49 Comments
Feb 1, 2021Liked by Matt Stoller

I think your description of the Democratic Party is spot on. I'm a millennial from the purple rust belt- I would guess the blue collar vote that went for Trump would have been split if it had been Trump/Bernie. Working people are less concerned about politically correct social dogmas (the focus of the Democratic Party at times) than they are about jobs and paying their bills. These are the people contributing measly amounts every paycheck to retirement investment accounts not knowing if they will ever see it, the people who are now pretty angry that some unemployment in 2020 has easily rivaled their union wages. One pro-Trump friend recently complained to me that instead of sending people $600 to do nothing, why not pay teachers more so schools are better and nurses more so their jobs are more meaningful- not a typical Republican stance.

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IMHO the solution to the Cantillon problem is to do money creation at the level of the mass population, instead of through centralized channels.

Step 1: Create postal banking. Every citizen just automatically has a bank account, which they can access through any post office.

Step 2: Implement UBI, by way of having the Fed just deposit money in everyone's postal bank account every month. The question of exactly how much depends on your location (index annually to county median wage income), and on the status of the economy -- when neutral indicators like the Sahm Rule say we're in trouble, the UBI goes up. When the economy is booming, it goes down.

Step 3: Now that we're controlling the money supply by way of pumping money _directly_ to the people, gradually raise the fractional reserve requirements on banks, to rein in the speculative behavior they've engaged in since the '70s (the entire last half-century has been repeated cycles of the Savings and Loan crisis, at ever-larger scale). And bring back _extremely_ strict rules against consumer banks engaging in speculative investments themselves -- consumer banks should ONLY be doing "maturity transformation", not mixing up that business with the stock and bond markets. Make Banking Boring Again!

(Also, fun side benefit -- now that everyone is banked, we can convert the progressive income tax into a progressive consumption tax, trivially, by making income that is left in your postal savings account, or any other savings through an institution that qualifies with the IRS, tax-deductible.)

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Feb 1, 2021Liked by Matt Stoller

"What is really happening is not that we’ve run out of problems to solve, but that the economy has become a giant “kill zone,” which is a term venture capitalists use to describe areas they can’t invest for fear that a monopolist will crush their company." Or when they do decide to make investments, they are outsized, weaponized big money bets like SoftBank's investments in Uber or WeWork that are, in part, meant to deter competitive investments.

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I'm surprised Matt is so down on this moment. He rightfully rails against the modern progressive movement for being too focused on "the humanities," and seemingly allergic to the gritty details of business and power structures. Now we have a wave of normal people who are beginning to learn about short sells, clearing houses, and other intricacies of the financial sector. The best way to learn is by participating.

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Correction on Robinhood: The trading restrictions they instituted on GME and other stocks were for all traders. I do not have a margin account or borrow money to trade stock, and yet I was prevented from opening new positions of GME and still am to an extent. So the argument that Robinhood acted because the banks were limiting its borrowing capacity is not completely right. Why was I restricted from trading when I had 100% cash in my account to fund the trade or option?

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founding
Feb 1, 2021Liked by Matt Stoller

Great read, as always, but Trump, Jr. is not a member of Congress.

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Feb 1, 2021Liked by Matt Stoller

Good read.

But personally, I’m done arguing on the basis of common sense and reality. For example, I can explain to some cryptocurrency religious believers why it’s not really decentralized or democratic (those who pay the highest fees will have their transactions processed first; those who are most well-funded will have dominant mining power) but it doesn’t matter because the believers who don’t know the first thing about how cryptocurrency really works can still make tons of money “investing” in crypto. Believers can still make money buying Tesla shares even when Tesla’s market cap is higher than the top six automakers combined, while having less than 1% of worldwide sales. Who says it’s overvalued? At the end of the day, the one who made money is in the right. (And when they lose their shirt, they don’t talk about it and we aren’t cruel enough to tell them “See? I told you so!”)

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Although structural deficiencies can be a factor in the scenarios you reference, it is an over reach that simply lacks sufficient foundation, in an attempt to dismiss far more nefarious realities. This article also overlooks the fact that Google deleted thousands of negative reviews of Robinhood and that Robinhood, is largely back by a host of hedge funds. JP Morgan Chase (5 omitted counts of felony) backstops many hedge funds & was primary to Melvin. They literally held long positions in GameStop & less in puts. Allowing them to trade both sides & exploit inflated stock. Apparently, a strong likelihood they had direct insight into trading data through hedge funds like Melvin or others like Citadel (Cohen) and the Robinhood platform. Thus, your dismissing the possibility of there being any collusion, particularly when referring to the casino-like modus operandi of Wall St in the same article, is unpersuasive. I’ve found your initial “plumbing” explanations relative to CARES Act valid and compelling but not in this instance. If all we own is a hammer, everything looks like a nail. Perhaps the same can be said of plumbing. You might do well to expand your tool kit. I enjoy your work but you seem to cherry pick key info to omit and dance gingerly around Occums Razor.

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"Robinhood has a risky and somewhat sleazy business model; the brokerage encourages its customers to speculate wildly, automatically setting them up in “margin” accounts"

It doesn't. You have to be approved to use margin and it's only up to the amount you have in your account. You can't just borrow infinite money.

"Roughly half of its clients are now in GameStop, and many of them have bought the stock with borrowed money"

How did you arrive at the conclusion that "many" bought on margin?

"or with a riskier derivative bet known as an option. "

Depending on how you use it call options are less of a risk than using margin because you know the exact amount you're risking when purchased.

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Ordering the book now!

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The difference between now and the 1920s/1930s is that the Federal Reserve back then wasn't as creative in keeping the party going.

So when you have a party going like we do now, well past it's due date, this is what you get. Is it fraud? Is it corruption? Or is it everybody dancing because the music is still paying?

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“none of whom have much of a relationship to the anger and frustration of a broad swath of young men who have no way to live meaningful commercial lives” and women? Or na? Very insightful article, but it often felt like you were speaking to men in a man’s market.

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Another good comparison for the everything bubble is Dawson City during the Klondike Gold Rush. Tons of gold dust and not a lot of anything else: prices were super inflated for everything. Tons of cheap money with nowhere to go.

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Great piece, Matt, a few points:

We have had a huge, state-supported (or worse) upward transfer of wealth since the 1980s. And all that loose cash has to go somewhere. And since there's more money in speculation, that's where it goes. So we're getting a lost generation of kids graduating college with a lifetime of debt or worker class people whose full time jobs aren't actually full time and refuse to pay a living wage (forget benefits) -- not that professions are so great either. Anyway, a lot of mitigation can be financed by a transaction tax on the speculating but the powers that be, not surprisingly, hate giving up the fraction of a penny.

As for the reader's note about CVS and the vaccine rollout: West Virginia's (alleged) success is based (allegedly) on the lack of chain pharmacy. The local pharmacy is closer, more nimble, etc.

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