The great thing about the internet is you can convince people halfway across the globe to do stupid things. It also is the worst thing about the Internet.
What do Gold, Bitcoin, Gamestop, and the Tide Pod Challenge have in common? Everything. Seems you can suggest something on the Internet, and odds are, since there are millions of people out there, one of them will do what you suggest. So, for example, if you post a fake YouTube video saying that putting your cell phone in the microwave will recharge it faster, some idiot will do it. And teenagers have been doing this sort of thing for laughs, since the dawn of time. The problem is, today, they have a far-wider reach with the Internet.
I mentioned before a hapless friend of mine. We used to hang out together with another "friend" Eric, who in retrospect was no friend at all. Eric would say to my hapless friend, "Hey, Chuck! I bet you can't break that streetlight with this rock!" And Chuck would demur until Eric made clucking noises and called him "Chicken!" Chuck had a great throwing arm, so he would huck that rock, glass would shatter, and we all would scatter - that is, except Chuck, who would be standing there holding a rock when the Police arrived.
People can be like that - casually evil on the one hand, and stupidly ignorant on the other. The Chucks of the world are always at the mercy of the Erics of the world.
So, someone goes on the Internet and says, "What jolly fun! Let's screw some hedge fund by bidding up a worthless video game retail company stock by a factor of ten!" And people jump in and do this. The guy who started it all, who paid only a few dollars a share, makes out like a bandit. The hedge fund gets burned a little bit. But the guy who really got hurt was Chuck, who paid top dollar for the stock and "held on" to it on the advice of Eric. Maybe he didn't lose a lot of money, but it was a lot to Chuck.
Gold and Bitcoin are the same way - manipulated online and in the media, to get gullible Chucks (and even a few Erics) to buy and sell. As I have noted before, Gold is a fear metal and people buy it out of fear. Fear of the economy collapsing, the "fiat currency" being worthless, or just plain old fear of missing out. Better buy now before the train leaves the station!
But historically, gold has been a mixed bag. It peaked right after it was deregulated in 1973 during the first gas crises, and then languished until about 1982, when people were freaking out over yet another gas crises and inflation. Then it sank and stayed there for two decades. People who bought in response to the market crash of 2008 ended up trailing the market in subsequent years, as stocks and bonds recovered, but gold.... languished.
I recently read an article that gold is dropping like a fly. But I looked online at the gold charts and found that... well, it is just being gold, hardly dropping much at all. What was the point of the article? To get people to panic-sell? To induce fear? Perhaps. And that is the problem with the financial media - they can manipulate markets and not much can be done about it, as they are "reporting".
Pump 'n Dump is a game as old as time. And anyone can play. I noted before how a teenager in New Jersey made tens, if not hundreds of thousands of dollars (millions?) by sending out mass e-mails hyping penny stocks. All it takes is one or two out of a thousand - when you are e-mailing millions of people - to cause the stock price to spike, which fulfills the "prediction" that the stock is going places. The teen then sells, the whole thing collapses, and a lot of people lose a little and one guy makes a lot.
Recently, Elon Musk, the mother of all stock manipulators, bough $1.5B of Bitcoin and the market went nuts. Almost overnight, Tesla made more money on its Bitcoin gambit that it did making cars. And the press was complicit in all of this. "Tesla is buying Bitcoin!" they shouted, "This shows it will see wider acceptance! You can buy a Tesla with Bitcoin now!"
Well, yes and no. The problem with Bitcoin, which has not been solved, is that it can take an hour to process a transaction and it costs tens of dollars to perform - at the very least. And with each successive transaction, the process takes longer and gets more costly. So yes, maybe buying a "big ticket" item like a Tesla with Bitcoin may be possible, but then again, it already was done, a long time ago. Give how volatile Bitcoin is, Tesla isn't so foolish as to price their cars in Bitcoins. So the price remains in dollars (or other local currency) and if you buy with Bitcoin, they figure out how much that is and then process the transaction. In prior years, this was done merely by converting the Bitcoins to dollars and then taking dollars as payment.
Since Tesla's suppliers are paid in dollars or local currency, the same will hold true. Maybe it will be convenient for Tesla to pay Chinese battery suppliers in Bitcoin, but the price paid will still be in local currency, and no doubt the supplier will immediately convert the received Bitcoin to local currency. Indeed, hanging on to Bitcoin is foolish, as it can change in value radically - up and down - in a matter of hours, if not minutes. So if you accept $1M in Bitcoin, and hang on to it for a couple of days, it may be worth only $800,000 and you are screwed.
Quite frankly, I learned this lesson the hard way, dealing with overseas attorneys. I would hire an attorney for file a Patent Application in Japan for my US client and then invoice my client for my services and my Japanese partner, who invoiced me in Yen. In the 30-to-60 days it took for me to get paid, the movement in currency exchange could be such that I would end up losing money on the deal - if currencies moved 5-10% in the wrong direction. Now consider Bitcoin, which can change in value by 20-30% or more, overnight. It just is not a workable "solution" to anything.
So why the big announcement by Musk about Bitcoin? Well, he wanted to manipulate the market and succeeded. And a bunch of doofuses out there who took the Tide Pod Challenge or microwaved their smart phones - or bought Gamestop Stock - went out and bought bitcoin. In fact, I suspect a lot of Redditors did just that - convinced these little "inside tips" are only being shared with them, and not 5 Billion other Internet users. And yes, since they bought, the price goes up, "proving" that Musk was right!
Of course, Elon Musk is no stranger to stock price manipulation. You recall the SEC had to have a little chat with him, when he tweeted that the company was going to be bought out for $420 a share (get it? 420! Like in marijuana, man! tee-hee!). The stock price soared and of course, there was no buyout offer. The folks who bought high and sold low got screwed. But Musk got to stick it in the eye of the short-sellers of his stock, of which there are legions, and he has been doing so for some time now - and getting away with it, too.
It seems that we have re-entered the era of the robber barons. Back in the late 1800's, the Jekyll Island Club was founded as a retreat for the mega-wealthy. Back then, there was no income tax, so if you made an obscene amount of money, you got to keep it all. So we had superstar industrialists and investors like Rockefeller, Morgan, Carnegie, and others, who busted unions, kept wages low, and raked in monopoly profits and didn't feel bad about it at all.
In intervening years, not so much. The income tax and inheritance taxes - as well as numerous heirs - dissipated dynastic wealth in short order. The Jekyll Island Club is now a hotel in a State Park. The Carnegie family, who settled in nearby Cumberland Island, divided up the place into hundreds of tiny lots, which the government has been trying to buy back to form a national seashore.
Today, we have a new legion of industrial and investment superstars - Elon Musk, Jeff Bezos, that Zuckerstein kid, and that refugee from ZZ Top who runs Twitter. We still have more conventional Billionaires, such as Warren Buffet, of course. But the financial press hangs on their every word, and we laud and admire them from afar. Well, some people do. I am less and less enamored of our rock-star Billionaires.
Being a CEO of a company wasn't such a lucrative gig back in the 1950's and 1960's. Oh, sure, you had fellows like Kaiser, who made a fortune in Aluminum and shipbuilding (and almost lost it all in automobiles). But it wasn't like the glory days of the monopolies and trusts. High union wages meant that profits were pretty thin - if non-existent.
But something changed, right about the time I started college. Pension plans and health plans started to go away, replaced by the 401(k) and "go fuck yourself". Unions declined in popularity, and foreign companies opened up plants in the "Sunbelt" where wages were low. But more than that, the officers of companies realized they could make a lot more money by running a business into the ground. Paid in "stock options" to please shareholders, they would pump up the stock price long enough to cash in, and then leave the smoking ruins for the next chump to deal with. It was pump-and-dump at a whole new level. You could make tens of millions of dollars as a CEO, CFO, COO, Chairman of the Board or just a lowly President of a company - something unheard of, when I was a youth.
Meanwhile, new "business models" were being dreamt up, where low-wage employees would become low-wage contractors forced to work "side hustles" in order to put food on the table. The disparity in wealth started to accelerate. And since everyone had to fund their own retirement, a whole generation had to learn how to become "investors" in this new economy. Problem is, the guy driving for Uber isn't really going to be such a great investor - particularly when he gets his investment tips from some anonymous guy on Reddit, or from Elon Musk.
Fortunately, our friends at the National Review are concerned for our welfare! Suppose the Federal Government adopts California's "three prong" test for who is an employee? We would lose the "freedom" to work five "side-hustles" to survive! People might have to be paid a minimum wage! The horror!
Wait a minute. Does this mean I'm turning into some sort of Communist? Hardly. My bitter experience with Unions made me realize why it is never a good idea to let the inmates run the asylum. But I can see where the pendulum is starting to swing in the other direction. Ms. AOC is the symptom of this scenario. When people feel put-upon, they will lash out, which is why it is never a good idea to take all you can get, even if you can get away with it for the time being. When ordinary people feel they have nothing left to lose, well, the very rich could find themselves in a bit of a pickle.
The irony, of course, is that a lot of the people who first felt this pinch - the high-wage union workers in the rustbelt - voted for Trump, who promised that high-paying steel and coal jobs would come back. Jobs that basically destroy your lungs over time, that is. And yes, while the union wages of their fathers were great, I am not sure those wages are coming back anytime soon - or those industries. Pittsburgh is no longer clouded in smoke from steel mills, as the steel mills are long gone and never coming back.
The irony is, of course that Trump never paid a union wage to any of his employees in his life - at least not without a bitter fight. Sure, the casinos organized and went on strike. Those casinos are no longer in business. Trump is hardly the friend of "the little man" or a true populist. He just tells populist lies to get elected.
If he isn't, then who is? Traditionally, or at least in more recent tradition, this was the mantle of the Democrats. And it still is, for the so-called "progressives" of the party. Sadly, their embracing of far-left causes has alienated the blue-collar workers, who don't want to shut down dirty industries, but just make sure they get a slice of that pie. And as for transgender rights, well, they are mystified by that and other far-left causes as well.
But perhaps some sort of sea change is in the works. While the prospect of being an independent contractor seems keen at first, the reality kind of sucks, particularly if you don't have health insurance or a retirement plan. And our friends in the GOP keep promising to kill off both Obamacare and Social Security - eliminating what little we do have. Yet blue-collar workers vote Republican, just as people take the Tide Pod Challenge and microwave their cell phones. People are idiots, look around you.
Sadly, this will probably push the pendulum too far in the other direction. We will see a resurgence in unionism and regulations, which will help some workers, but raise costs and fuel inflation. And this whole "let's let everyone out of jail" thing has already gone too far - New York City is turning right back into the crime-ridden ghetto it was back in the 1970's. And no, it wasn't glamorous, either.
This is the inevitable result of "too much of a good thing" - when people grab for too much, and leave others with nothing.
