GameStop, the natural experiment

"And there are some, I believe, who practice the fourth, fifth, and higher degrees."

Someone, reminding me of my 10-year-old debate with Robin Hanson, texted me and said: this GameStop short squeeze proves your point about futarchy, doesn’t it?

Well, kind of. It’s certainly an interesting uncontrolled event. Arguably GameStop does more to prove my point about asset transformation and systemic risk. But it is also an instance of market coordination (stop saying the m-word, which is a pejorative), which in a broad general sense is also the problem with Professor Hanson’s futarchy.

The most general possible point of the experiment is that market coordination works. If a market price is a pure effect that causes nothing further, the market is theoretically efficient. But once the price signal becomes a cause—as in futarchy, where markets control political decisions, or as in a short squeeze, where price signals trigger further buying—the side effects of that cause may give market participants ulterior motives to make bets which are intentionally inefficient.

(Professor Hanson at last report still refuses to concede the overwhelming power of my perspicacious objections—Professor, you may name the time, the place, and the arms.)

Since r/wsb is a mob and not an army, the $GME squeeze is decentralized coordination. This phenomenon is also of political interest. In addition to being (mostly) centerless, which makes it highly defensible, the players are organized not by commitment but by cohesion—they are buying $GME not because they believe in the company, but because they believe in each other. Here is a collective action which is effective, yet nihilistic—something under heaven and earth, which may not be in your political philosophy.

So we have a double natural experiment: in both economics and political science. No wonder everyone thinks this GameStop thing is so cool.

(TLDR: my guess is that what will pop the bubble is either some kind of SEC order, or GameStop issuing new shares, But even this will be hard.

My best guess: SEC tells GameStop to issue new shares. My ideal policy: the Fed reprivatizes GameStop—buying it at its current valuation, cashing out all positions long or short at their present value, then auctioning the equity back to the market.)

Economics for retards

When the “retards” of r/wsb say “I like this stock,” their retardation is purely ironic. They don’t actually like this stock. (Except that GameStop was already a 4chan meme.)

Their interest in this stock is not related to its current or prospective price-to-earnings ratio, its dividend stream, the assets on its books—or any of that lame-ass bullshit. Hey boomer! Want to know something? You can’t say “asset” without “ass.”

Market coordination is any activity, organized or spontaneous, that affects a price signal for ulterior reasons—with trades motivated not by the security’s expected return, but by the hope of influencing some side effect caused by the price signal. In the case of a squeeze, that side effect is forced buying by screaming, tortured shorts.

The efficiency of markets is super-tempting as an epistemic tool. The market, it seems, is always right. So why not always do what the market tells us to do? Why not link decisions to market outcomes? Because as soon as we let the market tell us what to do—the market is no longer always right.

Every time you link a market signal to some side effect, you are leaking that effect’s power backward into the market. You want the causality to flow only forward. But the pipe has no valve. So the market becomes contaminated with power.

Anyone who can coordinate a market signal can also coordinate any side effects—and often has some incentive to do so. If there is such an incentive, your market will find itself befouled with uneconomic trades—and its signal’s accuracy will be ruined. And that’s why, as I write, $GME is not priced according to textbook fundamentals.

(Don’t worry if you don’t quite get this—we’ll go over it again in way more detail.)

The market for whiteness

Such contamination is especially dangerous in markets designed to work as Keynesian beauty contests, without any direct causal connection to the underlying signal—for example, a blockchain dispute-resolution contract like Kleros.

These are agreement markets: they reward players who agree with other players, and punish those who disagree. Every player’s incentive is to always be in the majority.

The KBC design assumes that the only rule that can coordinate the players is the rule of truth—that everyone’s opinion equals universal, objective truth plus individual, random noise. But there are infinite alternative coordination rules. (This issue also plagues proof-of-stake, or “POS,” blockchains.)

For example, imagine if Kleros were taken over by white supremacists, whose rule of judgment was simple: decide every case in favor of the whitest side. Once this Kleros Klan got in the saddle, every judge whose criterion was truth, not racism, would lose money on every case where white was not actually in the right. Soon these honest judges would be driven bankrupt and drop out—making Kleros a straight-up klavern. (Who would then fall out amongst themselves about the technicalities of whiteness.)

Pure agreement markets are rare. Usually there is a more concrete causal connection from the fundamentals of a market to its price signal. What this means for any market coordination is that this coordination is, at some fundamental level, unprofitable. It is trading with a suboptimal strategy.

But that it is unprofitable only means that players with an ulterior motive must incur a cost, in some fundamental sense, to achieve that ulterior motive. Maybe that cost is worth it. It is possible that the market can drain their wallets dry before they get what they want; it is also possible that the market can’t.

In the GameStop case, the ulterior motive is a short squeeze. What is a short squeeze, exactly? A short squeeze is actually a very unusual kind of bank run. Its cause is the unsound and unstable, but ubiquitous, bad accounting practice of asset transformation, which inherently produces systemic risk.

The retards (who might be able to stay retarded longer than Citadel can stay solvent) are exploiting a structural instability created by this bad accounting—which is left over from the 19th century. So e. e. musk is right when, in a sort of poem, he writes:

u can’t sell houses u don’t own
u can’t sell cars u don’t own
but u *can* sell stock u don’t own!?
this is bs – shorting is a scam legal only for vestigial reasons

Well, “scam” is a bit much. But the sentiment is basically correct. Let’s work through this interpretation in exquisite proctological (excuse me, praxeological) detail.

The pure bubble

We’ll start by understanding a pure bubble, with no side effects—in a stock that no one is shorting, about whose price no one cares, and whose shares no one is printing.

The basic math of a pure bubble is that, given an arbitrary amount of money, you can pump this stock’s price up to an arbitrary level. However, you cannot get any more money out than you put in.

What you can do is profit by being the first in and first out—but the bubble remains a zero-sum game. The players are just being rearranged. This is why a pure bubble, if intentional, is a scam—a pump-and-dump scheme. For every winner, there is a loser.

Le short squeeze

But if the stock is shorted, now the pure bubble is no longer pure. It has a side effect. That side effect is pain—for the shorts. As Musk, the poet, writes:

Here come the shorty apologists
Give them no respect
Get Shorty

Shorty can relieve his pain (but not his losses, which are lost forever) instantly—by buying. And hence driving up the bubble—which is no longer zero-sum.

This is a game of musical chairs. Technically, it can go up forever—especially when there are two and a half times as many butts as seats.

It’s important to also note that the people with the butts are not really that rich, in an accounting sense. These funds, banks, etc, do have zillions of dollars of assets—and just slightly fewer zillions of dollars of debt.

This difference, which is smaller than you think, is how much money they actually have (their “capital”). The usual ratio of their capital to their assets (their “leverage”) is set at a level that makes the YOLO margin options daredevils of r/wsb look like Julianne Moore in Safe. “They put derivatives in everything these days.”

And this is safe—since all conceivable failure scenarios have been simulated by the risk management team, all ex-physics professors whose PhD work involved not just finding the Higgs Boson, but actually fucking it—guys who, aged 11, didn’t just win the International Math Olympiad, but had their jersey retired—sir, the guys have run the numbers. Twice. And there’s no way this can happen. You can head home now, sir.

But none of their fancy models accounted for a bunch of Reddit retards… can’t you almost see the movie?

What’s actually happening here? Let’s delve into the proctology—I mean, praxeology. Basically, bank runs happen because people think statistically, not praxeologically. People think statistically, not praxeologically, because that’s what the law requires.

A bank run on the gamer shop

What is a short, anyway? Who is this mysterious… Shorty? What are his nefarious activities? Are they legal? 100%. Are they a scam—as Space Admiral Musk asserts? Well… it’s complicated.

Shorting really is a kind of counterfeiting—honest counterfeiting. To short GameStop, you literally just print your own GameStop share. You put your name on it, of course. And what do you do with this fake share? Sell it, of course. What else would you do?

The counterfeit share is a promise, made not by GameStop but by you, that whatever benefits a real GameStop share confers (dividends, free Xbox games, raffle tickets, etc), your fake one will provide as well. Obviously, you owe whatever this promise is worth. The money you made by selling it (selling a promise is what “borrowing” is) is yours.

Musk is right to refer to this as a “vestigial practice.” The truly vestigial practice is not the fabrication of these counterfeit shares—but the old “paper belt” financial systems which treat these two very different securities, the real GameStop share and the fake one, as the same thing.

It’s true that they promise exactly the same returns; but the promises are made by different people (“counterparties”). These are different financial instruments—because they have different risk structures. They also confer different rights—a fake share has no shareholder vote. Mixing them together is just a 19th-century programming error.

Obviously this mistake is obvious—so it has a patch. The promise that is a short is your promise, but it is secured by a central clearinghouse. Through your broker, this clearinghouse watches your capital, makes sure you can always pay off your promises by selling assets, and if you can’t sells them for you.

In theory the clearinghouse can’t fail. In practice maybe it can—if it gets in the way of the wrong flash crash, which is the actual reason brokers turned off GameStop trading on Thursday. A flash crash is a chain reaction of automatic selling—which can happen at arbitrarily high speed, making margin accounts insolvent before margin calls fill. (A flash crash is also a concern for stablecoins built on asset transformation—see below.)

If the clearinghouse did fail, and instead of a real GameStop share you held a piece of paper signed by (a) some dude, and (b) what used to be a clearinghouse but got torched and is now a crackhouse, you really are SOL. (Pro tip: you can usually ask your broker to hold only real shares, not laminated promises. Call and tell them not to let your shares be “borrowed.”)

But in practice, America is the stock market. Which means anyone who is useless to the stock market is useless to America. (And has probably gotten that message, too.) Which means your laminated promises are actually safe, because the clearinghouses are too big to fail and will be bailed out.

Which also means that they are de facto government agencies. But we don’t feel any urgent need to admit that. Increasingly, the 21st-century consensus of government looks like it is coming into view: pseudolibertarianism.

Pseudolibertarianism is nominally libertarian and polycentric, but actually statist and monocentric—mating the empathy of capitalism with the efficiency of socialism. This worst-of-both-worlds dystopia flourishes by uniting the worst people from both sides.

Synthetic assets are good, actually

Again, the fundamental problem here is bad accounting.

The value of the promise is fundamentally lower than the value of the share, because the risk of the promise can never be zero—especially since the final policy in the stack of insurance policies that purports to fill the gap is an informal government promise—the clearinghouse is “too big to fail,” whatever that means. On such pillars rest our roofs.

Any financial system dependent on informal securities must be in some sense vestigial. At least, no one would design any such thing. Even if there is no way to fix a system, it is often useful to know how it would be designed if it could be designed from scratch.

The default path for fixing a system is to rationalize and formalize current practices. If we eliminated the risk gap by fully nationalizing the market, broker and clearinghouse, your synthetic laminated promise would truly be as good as a real share—and synthetic shares could be injected ad libitum into the market for real shares.

The description I gave above, which is of what some call naked shorting, has already gone halfway there—well past reality. While there is nothing fundamentally wrong with naked shorting, it is not looked upon well by securities law—but it’s also treated like driving 70 in a 55 zone. If anything is vestigial, this “gray area” BS is vestigial.

In reality, there is a gnarly system of “borrowing” shares which often breaks down and makes shares “hard to borrow.” Islamic banking uses similar rickety constructions to pretend it doesn’t have interest rates. (Western banking is closer to Allah every year—indeed Japan has long been fully halal. Though Allah’s view on negative interest rates is not clear—is there some hadith?)

Far from destabilizing the market, unlimited safe and healthy naked shorting would stabilize it—because if Wall Street can go “all in” against Reddit, Wall Street walks all over the tards. Wall Street knows that GameStop will not be trading above $30 in six months, or maybe even six hours—so there is a huge amount of money to be made.

But to make this money, you have to have perfect timing, balls of steel and a bankroll the size of God. Wall Street has only two of these things—but Reddit has the other. That’s why the battle is fun. If Wall Street knew that Wall Street could go all in with unlimited synthetic shorts, they would drive GameStop back to $15 in 45 seconds.

But because of this funky “borrowing” infrastructure, which is, like, something that feels like it was invented by Jesse Livermore in 1927—or possibly John Law in 1727—I complain about old operating systems because they date to 1972—Wall Street cannot project that Wall Street will put on unbounded shorts. So it cannot model its risk. Wall Street does not have balls of steel. Wall Street has risk-management departments.

There are individual financiers who have balls of steel. Probably at least half of them have gone full Coriolanus, and joined the retard mob. It is often wise to obey random coordination signals—that’s why the battle is fun.

Synthetic assets are bad, actually

The fundamental cause of the instability is that you shouldn’t be transforming demand for one asset into demand for a qualitatively different asset. Here, demand from what should be the prediction market for the future price of $GME is hemorrhaging spaghetti, driven by a savage positive-feedback loop, into what should be the market for savers to stake their retirements on a chain of videogame stores.

In theory, when you add artificial demand or supply to a market whose price is driven by fundamentals, and this artificial demand or supply creates an artificial mispricing, this mispricing should attract speculators who expect to profit from it. In practice, many forms of market failure can sufficiently daunt this army of market vigilantes, these bold knights of the capital-asset pricing model—till they lose the will to fight, and their citadel is stormed by a braying mob of horny, retarded, revolting peasants.

All forms of asset transformation create structural instability, because all forms of asset transformation create automatic buying and/or selling. As Wall Street first discovered in 1987, automatic trading is to flash crashes as buffer overflows are to getting your website hacked.

The stablecoin catastrophe

For a pure example, consider a crude “stablecoin” which turns a supply of Ethereum into a supply of digital dollars. The dollar hodlers demand dollars, not ether. But they can collateralize virtual dollars with a stockpile of Ethereum, thereby transforming their actual demand for dollars into spurious demand for Ethereum.

The virtual dollars are safe because they are collateralized by more than their value of Ethereum. But value is just price. If the price of Ethereum drops, the contract has to sell Ethereum for dollars, preserving the peg.

This works until a significant amount of demand for Ethereum is actually transformed demand for dollars—spurious demand. At this point we see the potential for a feedback loop which creates a self-sustaining avalanche of Ethereum sales—a flash crash.

Since selling into this avalanche is essentially impossible, and since Ethereum’s price is a Keynesian beauty contest anyway, it can crash to arbitrarily low levels. Fortunately, if only because Bitcoin is ancient and retarded, Bitcoin is immune to this instability.

Takeaway for market designers

Speculators are good because they predict the future price curve of a security. But they should speculate as if speculating in a prediction market for rainfall in Spain—betting against all other speculators, to predict a signal that no one can predict perfectly, and no one can affect at all.

Speculation should not directly inject supply or demand into primary asset markets. The collective opinion of the speculative prediction market should only have indirect effects—effects mediated by humans who respond to the signal this market produces.

If the prediction market has a direct effect on the primary market, it is as if the clouds in Spain cared how much rain the Spaniards in the plain expected them to contain. If the clouds were that smart, who could predict the weather? It would be chaos. Chaos is exactly what I see when I look out the window.

In theory, in the long run, traders in the primary market should be able to ride out these speculative oscillations—and even profit from them. Why should they have to? The size of these rogue waves, though a function of leverage, is not even predictable. The goal of a market designer is to not have chaos.

Speculation should be a zero-sum game whose only side effects are: (a) redistributing dollars between winning and losing speculators; (b) producing interesting predictions about the future. Speculation should never directly cause anything.

How the battle ends

People often mistake me for some kind of rich and/or powerful person. I am neither! Why would I be out here grifting for my supper on Substack? Do you know how shitty it is to be even a tiny bit famous? But in a past life, I was once a CEO, unbigly and very reluctantly. I know what a share is, and a board. I have even passed a resolution or two. And I know the GameStop C-suite is shitting bricks the size of Stonehenge.

In theory, it is entirely up to them to stop this—and they can even stop it in a copacetic way. The GameStop management has every legal right to print GameStop shares and sell them. They have every financial incentive to print GameStop shares and sell them. The retards can stay retarded longer than the hedgies can stay solvent—but no one can be more retarded than a printer. I hear it goes brrr.

And yet—why should they let all the hedgies off the hook at once? Why not drip out a few shares at a time, for a price as sweet as gold? At least in theory, the management is aligned with its new barbarian shareholders—bad as their manners may be. Both have a logical incentive to feast long and slowly on the unlimited, Lloyds-like liabilities of the trapped fund bros. Remember when Frodo got strung up in a cave by that big spider?

As Matt Levine notes, this is a legal and regulatory mess. Hence, Stonehenge. In some ways, “Gamergate 2: Financial BGL” is like covid, a genuine libertarian moment. In a libertarian world we would all long since have been vaccinated. In a libertarian world, the masters of the universe would all long since have put these retards in their place.

The world is as it is—with what result, we see. It did not end well for Coriolanus. And who, observing these events, does not hear the voice of the Big Lebowski echoing in his head? “Lebowski! The bums will always lose. The bums will always lose, Lebowski!” And yet—whose side are you on?

How it should actually work

Here is a weird policy opinion I have that probably nobody else has. I feel that a well- designed market should separate primary and secondary demand. Here is how this financial utopia of mine would work. I am just an Internet rando so forget I said this.

There would be one asset market A which set the price of all securities through unlevered, untransformed demand, from actual savers, for instruments of saving. There would be another prediction market B which predicted the future price of securities, by matching purely speculative long and short bets—without market making, delta hedging, or any other source of mechanical liquidity.

These markets would be as separated as possible. This is hard. But the goal is to prevent feedback loops from the prediction market backward to the asset market. Information can still feed back—asset investors can see the future price path that the consensus of speculators currently predicts—but demand should not feed back.

Under the current design, speculators can drive all kinds of savage leveraged feedback into the asset-price signal. A short squeeze is just this kind of feedback. In a Hayekian signaling sense, grotty feedback does not improve the efficiency of market calculation. Feedback is just noise—and with all due respect to libertarians, noise is disorder. And suppressing disorder is the basic task of even a libertarian government, isn’t it?

The purpose of a market is to produce an accurate price signal. Separating these two markets, if possible, eliminates speculative feedback and improves the fidelity of the signal. But how can two markets be separated?

Here is one design which, though too hilarious to be serious, illustrates the solution: divide players into two groups, by the first letter of their surnames. The A-M players can play only in the asset market; the N-Z players, only in the prediction market. So no one can hedge a prediction by buying an asset—a process that contaminates both markets with completely spurious, mechanical supply and demand. This alphabetic separation is obviously retarded. But there is probably a non-retarded way to get the same result.

Where the mob will go next

Obviously, a mob is a wild, reasonless animal. Philosophy cannot predict it, any more than philosophy can predict a wolverine. All we can do with our logical faculties is to calculate where the wolverine should go—if by some chance it is a rational wolverine.

The essential problem with the Reddit Retard Revolution is that it has no exit strategy. While it is aiming at a real instability, this instability is not a revolutionary instability, but a dead end.

The $GME price has only one stable equilibrium: the normie equilibrium (which sounds like a Robert Ludlum novel). It cannot come to rest anywhere but earth.

Therefore at a certain point it will return there—and in that degringolade, it will be every retard for himself and the devil take the hindmost. The revolution, in short, is doomed to turn on itself. Brother will knife brother. Armez-vous, retards!

So GameStop is not a retarded rerun of 1917. It’s more like: a retarded rerun of 1905. But maybe 1917 couldn’t have happened without 1905. If the wolverine was thinking logically (this is not necessarily how to think about a KBC—especially not when the other judges are retarded)—what would Lenin do? Lenin would look for two things.

First, because say what you want about Lenin but dude was a winner, he would look for a second equilibrium—in which whatever stonk the retards sent up could stay up. Rather than just kicking the market into an interregnum of chaos, a pirate looting frenzy in which the weak are skinned and the strong exalted as heroes, until the dream collapses and the old regime returns, would inaugurate a new financial order. Rather than sacking the Capital, Lenin would take the Capital—and rule from it. Do you… feel in charge?

Second, because Lenin was just as lazy and mean as any retard, he would look for a huge buffalo herd of structurally trapped shorts. We’re no Bolsheviks here, but good Americans—but no sport is more American than surrounding a huge herd of buffalo, shrieking like rabid apes till they stampede over a cliff, then grilling the tendies.

A second equilibrium

A second equilibrium is a monetary equilibrium.

The only way a stonk, or a piece of paper, or a little chip of metal, or anything, can go up and not come down, is if it turns at least partly into money: a medium of saving, or store of value.

The only way for everyone not just to see their tendies as green numbers on a screen, as badges, as catch-and-release tendies before the inevitable rout, but for everyone to take them home and enjoy them permanently, is monetization: turning a normal good, valuable or even worthless, into a standard currency which is conventionally used to transport purchasing power across time.

Such a currency is inherently overvalued—just like $GME. But unlike $GME, it goes up and stays up. Why? Did you know that women, if someone tells them you’ve never read Carl Menger’s On The Origins of Money, look at you funny—like a piece of bad cheese?

I have written enough about monetary equilibria and monetization/remonetization over the years, so I thought I’d just link to the first piece I wrote on the subject, way back in 2005. This was the first essay, besides blog comments (and, in the early 90s, Usenet), I ever put on the Web. (The intro was so cringe that I let my mysterious literary executor rewrite it.) I do still believe pretty much all of it.

In 2005, I really had no way to know that our hyper-rational financial system would not instantly hyper-organize itself around these new principles. Actually it took 15 years; Bitcoin (if Satoshi is who a lot of people think he is—he was on my blogroll in 2007); and r/wsb. And it’s only just started! (And the principles aren’t really new, just a very trivial extension of Austrian economics.)

And if, like Matt Levine, you have questions like

If pure collective will can create a valuable financial asset, without any reference to cash flows or fundamentals, then all you need is a collective and some will. Just hop on Reddit and create value out of nothing. If it works for Bitcoin, why not … anything? Why not Dogecoin? Why not Signal Advance? Tesla Inc.? GameStop? 

All the principles you need to know are behind that link. Let’s take Doge, for instance. Is it monetizable? Kind of but not really.

Doge is more monetizable than GameStop, which is totally unmonetizable because (a) it is not categorically unique, (b) there is another valuation model for it, and (c) most important, there is an authority that can print an infinite amount.

Doge has only the first problem. Although a shitcoin with a long and storied history, and the original memecoin, it is an also-ran even in the altcoin space. In the end, there can be only one stable monetary equilibrium—one stably-overvalued good—and it will be Bitcoin or Ethereum if it’s a crypto, gold or silver if it’s a metal, and the dollar, euro or yuan if it’s paper. In an iterated Keynesian beauty contest, the leader tends to win.

Moreover, Doge for some stupid meme reason has a design error: a 5% annual dilution rate. The way to think about dilution is to think in terms of normalized accounting—in which your position in a token is defined as a fraction of all tokens outstanding.

In this model, which is obviously correct, owning Doge is like putting your money in a bank which steals 5% of it a year—to give to randos—because “deflation is bad.” No, retard, actually deflation is good—it means your money isn’t just holding its value, but actually going up. I like money!

The weird, semi-shady, non-decentralized pseudo-crypto XRP has done much better than it deserves, because of its 0% dilution rate. I genuinely think you can’t understand this issue correctly unless you are literally retarded—or at least, know how to fake it.

The 5% thing is fatal. Even with the rocket fuel of the retards, it’ll be hard for a horse this weak to come back from this far back in the pack. I’m not sure how anyone could fail to enjoy chanting “DOGE DOGE DOGE,” but I don’t think it’s enough. And of course—basically no one is shorting Doge. So no buffalo, which bounds thy tendies.

The mighty buffalo

At this point our wolverine eye cannot help but turn to precious metals. My precious! No one can doubt but that these goods are monetizable—the word for “money” in every other language on the planet means either “gold” or “silver.” I like gold. I like silver, too!

But the question is: where’s Shorty? Are there any shorts? As a wolverine, you have no choice but to go where the buffalo roam. Who is shorting gold or silver? Well…

If you want to investigate the existence and accounting structure of synthetic precious metals, aka “paper gold,” good luck. My advice would be to start small and simple. First—just for practice—figure out the JFK assassination.

Once you really understand that, you might have some chance of analyzing the gold-derivatives market. Suffice it to say that according to BIS statistics, today’s market has about $900 billion in outstanding gold derivatives—more or less, laminated promises of gold—and $80 billion in silver derivatives. That’s about 15,000 tons of paper gold—three times as much as Fort Knox—and about 90,000 tons of silver.

That’s… a lot of buffalo. Now, as always, the essential question is: who made all these promises? And what do they have to back them up?

Part of this includes the “hedge book,” or the forward promises of future gold made by gold miners. That’s about 300 tons today—so we’re off by a factor of about 50. Okay… some of it must be offsetting; what you really want is the consolidated net liabilities of all bullion banks… really. Just start with JFK.

Also, while these forward sales represent real gold “in the ground,” it’s still in the ground. You can’t exactly deliver ten tons of ore in a hole in Ghana to the COMEX. So… we’re looking at roughly… on the order of… a trillion dollars of buffalo meat. Okay. Is there such a thing as too many tendies? I think there might actually be.

The thing is that it’s very easy to make fake precious metals, at least on paper. They don’t pay any dividends and no one uses them for anything. Probably no one will ever come back with that piece of paper and ask for a hunk of metal. Who would do that? Some retard?

What’s interesting is that silver, although inferior by all standards as a precious metal—silver is really the Ethereum of precious metals—has a special quality: it is financed like a precious metal, but used as an industrial metal.

As a result, total stocks of silver by value are much lower than stocks of gold—since physical silver is rarely used to store wealth, whereas physical gold often still is. So the ratio of paper silver to physical silver is also much lower. So if you put a lighter under the paper-silver market—that metal, though an inferior currency, “catches” faster.

The precious-metals markets are connected to the stonk market through ETFs. The major ETFs are SLV and GLD. Contrary to popular belief, they hold real metal bars (though there is nothing wrong with the closed-end Sprott equivalents, PSLV/PHYS).

The way these ETFs work is that if their price rises above the spot metal price, which is set by the aforementioned paper-silver market, their “authorized participants” (big banks) can profit by buying metal and exchanging it for ETF shares. They like money, so they tend to do this. Same in reverse, of course, when the ETF goes down.

The result is that if the market drives the ETF price up above the spot price, it creates a giant sucking sound which wants to find all the metal in the world and suck it into the ETF. Only real metal will do—not promises to mine some hole in Ghana in 2025. I’m sure it’s a very nice hole, but… this is of course a maturity-transformation collapse.

So anyone with a claim to metal, because that kind of a person probably likes money, wants to turn it in for actual metal that they can give to the ETF. But, assuming our JFK analysis is accurate and there are more claims than actual metal—we’re back to the ol’ game of musical chairs. With a lot of butts, and not all that many seats. I think.

Moreover—in the lives of those now living—this has happened. In silver. It was in 1980, so it wasn’t decentralized. And there was no ETF. It was literally a conspiracy of three people to coordinate (corner) the silver market.

They succeeded, but they were using too much leverage—so they literally had paper hands, and it was easy to break them. Using leverage (borrowing money to buy stonks) in a coordination attempt is like that scene from The Wire where Stringer Bell asks his class if they’re “taking notes on a criminal conspiracy.”

The powers that be can easily break your corner by pulling your leverage—and why wouldn’t they? Historically, they always do. It’s very legal and very cool. Why wouldn’t they do it to you? Asking for a friend.

The current market capitalization of GameStop would buy about a third of the world’s silver stockpile—and more like 1/250 of the world’s gold stockpile. While this makes gold a better, stabler currency, it makes silver easier for any retard or retards unknown to squeeze—or so I think.

That’s why I just bought a little silver. Not investment advice—merely full disclosure. Probably fuck-all will happen. But it’s still silver. I like this metal.

A much more open and general run

Some eggheads interpret GameStop as a political event. Nor are they wrong. There is an remarkable analogy from almost 200 years ago—Francis Place, and his “To Stop The Duke, Go For Gold” campaign, in 1832’s wild Days of May.

As Place himself wrote in a letter:

It was very clearly seen that if a much more open and general run for gold upon the banks, the bankers and the Bank of England could be produced, that the embarrassment of the Court and the Duke would be increased, and that if a general panic could be produced the Duke would be at once defeated. To this purpose the attention of us all was turned, and many propositions were made to increase the demand for gold.

There was a general conviction that if the Duke succeeded in forming an administration, that circumstance alone would produce a general panic, and almost instantaneously close all the banks, put a stop to the circulation of Bank of England notes and compel that Bank to close its doors, and then at once produce a revolution.

While the discussion was going on some one said, we ought to have a placard, announcing the consequences of permitting the Duke to form an administration and attempting to govern the country, to call upon the people to take care of themselves by collecting all the hard money they could and keeping it, by drawing it from Savings Banks, from Bankers, and from the Bank of England. This was caught at, and Mr Parkes set himself to work to draw up a Placard, among the words he wrote were these,—we must stop the Duke—These words struck me as containing nearly the whole that was necessary to be said, I therefore took a large sheet of paper and wrote thus.

To Stop The Duke Go For Gold.

I held up the paper and all at once said, that will do—no more words are necessary. Money was put upon the table and in less than four hours, the bill stickers were at work posting the bills.

The Bank of England was a fractional-reserve bank whose notes were denominated in, and redeemable for, gold. It had suspended redemption during the Napoleonic wars, then brought it back after the Corsican ogre was vanquished. Everyone had the right to redeem any note for gold, but of course hardly anyone ever did. Same old story.

Place, a Chartist—basically a sort of Jane Austen communist—wanted to bully the Duke of Wellington into letting the Tory House of Lords approve the Reform Act 1832, the first great step in the decline of the British gentry. His idea was to organize the whole lower-middle-class population into a sort of subreddit, and get them to buy $GLD. This would of course mean a run on the Bank of England. Which would wreck the British financial system and cause a revolution. Which would be good for the working man.

And it worked. Not that there was a run—that the “Iron Duke” caved. To this retard. Maybe that was the beginning of the end. In any case, if you’ve learned anything here, at least you’ve learned that 1832 was lit.

Cohesion, commitment and nihilism

From a political or even historical perspective, though, the financial nature of the collective action is not the most important fact about the Retard Revolution. What seems more important is its ironic nature.

In the age of democracy, long before any of us was born—perhaps it is best defined as the age of Francis Place—collective action was inherently sincere. There was nothing even slightly ironic about a Chartist handbill.

A couple hundred years later, the same rainy island emitted a sci-fi TV show in which voters elect a cartoon character. Not everything in Black Mirror will happen. This will.

The ironic approach to democracy uses the same mechanisms, but plays by completely different rules. The normal state of the ironic voter is a state of nihilism; he believes in nothing; he is happy to do anything, “for the lulz.” The idea of sincere and instinctive collective spirit, Ibn Khaldun’s asabiya, is one he finds hilarious and/or horrifying.

Yet he is a human being and a human being is a social animal. He will cohere—he will act in concert with his fellow human beings—and he will enjoy it. But as a modern and cosmopolitan human, he can do so only ironically—as a game.

This is cohesion without commitment. To persuade an army of retards to all buy stock in the same company, it is not even necessary to persuade them to believe in the company.

They understand and believe in their collective action; but this collective action is not a mass projection of an individual action they believe in. It is a collective strategy made from individual actions which are individually ridiculous—but collectively effective.

Normally, cohesion and commitment go together. But we expect cohesion to be the effect of commitment—you obey your officers loyally because of your passionate loyalty to your country. Here, commitment is the effect of cohesion—anyone who hodls side by side with you is your brother, regardless of the stonk.

The capacity for significant collective ironic action is very rare in human history—so rare that I am at a loss to think of another example. It must have happened. Irony is not a new invention—but its distribution across a whole population is unprecedented. Of course, this same population has lost all its capacity for collective sincere action.

Perhaps this is the broad political-science lesson of GameStop: that although politics is the organization of mass human action, the alignment of mass action on the basis of sincere commitment is a phenomenon of the past, designed for the population of the past—a population that now seems unimaginably simple, sincere, and responsible.

But the gamification of mass action on the basis of ironic cohesion is the phenomenon of the future—designed for a population which is only becoming more sophisticated, cosmopolitan and frivolous. I can’t wait till we start doing this with actual elections: nihilistic, gamified voting. Just like that TV show.

Party update

I have good news and bad news. The good news is: January saw strong 30% month-over-month growth—enabling me to buy my children, who are hungry, some tendies. The bad news is: the normies are even stronger.

Retards and gentlemen, we have slipped from #16 to #18 on the Substack politics chart. I anticipated this! I did! Still, it comes as a shock…

So—if you like this kind of shit—well, here’s one way to send a collective message: