. Will the opportunities for change afforded by Republican failure be wasted again in 2008?

With the honeymoon over, the truth about the Obama administration became clear, and is even more clear today, that the answer is a resounding “yes!” -- another lost opportunity.

Will the opportunities afforded by the defeat of the odious Trump administration be wasted also? Will the Biden administration turn liberals and those tied umbilically to the Democrats against advocating for any real change? Will the “responsible, practical” left entrust change to a Party with a history of betrayal? Will Biden follow Obama, Clinton, and Carter-- 20 of the last 46 years of presidential administrations-- down the rat hole of unfulfilled promises?

Today, with the left shackled to foundation grants, NGOs, and think tanks, as well as lacking the will to escape the gravity of the Democratic Party, the prospect of a truly independent political movement grows dimmer.

Yet the need for independence has never been greater!

As the crises of US capitalism mount, the argument for moderation and compromise becomes the argument for surrender. If it seems daunting to build a militant, independent left, surely it is even more frustrating to invest time and energy into an immovable instrument of capital, an institution that has shown, for most of our lifetimes, to be capable of only serving the interests of ruling elites, unless prodded by a determined, independent, militant movement.

Trump is gone, but Trumpism will return, if we fail to overcome the inertia of a lifetime of Democratic Party betrayal of meaningful reform.

Greg Godels

Saturday, February 6, 2021

Games People Play

Our corporate media has been in a frenzy. The unprecedented January 6 assault on the Capitol in Washington, DC has conjured widespread interpretation and unbridled speculation. Conspiracy theories abound, from fascist coup attempts to murderous assassination attempts against our beloved leaders. Whatever its actual meaning, it has long since become a gambit in the political games played in the two-party casino, a move shaped by the advantage thought to be gained by our high-stakes politicians.

Speaking of casinos, the new year has brought us a different high-stakes game playing out dramatically in the stock market. The last few weeks have seen an escalation in the war between some financial hedge funds-- private investment clubs for “sophisticated” investors (big money!), utilizing arcane, complex strategies and exotic investment instruments-- and a gaggle of day traders organized to act in concert through popular internet discussion sites.

Hedge funds are like the gambler who enjoys both the benefits of having a larger stake and a greater insight in the game; the hedge fund manager/gambler can shape the direction of the game as well as predict its course. With the growth of hedge funds in the 1990s, participation in a prominent hedge fund became a mark of exclusivity and prestige for the very rich.

Because they digest market information better and faster, hedge funds accelerate the accumulation of capital in the hands of the very rich, greatly increasing inequality. Their market advantages make them appear to represent less risk, but the competition between them for the favors of institutional investors often leads them to risky ventures. Their “private” status largely keeps regulators off of their backs.

Until recently, these big players have had their way in financial markets.

Other innovations have produced new players in the stock market. The introduction of impersonal internet companies that facilitate individual stock purchases without fees have enabled a renegade cabal of new day traders (estimates range from 6 million to 20 million) who communicate with each other about stock purchases over forums like WallStreetBets.

Despite the fact that the battle between short-selling hedge funds and rebel investors has only been noticed by the sensation-seeking mainstream media in recent weeks, the conditions for its escalation have long been noticed by the financial press. I wrote in late September 2020:

Some would be surprised to learn that in the modern era, individual investors-- day traders and the like-- only account for roughly one in ten trades. The rest are made up by institutional investors, funds, etc. But, in 2020, the number of trades by individual investors has doubled, accounting for about 20% of equity market action.

With social media tipsters and discussion boards, the born-again investors have accounted for many stock valuations that puzzle and concern wiser investors. Tesla, for example, has gained 438% this year, establishing the maverick car company as the highest valued auto company in the world and the eighth largest corporation in the US by market value.

Fed by social media gossip, investors jacked up share prices of Eastman Kodak by as much as 614% before losing most of the gains! This kind of euphoria-driven investment has mature investors and advisors shaking in their boots.

While few outside of Wall Street noticed this phenomenon, it nearly sank some prominent hedge funds that specialize in a particular form of options purchases-- the opportunity to sell a stock short. 

Hedge funds like Melvin Capital Management typically purchase an option to surrender a stock to a buyer at a set price. Convinced that the stock price will fall in the negotiated time frame, they hope to buy the stock at a lower price to exercise their option, pocketing the difference between what they committed and what they actually paid (for a remarkably short, but clear explanation of this process, see this article in FightBack!NEWS).

Short-selling hedge funds function like financial sharks-- they exploit market weaknesses and turmoil to manufacture a financial advantage at the expense of wounded corporate enterprises like GameStop, AMC Entertainment, Bed, Bath, and Beyond, BlackBerry, and others. Smelling blood in the water, they use their strategy to extract profit from the decline of the stocks of these companies, repeating their short selling until they drive the share prices to oblivion.

These hedge funds were akin to the financial vultures who profited by driving the cost of debt of European countries, like Greece, into the stratosphere after 2009.

But a strange thing happened in January.

Organized around the common goal of making money and utilizing the reach of social media, a substantial group of day traders pooled their collective power (a lesson for the tame US labor movement) to pillage the short-sellers. With the verve of sports fanatics, internet cheerleaders like newly-born celebrity investor Keith Gill fomented an uprising against short-sellers to buoy the prices of the targets of the short-selling vultures, especially a company called GameStop.

Consequently, GameStop shares rose 1600%. Another company’s-- AMC Entertainment-- share prices advanced 301.2% in one day, January 27!

Short-sellers, betting on share-price collapses by these damaged companies, were hammered by the increases engineered by the renegade day traders. They made money, but some hedge funds lost a lot of money. It is estimated that one hedge fund, Melvin Capital Investments, lost 53% on its investments in January from the collective action of day traders. On GameStop alone, hedge funds lost nearly $25 billion at one point in January.

The mainstream media pounced on the “battle” between day traders and hedge funds, projecting a David-versus-Goliath story. Congress members reacted predictably, some siding with David, some with Goliath.

When the no-fee trading platforms supporting the day-trading rebels stopped trading on the key stocks, odd-bedfellow politicians Senator Ted Cruz and Representative Alexandria Ocasio-Cortez reacted indignantly. AOC-- the master tweeter of the celebrity-left-- saw an injustice in denying the “heroic” retail traders from buying shares, “while hedge funds are freely able to trade the stock as they see fit.” This might appear to some to be an odd concern for a self-avowed “socialist.”

Multi-billionaire Elon Musk joined Cruz and AOC in sympathy with the upstart investors, tweeting “Get Shorty” to his 40 million followers. Of course it is worth noting that these same investors have created a frenzy of buying behind his company, Tesla, making him the world’s richest person.

Despite the popular, media-driven narrative of good rebels versus rapacious hedge funds, the truth is that this dust-up has very little to do with the fate of working people in the US. Capturing even sectors of the US left, the quaint story of an army of amateurs bringing down powerful hedge fund managers spread far and wide. Some saw the events as a populist rising, an exaggeration in the same league as the hysterics decrying a coup attempt on January 6.

Behind the facade of righteous anger directed at the flesh-eating hedge funds was individual lust for easy money corralled into a surprising market force and targeting a small, but vulnerable corner of finance capital. Portraying this as a populist rebellion, as an assault on the forces of economic tyranny is… simply absurd.

With Toto pulling the curtain back from Oz’s wizard, one finds a couple of relatively small-time fund managers who “sowed seed for frenzy” over GameStop, according to The Wall Street Journal. Both made millions off of sparking what is being sold as a rebellion.

And then there is Citadel Securities, the trading firm owned by a billionaire hedge fund manager and the largest player in facilitating retail stock trades. Citadel, more than any other company, supports the trades of the fee-less brokerages that attract the day-trading crowd. Accordingly, it makes vast sums from the explosion of new retail investors who collectively exploit the short-sellers.

At the same time, Citadel helped bail out a victim of the day-trading frenzy, participating in a $2.75 billion loan to Melvin Capital Management. Talk about working both sides of the street!

As The Wall Street Journal prominently noted (February 4, 2021), hedge funders Richard Mashaal and Brian Gonick jumped on the GameStop mania in September, cashing out at $700 million and making a hedge fund, Sunvest Management LLC, one of the big winners.

There is little heroics in this farce, and little justice.

In any case, forces within finance capital smashed GameStop on Monday, February 1, with the stock dropping 100 points and losing over 30% of its value. On Tuesday, another devastating blow was delivered. Game over for the GameStop rebellion.

We learn from this farce that there is no "peoples’ capitalism."

We learn that the stock market is, today, divorced from the real economy (though it cannot remain divorced forever). In fact, it is currently functioning as a casino for the wealthy, almost wealthy, and wannabe wealthy.

We learn that the stock market operates apart from the interest of working people and can offer no solace for those working for a living. And if we study history, we learn that investment mania, like that making headlines today, generally precedes a serious crisis. The similarity with the lead-up to the Dotcom bubble is uncanny.

Less than a month into the post-Trump era, with the Republican Party divided and the Democratic Party scrambling to separate from its weak-tea campaign promises, the corporate media is busy searching for a reality TV replacement for Trump’s antics. They have tried to transform an over-the-top tailgate by Trump’s camp followers into a coup attempt in DC.

And now they have sought to raise a mischievous, self-serving financial maneuver into a populist attack on the bastions of wealth and power, a media story akin to promoting a pick-up basketball game at the YMCA during the NBA finals.

Both stories serve as distractions from the destruction and insecurity faced by those who work for a living, by those distant from the rulers nested in Washington, DC and the financiers and their admirers tied to Wall Street.

Facing joblessness, eviction, foreclosure, and a broken, ineffective health care system unable to deliver hundreds of thousands of US citizens from a death sentence, the public needs more than an entertaining, sensationalist narrative.

In the shadows of these media circuses lurks the real story, a story of a politico-economic system bringing misery and despair to millions of US citizens, corrupting US politics, denying a solution to a wrenching health care disaster, and spurring inequality. Dare I say the word that eludes the corporate media?


Now that would be a story worth telling.

Greg Godels