[Plura-list] Thinking through Mitch McConnell's plea for comity; Further, on Mitch McConnell and comity; Understanding the aftermath of r/wallstreetbets
Cory Doctorow
doctorow at craphound.com
Sat Jan 30 13:41:29 EST 2021
Today's links
* Thinking through Mitch McConnell's plea for comity: A thoughtful analysis.
* Further, on Mitch McConnell and comity: I thought about it some more.
* Understanding the aftermath of r/wallstreetbets: Even if there's no
angels, there's still a path to glory.
* This day in history: 2011, 2016
* Colophon: Recent publications, upcoming/recent appearances, current
writing projects, current reading
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🦃 Thinking through Mitch McConnell's plea for comity
Senate Minority Leader Mitch McConnell, via Twitter: "Today, I made
clear that if Democrats ever attack the key Senate rules, it would drain
the consent and comity out of the institution. A scorched-earth Senate
would hardly be able to function. It wouldn’t be a progressive’s dream.
It would be a nightmare.
"I guarantee it."
https://twitter.com/LeaderMcConnell/status/1354204878114086916
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🦃 Further, on Mitch McConnell and comity
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Seriously, fuck that guy.
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🦃 Understanding the aftermath of r/wallstreetbets
A couple days back, I wrote up my best understanding of what happened
with /r/wallstreetbets and meme stocks like Gamestop, trying to show how
all the different, seemingly contradictory takes on the underlying
financial stuff could all be true.
https://pluralistic.net/2021/01/28/payment-for-order-flow/#wallstreetbets
In the days since, a new series of contradictory takes has emerged,
these ones disputing the meaning of this bizarre financial spectacle,
and likewise what response, if any is warranted as it unfurls.
I think that all of these takes can also be true, and as with the
trading itself, reconciling them requires that we widen the frame.
Let's start with Jimmy Carter.
In 1978, Carter's IRS created the 401(k), a tax-sheltered account for
people who wanted to gamble on stocks to fund their retirement.
That was a fringe proposition at best.
The normal retirement system was a "defined benefits" pension where your
employer guaranteed you a certain monthly percentage of your salary from
retirement to death.
The vast majority of Americans wisely prefered a guaranteed payout to a
tax-advantaged gambling account.
Obviously, right? On the one hand, you have the guarantee of a pension
(maybe even inflation-indexed); on the other, you have a bunch of bets,
that, if they go wrong, leave you literally homeless and starving.
When gamblers remortgage the family home and cash in the kids' college
funds to play the tables, we consider them to have a mental illness, a
pathological condition that harms them and the people around them.
Giving up a defined benefits pension in favor of a 401k is just the same
kind of bet - staking all the money that will support you when you exit
the workforce on the movement of stocks and bonds.
Who would do that voluntarily?
Pretty much no one. But the transition from defined benefits to 401k was
not voluntary. Finance ghouls like Ethan Lipsig wrote memos to major
employers like Hughes Aircraft showing them how they could ditch their
pension obligations by moving workers to 401ks.
In the 80s, Reagan created a bunch of legal tools that allowed employers
to coerce their workforces into giving up the security of a pension and
force them into gambling their salaries on the prayer of a win in the
markets.
This was insanely, amazingly great for the finance sector, in three ways:
I. It made companies more profitable. Guaranteeing that the workers
whose labor made your company viable wouldn't spend their dotage
starving and homeless is expensive.
Helping fund wagers on shares is much cheaper. The finance sector
represented the major shareholders of the companies that transitioned to
401ks. The savings were transferred to these shareholders and the
finance sector got commissions.
What's more, this temporary inflation of share prices disguised what was
going on with the pension switcheroo: workers' defined benefits pensions
were liquidated and turned into stocks, just as stocks were going up
because their pensions had been liquidated!
Their legs had been amputated out from under them, but so subtly that
they didn't yet feel the pain - and now their bosses cooked their legs
and snuck them into their dinner, and everyone marveled at how full they
felt after that hearty, meaty meal.
II. 401ks brought a lot of suckers to the table. The market was - and is
- dominated by "sophisticated investors," AKA predators, who knew all
the ways to fleece the rubes who had no idea how any of this worked.
The predatory nature of finance only increased over time. Hedge funds,
for example, exist to find unethical practices that are legal (thanks to
loopholes in the rules) and exploit them until they are illegal.
III. 401ks created a political force outside the finance sector that
would lobby on its behalf. Transforming America into a nation of
stockholders meant that workers had to choose between supporting rules
that protected their jobs and rules that protected their retirement.
For your pension account to grow, you had to support policies that
permitted finance ghouls to offshore your job, or misclassify you as a
contractor, or eliminate the safety rules that prevented you from being
maimed, or take away your right to sue for compensation.
Every time there's a particularly ghastly bankruptcy driven by PE or
hedge funds - Toys R Us, Sears, etc - it emerges that at least some of
that money is coming out of a union pension fund.
That's marketization - turning the once obscure, boring business of
market-based capital allocation into a matter of import to everyday people.
Marketization begat financialization.
While marketization is primarily about capital allocation (who gets what
money), financialization is about bets. Sometimes those bets are about
things - businesses, houses, coal and timber - but things are limited.
Mostly the financial market consists of bets on other bets.
Bets are infinite. Every time you make a bet, you create inventory for a
market in a bet on the outcome of your bet. And that's inventory for a
new market: bets on the outcomes of bets on the outcomes of bets.
It's called Wall Street Bets for a reason.
Bets need referees, someone who decides who the winner is. In sports,
it's a major scandal if a referee is caught wagering on one of the teams
in a match. In the financial markets, it's the norm - referees that lay
wagers on the outcome of the contest they're overseeing.
Let's take stock:
* Workers are forced to play the casino, and if their bets fail, they
spend their old ages homeless and starving;
* The vast majority of casino games are wholly abstract - bets on bets
on bets - and require layers of refs;
* the refs are all crooked.
Every couple of years, we have a massive, systemic financial crisis, and
every time that happens, the finance sector lobbies for a
no-strings-attached bailout, abetted by suckers who hate the finance
sector but fear starving in their old age.
We're about to be engulfed in the second-largest crisis of our lifetime
- the reckoning from trillions in capital market gains propped up by the
Trump administration's policy of buying all corporate debt as a covid
stimulus.
https://pluralistic.net/2020/09/28/cyberwar-tactics/#aligned-incentives
(the largest crisis of our lifetimes is a few years off, as the climate
emergency piles losses on losses, stranding tens of trillions in assets,
from fossil fuels to obsolete gas-stations to literally underwater
coastal real-estate to whole towns incinerated by wildfires)
That's where we're at: a crooked casino that we've trusted our futures
too, a crisis on the horizon, and a bunch meme-stock "players" who have
thrown the normal weirdness of the market into stark relief through a
spectacular stunt.
A lot of people are angry at Robinhood, the stock-trading platform at
the center of all this. Robinhood froze trading on meme stocks, and has
only allowed it to come back in a useless, performative trickle that is
seemingly calculated to prevent more meme-stock gamesmanship.
Is Robinhood just another crooked ref? Yes…and no. The meme stock run
upset the stable cheaters' equilibrium whereby cheating never escalated
to the point where the game just collapsed.
For example, the total short position on Gamestop exceeds its total
stock issuance.
Translation: there were more Gamestop shares promised between bettors
than exist. When the game stops, all those promises come due, and they
literally can't be paid off because there aren't enough tokens in
circulation to settle all the debts.
Robinhood halted trading in part because the big fish upstream of
Robinhood also halted trading, because they have even more at risk than
Robinhood does if the game collapses - they the refs for MANY players,
all the same size as Robinhood or larger.
https://www.bloomberg.com/opinion/articles/2021-01-29/reddit-traders-on-robinhood-are-on-both-sides-of-gamestop
But remember, the refs are cheating. And they are both downstream and
upstream from other games in which the refs are also cheating.
And the games, as a whole, encompass our economy, including the solvency
of the "real economy" (the people who make masks, deliver groceries and
drive ambulances), and whether you spend your old age homeless and
starving.
So the people who say, "Don't blame Robinhood, they didn't halt trading
to help billionaires, they halted trading to prevent the game from
collapsing are right."
But they're not the only ones who are right.
Also, there's the people who say that meme stocks aren't making money
for little guys at the expense of the big guys. They're right too.
First, because these stocks will all need to be converted to cash, and
that means selling them.
https://arstechnica.com/tech-policy/2021/01/the-gamestop-bubble-is-going-to-hurt-a-lot-of-ordinary-investors/
When the selloff starts, the price will plunge, because even if the
stock was undervalued before, it's certainly overvalued now. Every
bubble produces wealth for its early bettors who sell out to later
players who lose everything when they can't find a sucker later on.
From Beanie Babies to subprime, bubbles burst and leave suckers holding
the bag. If you just heard about meme stocks last week, you're too late
to make money off of them.
There's another version of the "this isn't little guys, it's big whales"
that's *also* true: the main beneficiary of the meme stock runs is giant
funds who magnified and the bets from r/wallstreetbets and got out smart
and fast.
https://twitter.com/zatapatique/status/1354904995901136896
So given all this, what can we make of calls (from parties as varied as
AOC and Ted Cruz) to investigate Robinhood and other retail brokerages
to see whether they're honest refs, or in the tank for billionaires?
At Naked Capitalism, Yves Smith calls this a "fatuous uproar," saying
that the Senate has more important things to do during the
racing-out-of-control pandemic than to investigate a literal penny-ante
grift.
https://www.nakedcapitalism.com/2021/01/the-fatuous-uproar-about-robinhood-and-gamestop.html
Do we really care who the winner is in "a beauty contest between
Cinderella’s ugly sisters" ("clueless new gen day traders versus clumsy
shorts")?
Smith is right too.
A speculator-v-speculator contest that falls apart when the crooked ref
halts play to prevent collapse - who cares who "wins?"
But here's how they can all be right - the "who cares" and the "goliath
v goliath" and the "bubble" and the "Robinhood is a plutes' honeypot."
*If* there's hearings, and *if* those hearings expose the absurdity and
corruption of the system, *then* there is a chance to build the
political will to make real, systemic changes when the crisis comes.
And there's a real crisis coming: two, in fact. The covid junk bond
financial crisis, which is due very soon, and the climate crisis
stranded asset emergencies, which will unroll with increased tempo and
intensity for decades to come.
The half-century cycle of "addressing" finance crises by increasing
financialization MUST stop.
If the meme stock spectacle gets us to pay attention to hearings that
reveal the irredeemable rot of the system, then it's a unique chance to
spread *real* "financial literacy."
And that literacy is the necessary (but insufficient) precursor to
taking action when the time comes - and the time is certainly coming soon.
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🦃 This day in history
#10yrsago Morrow’s Diviner’s Tale is a tight, literary ghost story
https://memex.craphound.com/2011/01/30/morrows-diviners-tale-is-a-tight-literary-ghost-story/
#10yrsago ATM skimmer that doesn’t require any modifications to the ATM
https://krebsonsecurity.com/2011/01/atm-skimmers-that-never-touch-the-atm/
#5yrsago Same as the old boss: Justin Trudeau ready to sign Harper’s EU
free trade deal
https://www.cbc.ca/news/politics/trudeau-eu-parliament-schulz-ceta-1.3415689
#5yrsago Danish government let America’s Snowden-kidnapping jet camp out
in Copenhagen
https://web.archive.org/web/20160126202504/https://www.denfri.dk/2016/01/usa-sendte-fly-til-danmark-for-at-hapse-snowden/
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🦃 Colophon
Today's top sources:
Currently writing:
* My next novel, "The Lost Cause," a post-GND novel about truth and
reconciliation. Friday's progress: 522 words (105202 total).
* A short story, "Jeffty is Five," for The Last Dangerous Visions.
Friday's progress: 252 words (2395 total).
Currently reading: Analogia by George Dyson.
Latest podcast: Someone Comes to Town, Someone Leaves Town (part 29)
https://craphound.com/news/2021/01/25/someone-comes-to-town-someone-leaves-town-part-29/
Upcoming appearances:
* Launch for the young adult edition of Edward Snowden's memoir
PERMANENT RECORD, Feb 9,
https://www.eventbrite.com/e/edward-snowden-in-conversation-with-cory-doctorow-tickets-136734968973
* Boskone, 58, Feb 12-15, https://boskone.org/
* Keynote, NISO Plus, Feb 22-25,
https://niso.plus/cory-doctorow-to-keynote-at-niso-plus-2021/
Recent appearances:
* Monocle Reads
https://monocle.com/radio/shows/meet-the-writers/monocle-reads-87/play/
* Hedging Bets on the Future (Motherboard Cyber):
https://play.acast.com/s/cyber/hedgingbetsonthefuturewithauthorcorydoctorow
* Applying the Pandemic Mindset to Climate Change:
https://hbr.org/podcast/2020/12/applying-the-pandemic-mindset-to-climate-change-with-cory-doctorow
Latest book:
* "Attack Surface": The third Little Brother novel, a standalone
technothriller for adults. The *Washington Post* called it "a political
cyberthriller, vigorous, bold and savvy about the limits of revolution
and resistance." Order signed, personalized copies from Dark Delicacies
https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet
analyzing the true harms of surveillance capitalism and proposing a
solution.
https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59
(print edition:
https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907)
* "Little Brother/Homeland": A reissue omnibus edition with a new
introduction by Edward Snowden:
https://us.macmillan.com/books/9781250774583; personalized/signed copies
here:
https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
* "Poesy the Monster Slayer" a picture book about monsters, bedtime,
gender, and kicking ass. Order here:
https://us.macmillan.com/books/9781626723627. Get a personalized, signed
copy here:
https://www.darkdel.com/store/p1562/_Poesy_the_Monster_Slayer.html.
This work licensed under a Creative Commons Attribution 4.0 license.
That means you can use it any way you like, including commercially,
provided that you attribute it to me, Cory Doctorow, and include a link
to pluralistic.net.
https://creativecommons.org/licenses/by/4.0/
Quotations and images are not included in this license; they are
included either under a limitation or exception to copyright, or on the
basis of a separate license. Please exercise caution.
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"*When life gives you SARS, you make sarsaparilla*" -Joey "Accordion
Guy" DeVilla
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