Organised individuals can alter financial market dynamics. A problem for public order that do not have a solution – Originally published in Italian by Formiche.net
A group of self-organised investors via the Reddit platform managed to prevent a speculative action on the Gamestop video game chain’s stock by carrying out one opposite direction .
Goliaths of Wall Street had bet on the collapse of the stock of a company that was already in bad shape, the Davids of the Internet began to buy shares, causing the stock to soar. As a result, the professional investors who had sold out are running the risk of losing staggering sums of money, not because there are any objective reasons for this (e.g. Gamestop’s incorrect value assessment), but because a (large) group of people, coming out of practically nowhere, have used the same tools of great speculation against them.
Now the financial world is wondering what the future scenarios might be because the Gamestop affair is certainly not going to end. Aware of the power they have gained, the ‘Amateur Internet Traders’ – as media snobbishly nicknamed them – have also turned their attentions to BlackBerry, another company that is not sailing in remarkably calm waters and whose shares have benefited positively from this interest.
If therefore, the presence of the Amateur Internet Traders were to consolidate, the stock market (and its intermediaries) would have to face very high risks, having lost control over the main asset of this sector: the information that enables them to organise ‘targeted investments’. If a myriad of micro-investors organises themselves without going through traditional channels, no stock is safe, and it is not possible to foresee the outcome of the transactions. In a word, or preferably two, it is financial chaos.
This affair hastily hails as a victory of internet users. It demonstrates the power of social networking platforms against powerful institutions – in this case, banks and finance. However, this statement is true, but only partly because the Gamestop case is the latest example of an unstoppable trend made possible by the ubiquitous diffusion of information technologies: the loss of the monopoly of centralised structures in favour of self-organised and uncontrolled behaviour.
It is no longer a question (and only) of disintermediation between individuals and institutional entities. We are facing a progressive loss of their role. Exercises in direct democracy, the organisation of protests against institutions and companies, the creation of economic value through cryptocurrencies, and now the affecting of financial markets undermine the traditional systems of control and operation of a state and the entire system. In short: the social pact is about to break down.
There is no longer any need for the state, in exchange for sovereignty, to guarantee rights and economic value that can be secured by instruments outside public control.
The problem, then, is not the reaction of hedge funds or financial institutions, but the response of the state to business models imposed by an industrial sector -that of information technology- which, in the name of profit, has undermined the functioning mechanisms of the political and economic system.
Although this reconstruction sounds more like the plot of a political fantasy novel, it highlights the need for the state to decide how to deal with this loss of role and power, which affects the very fabric of a nation. In other words, we should ask ourselves whether we are facing a drift of fundamental rights, transformed from a guarantee of social coexistence into individual claims against the state, whatever the cost.
Moreover, if this is the case, we should ask ourselves how to stem it, even if the answer may not be pleasant.