Reddit and Robinhood are driving a new kind of financial lottery: trading cheap options that require giant price moves to become profitable. As further economic support remains in limbo largely because of Republican intransigence, the GameStop narrative may entice many to try their hand at the financial markets. Victor Yakovenko, a physicist at the University of Maryland, found a correlation between speculative bubbles and periods of greatest inequality. But those who tend to make the most during these bubbles are the already wealthy.
Democratizing the economy, then, involves curbing speculation and pouring national resources into lifting up Americans and rebuilding public institutions. Canceling federal student debt, which President Biden can do without Congress, would grow the economy, relieve the disproportionate debt burdens carried by Black and brown borrowers, and incentivize science and engineering graduates to consider careers benefiting the public good. A modest wealth tax could be redirected to priorities like universal child care. Lawmakers should ensure hedge funds aren’t taking advantage of regulatory blind spots to make themselves too big to fail. A very small financial transaction tax could fund investments in reducing the racial wealth gap through programs like baby bonds.
The country needs transformational policies that tackle our dire economic state. Instead, President Biden is entertaining what are most likely insufficient Republican counteroffers to his relief package, as the speculation frenzy moves on to silver.
If there’s one thing I learned on Wall Street, it’s that traders are, at their core, both self-interested and singularly devoted to the zero-sum game. Trying to mimic this with zero-sum policies that seek to supposedly “democratize” access to financial markets and “disrupt” old ways of thinking helped get us into this mess.
But bold investments in public institutions can get us out.
Alexis Goldstein (@alexisgoldstein) is a former Wall Street professional who now works at Americans for Financial Reform. She is the author of the newsletter “Markets Weekly.”
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