Touting, selling, and fooling, Krugman on pseudo-populism

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Krugman

The GameStop epic short squeeze was the most-watched financial event at the beginning of this year, and it also brought a lot of controversy and reflection. This matter is not only a question of whether the market should allow short selling, Nobel economist Krugman (Paul Krugman) said that we must be careful of pseudo-populism.

Krugman is a very well-written economist. He started with a normal and rational market. Generally speaking, the rise and fall of the stock prices of small retailers will not be concerned by so many people. It is not like the semiconductor industry on the cusp. Even if the stock price is pushed to the peak by the Reddit crowd, GameStop only accounts for nearly 0.06% of the total market value of US stocks, an insignificant figure.

But he said that we are living in an unreasonable world, in a world where GameStop can briefly attract global attention. This madness does provide some important lessons, but it is not so much about the economy and the market as it is about psychology and politics. Facts have proved that despite Trump's only four years in office, American society is still very fragile, and too many influential people continue to fall for fake populism.

What Krugman wants to emphasize is the concept of fake populism. Although this may seem like a story of villagers rising up to defeat Wall Street, it is not. First of all, he said that short selling a stock whose performance is declining, as long as these hedge funds think that its stock price is exaggerated, then it is not a strange behavior. Anti-squeezing is actually not very rare. But this time, it was not a direct confrontation between the two legal entities, but the use of the power of social media.

But why it is said to be a pseudo-populism, because there is evidence that it is not real people who incited the people. It is believed that the spokesperson of the Reddit team pointed out in a statement to CBS MoneyWatch that recently, bots have frequently posted messages to incite public attention to stocks such as GameStop. Although the official has tried to delete posts, the effect has not been good. Indeed, in recent years, more and more topics on WallStreetBets are driven by robots rather than real investors.

Although the official did not give detailed details about which posts are called robots, this is not surprising. The cyber military industry is already very developed today. The research firm Epsilon Theory also analyzed the 30,000 posts posted on WallStreetBets on February 1st and found that nearly 97% of them were posted by robots, which is a pretty staggering number. The bot will post the same message multiple times from multiple fake accounts to amplify the effect.

Regardless of the facts, Krugman believes that this phenomenon is widespread. This is a predatory transaction that forces others to close their positions, but it is now catalyzed by social media. The predatory traders that we know originally were these hedge funds, but now they have become prey. This sounds exciting, but in fact, there are no good people in this story.

To put it simply, Krugman believes that this is just black and black, this kind of stock rally is not a sustainable phenomenon, and in the end, small retail investors who are caught in the high point suffer losses. Therefore, he emphasized that we really must be concerned about social inequality, and it is even possible to support populism, but we must ensure that this is "real" populism. We need serious policies to improve lives, not conspiracy theories and false class struggles.