Reddit's battle with Wall Street is not a joke

A "Reddit" logo. /Getty Images

Editor's note: Bradley Blankenship is a Prague-based American journalist, political analyst and freelance reporter. The article reflects the author's opinions and not necessarily the views of CGTN.

This week saw quite a bizarre story unfold involving GameStop, an American video game retailer, Reddit and some of America's largest hedge funds. Redditors took notice of the fact that these hedge funds, like Melvin Capital, took a short position on GameStop and were driving the price down before snapping into collective action to beat these firms at their own game.

While the situation is sure to leave lasting scars in the financial market, it reflects a serious class grievance not to be erased anytime soon.

Average people feel constantly cheated by Wall Street investors who profit from other people's suffering, which has tangible consequences that hedge fund managers are divorced from.

The fact that GameStop, a video game retailer that many in the millennial generation fondly remember as a place they bought games as a kid, was targeted by short sellers is a symbol for these Redditors of the depravity of Wall Street.

In a nutshell, short selling means that an investor borrows a share to sell at a high price to then buy back at a lower price and return that share to the original owner while pocketing the difference for a profit. However, the fact that a trader is obligated to buy the stock back for whatever the going price is means the potential for loss is unpredictable and theoretically without limit.

When the Redditors at r/WallStreetBets found out that this beloved company was being shorted, meaning that an individual investor or firm is betting on GameStop's shares (GME) to fall in value, they bought as much of the stock as possible in order to force these companies to buy back stocks at exponentially higher prices than they initially sold them for.

They were wildly successful in their strategy, successfully pushing Melvin Capital, a multi-billion dollar hedge fund, out of its short position and potentially driving it into bankruptcy. Other firms took huge hits and the losses to short sellers on GME are estimated in the billions of dollars so far.

In the end, however, everyone is bound to lose out at the end of the GME rally. Some of Wall Street's largest hedge funds and investors took massive hits, overall confidence in the market may be shaken and even Redditors who are currently sitting on overvalued GME will eventually get burned.

After all, an inflated stock price will not make GameStop or its business model profitable overnight, given the one-two punch of the COVID-19 pandemic and the fact that brick and mortar retailers have long been shut out from online competition.

What the debacle shows more than anything is deeply entrenched class antagonism. There are already jokes circulating that Redditors turned "Occupy Wall Street" into "Infiltrate Wall Street," utilizing a strategy that was both "stupid and effective."

Pedestrians walk past the Trump Building in New York, U.S. on January 24, 2021. /Getty Images

Seeing chatter from some of these day traders on Reddit, including one I talked to who bet their life savings on GME this week, the general consensus is that they don't care what happens to their investment in the long run because, to them, sticking it to elite investors is reward enough.

Mainstream media outlets are already painting this situation along political lines that simply don't fit; for example, CNN's Chris Cillizza wrote a column that blames the GME rally on Trumpism.

Cillizza points out that Redditors obviously don't believe GameStop is a competitive company and are only sticking it to investors, which is true, but adds that the situation "has its roots in Trumpism" because "the entire notion of Trump's candidacy and presidency was to stick it to the elites."

Painting class grievance as a uniquely Trumpian phenomenon is obviously not true and lacks serious nuance, which is the exact kind of smug thinking that allowed Donald Trump to cruise to the White House during the 2016 presidential election in the first place.

If media elites would like to avoid a similar situation down the road, as it appears they do, then they had better wise up to this fact. Cillizza would also do well to recognize the fact that Reddit's GME stock rally is being universally praised on all sides of the political spectrum, at least among younger generations.

To Cillizza's credit, he is definitely right that sticking it to the elites might "feel good in the moment," but ultimately will lead nowhere. However, this is the situation society faces – and there are already similar situations emerging – when there are no serious ways to redistribute wealth during a time of historic inequality and sheer uncertainty.

Recall that we are currently in the midst of a pandemic that is putting tens of millions of Americans into precarious situations such as possible eviction, food insecurity, lack of health insurance and joblessness.

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