I have a mental block when it comes to understanding much of anything to do with economics, macro-variety. Mostly it’s because I see economics as a contrived, flawed, crooked game. The whole scheme for centuries has been molded and manipulated by the haves in order to keep them that way. The entire foundation of economics is based on the unspoken philosophy that holds, Hey, we’ve got dough so that means we’re smarter people, more hard-working people, better people; if you haven’t got dough, too bad, you deserve your lot in life.
Just this past week some weird Wall Street thing went on that I’ve struggled to grasp. That is this whole GameStop phenomenon. I have long been unable to wrap my modest cerebral cortex around the very idea of short selling. I’ve tried to read explanations of it and within seconds my eyes glaze over and I start wondering if perhaps I should clip my toenails. BTW, toenail clipping is out for me for at least the next couple of months due to restrictions placed on me in the wake of my right hip replacement in late December. I am walking, though, and exercising and, slowly but surely, getting back to some modicum of normality I haven’t felt in nearly a decade. Here’s my new gadget:
I sometimes think about that long screw connecting my new plastic joint cup to my hip bone and start shuddering. The very idea that a piece of hardware store merchandise is inside me — permanently — doesn’t quite sit terribly well with me. Then I shake my head and worry about other things, like trying to persuade The Loved One to clip my toenails. (She does, happily. Bless her.)
Anyway, GameStop and short selling. I was listening to On the Media with Brooke Gladstone today. She covered it all because it is perhaps the definitive third decade of the 21st Century media story, inasmuch as the players involved used what-the-hell-ever social media to upend the market for a few days. She had a guest on, some fellow who writes about the economy, meaning I’ve never heard of him although, acc’d’g to Gladstone, he knows his stuff. She asked him the perfect First Question: What is short selling?
I’m a huge advocate of First Questions, employing them on my Big Talk weekly radio interview program on WFHB, 91.3 FM, Bloomington. First Questions are those queries about concepts and things that we all talk about regularly and confidently that we know what we’re talking about but…, well, maybe we’re not so smart about them as we’d like to fancy ourselves.
This fellow launched into a lengthy explanation of short selling, in keeping with economist-talk. Economists cannot, psychologically or biologically, explain anything in simple understandable terms. Y’know, because then it might dawn on the rest of us that the game is rigged. It’s like priests and ministers talking about god and existence. They go on and on for hours, dancing around the conclusion that, golly, we just don’t know.
Toward the end of the economist’s disquisition he said, and I paraphrase, in short selling, somebody borrows a bunch of stock from somebody else and sells it at, say, twenty bucks a pop. They’re hoping the stock’s value is tumbling so they can then turn around and buy back those shares for a ten-spot each. Then, when they return the stock to its owner, they’ve ended up making ten dollars on each share.
If I were a cartoon character, a lightbulb would have gone on over my head. Aha, I though, now I get it.
The economist continued: short selling is good for the market because it keeps certain stocks from becoming overvalued due to irrational exuberance, although why that’s important remains unclear to me. And, trust me, I wont be delving any deeper into these things because…, economics, right?
But I get it — as much as I care to get it — now. Short selling. Makes sense. And it sucks to high heaven. All I could think of was any system that rewards people for the woes and misfortunes of others is sick, probably fatally so. You, the short seller, are hoping an entire company — investors, managers, laborers, plus their families, their butchers, their mortgage holders, etc. — suffer the collapse of said biz just so you can make a few bucks betting on that failure.
My pal, the Lake County Republican, tells me capitalism ain’t perfect but it’s the best thing we’ve got. For my money, if that’s true we’re in a world of shit. I wouldn’t brag about it.