John Maynard Keynes warned us as far back as 1936 that “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”. Eighty-five years later and thirty-five years after Susan Strange wrote her seminal work ‘Casino Capitalism’, few people are bothered about the real economy. Instead, the way to improve the real economy, so goes the received wisdom, is through the financial one. What is good for the casino is good for the economy. At least, that is what the high priests of finance tell us.
But the masses seem to have had enough of such self-serving cant. This month, they used social media to band together to challenge the hedge funds, those lords of finance. Astonishingly, they succeeded in bruising and battering some of them.
The GameStop and associated short squeezes have been portrayed as a David versus Goliath battle, with the small investor beating the big shots at their own game. Some demented souls have compared it to the storming of the Bastille. Presumably ‘Traders of the world, unite’, would be their slogan. If these comparisons seem overblown, it’s important to realise that hype is part of the strategy, which is nothing but the time-worn one of pump and dump.