financethrowaway [comrade/them]
I’m going to try to Liz Franczak this.
The government provides several financial products which they sell to fund stuff. One of the ways, for example, are bonds like the kind grandparents used to buy for their kids. There are other types of bonds and securities too. These sort of act like little loans. You buy it, the government agrees to buy it back at its full price and with interest or some kind of appreciation value later on. I suppose if you’re dealing in bulk, you can make some money off the right kind of bonds so it’s in your interest to do it. Unlike stocks or private investment they’re almost zero risk since the government has to buy it back. The only way they couldn’t is if the government didn’t exist (:party-sicko: or some other major catastrophe like the government runs out of money and simply can’t afford to pay them back.
Another thing that happens is the people who buy government bonds will sell them to other people. You buy thousands of really good bonds, nobody else gets them because they’re not an infinitely abundant product, so now you can do a little retail markup on them and sell them to other people. If you never sell them, you still make money. Or you could sell them for an immediate return and the person buying them will make money too once the bonds reach maturity.
What bond dealers will do is sell the bonds quickly under a repurchasing agreement (repo), and buy them back quickly for a higher price. Some of the bonds have a periodic payout, kind of like taking dividends on stocks, so people buy it to collect that payout and then sell them back to the dealers. Now, I’m not totally sure the exact working or profit motives for this. I guess that the dealer is okay with doing this if the bonds are the kind that also come with interest so the government will pay them more money for them once they reach maturity.
The reverse can be true as well. When someone buys from a dealer they also enter a repo, but it’s a reverse-repo where they agree to buy it now but sell at a later date. The big takeaway is that people use the way these bonds work to make money. If you time transactions right, there is profit to be made on all sides. It’s kind of like exploiting game mechanics in a video game. You’re not cheating, just using the features provided by the devs. And this is how it’s supposed to work. It’s not even an exploit really, just playing the game. This is why high finance people smell their own farts so much. They go get a job where they dig through these esoteric financial rules and instruments, then learn how to spin enough plates at once so they make millions.
Where the actual cheating comes in is that large investors or companies can use the repo market to hide how shitty their business is. This happened around 2008 with Lehman Brothers. They traded certain bonds in order to cover up their over extension on subprime loans. There were/are also problems with how the repo market works, that was never fixed because, as far as I can tell, it’s how it’s supposed to work. It’s like a shitty market that shouldn’t exist but it does because other markets exists and the wealthy need it to exist so that other things can exist.
The three-party repo market is basically the wild west. Since the repo market works on the very short term (48 hours) it’s hard to actually keep up with transactions. Transactions take time anywhere. Even with the internet. Things have to go through clearing houses. This was one of the issues with $GME. It revealed that there are tons of transactions happening with retail investors (and even normal large-firms) that aren’t basically backed by anything. Because when you make a trade it’s done on credit, the idea is that they’ll accept the trade right now with the understanding that the funds will actually get to where they’re supposed to go, and the investments will also get to where they’re supposed to go. However that doesn’t always happen because it’s an imperfect logistics network, not magic. And when there’s an extra balance in the network, where someone never got their goods or someone didn’t get their money, there’s a crisis. The greater proportion of transactions where this happens, the more of a crisis it is.
Regulators stepped in after 2008 and tried to fix some of these issues in the repo market, by acting as a throttle. They could step in and back transactions with cash so it was assured that people got their money even if the transaction would fail otherwise. Or there wasn’t enough credit to back the transaction to begin with. They also paid banks to not do play in the repo market at all. This has cut the repo market in half. However, the Federal Reserve itself has had to dabble in the repo market increasingly because it’s how they compensate for banks not having enough money to loan out to people/businesses.
So, in summary, the Fed is buying back bonds or selling them because banks have too much money on hand that aren’t being handed out as loans. By taking back $351M from the market, they’re forcing banks to give loans to people (mainly giant corps and investment firms) to fill that hole. The issue here is that nothing is done in a vacuum and this is just them basically trying to keep things in a precarious balance. The might have to throw all that back in next week if something goes the other way and banks suddenly have too little reserve.
I think the moral of the story here is that the wealthy are throwing around tons of money so fast that the market can’t really keep up with it even with computer technology. The Fed is trying to hold it together but who knows how long that will last. Two of the wealthiest men on Earth are also “getting divorced” and moving a ton of their assets around as well. I can’t tell if there’s more money up in the air right now compared to normal, but I feel like there’s something going on. The rats are scattering.
What if he doesn’t know what margin is and they closed his account because it got margin called today.
To be fair, the GME squeeze happened, it’s just that everyone was playing telephone and thinking that it had to go up to $1000 because VW went up $1000 during its squeeze. By the time it was clear the squeeze happened, pretty much anyone who bought in above $100 was holding the bag. People had to come up with a reason why the $1000 never came, so they invented conspiracies. When it was really that there was a ton of bad info presented as insightful DD, such as the way these firms have to cover shorts. Clearly whatever amount of shorts existed or how far beyond profit they were, it didn’t matter. Instead of accepting being wrong, the entire financial industry is trying to short gamestop for some reason. It’s a classic failed prophecy. Every day someone posts DD about how today’s the day and it never comes and people just keep doubling down. There’s some new actor involved that prevented it and some new reason why it’s going to be tomorrow for sure. r/wsb got tired of this shit and kicked it off their sub for the most part. Now you have all these spin-off subs like r/superstonk that’s just Seventh Day Adventists but with redditors and various moonshot stocks that are about to take off any day now.
It’s really interesting from a social standpoint because you get to see how these kinds of things are born and grow. Conspiracies are made to cope with unexpected results, like they always have been. Whatever contradictions in capitalism it exposes, and whatever popular rage comes out of it gets absorbed into just repeating the same thing over and over. You have to pay more money to buy more stock because that’ll show them. Instead of people radicalizing into political action, it’s just slacktivism and consumption and culture like with everything else. The GME and crypto shit is a pretty good microcosm that represents exactly the same issues we have in society as a whole. It’s almost like if you can resolve the GME thing you have the formula to solve radicalizing people as a whole.
But I don’t think the crypto moonshot scams would be as big right now if it weren’t for GME. It’s all compounding and becoming common. Very scary but also kinda interesting in a car wreck kind of way.
Even doge is pretty much the example of a good pump and dump coin. It got big enough to actually return something and now people keep trying to replicate it. I saw another thing on reddit this morning for a weed game that generates NFTs and various cryptos. You use the coins to create NFTs and then the NFTs grow and you sell them for coin, I guess. It’s like a farmville type game. So you have the intersection of a lot of recent get-rich-quick things. The lazy facebook/mobile game market. Crypto, NFTs. Crazy times.
Everything that happens in the economy is caused by people making choices. When there is a crash, it is because enough people chose to act in a way that caused a crash. If people lose their jobs, it’s because someone chose profits over labor. There are no “natural” laws of the market. It is not a physical system governed by physics. It is a series of human choices. On paper, the market is a physics sandbox where there are laws of gravity and friction and momentum that all markets must obey. This isn’t true. It’s all people making decisions. If you can decide that profit is important above all else because profit is survival and prosperity for your business, then you can decide to value labor and realize that you don’t have the resources to take care of your employees and aren’t entitled to own a business. On paper, there’s nothing the employer can do, they can only react to the market. In real life capitalists have agency.
Yeah but this was always going to happen. No matter where this ends, when there’s a huge dip, there’s always going to be people getting scared. It’s part of the game. That’s why the paper hands vs diamond hands meme exists. People see a major dip and then run because it’s over, the naysayers were right, I was stupid for doing this, it was always going to end badly, etc. There’s never going to be a moment where everyone is happy in a dip. There have been people saying “I told you so” for days now.
On Jan 26 at 3pm it was $145. On Jan 27 at 10 AM it hit its all-time high at $371. The reverse can be true. It can fall from over $300 to $130 within 24 hours. Taking a victory lap today would be just as ephemeral as the other side cheering when line went up.
And just as a broader cultural thing, people want to be correct online. They base their entire thought process around being correct online. So they construct these “predictions” where they can’t actually lose. If the stock hits $1000 they were right all along because poor people will gamble their winnings and be destitute. If the price never gets above $200 again, they were right because they knew it would never get that high. This is an unfalsifiable claim, where the person can never be wrong. It’s easy to be right when you make such claims about the future. Where no matter what happens, you were right. But people do it and then convince themselves they’re prescient, and therefore we should listen to them.
I don’t know what’s going to happen. For all I know I lost most of my $50. I kinda want to make outrageous claims of this shit will be $2000 by Friday just to mess with the people taking victory laps. But I really don’t know. This could be the end and then oh well it was fun for a few days. But what remains true is that people always get bad vibes like the party is over when there’s a dip. And people do try to hedge their claims online into always being right. There’s no use in taking either one super seriously.
“We’ll get these by the summer”
“By the middle of the summer”
“By the end of the summer/beginning of fall”
He’s literally doing the “$100? Why do you want to borrow $50?” meme.
>decentralized currency
>guy with the most wealth buys a shit load of it
>crashes its value with one decision
>decentralized
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