Written By Abril Trankels.
Following the recent chaos on Wall Street driven by small investors, a new question has emerged for Washington that recruits both Wall Street "sharks", big tech and the entire political spectrum.
In short, the phenomenon was triggered by what is known as “short selling”. This action basically means that certain investors seek to generate profits by speculating on the fall in prices. Buying an asset for x amount of money from an institution or individual usually known as "brokers", who are then returned the same amount plus an agreed fee.
Meanwhile, the investor who bought those assets or shares sells them to a third party and waits for them to devalue (as he had speculated). Once they actually drop in price, he buys them again in order to return it to the broker; obtaining a profit thanks to the fall in the price of the asset.
However, this profit is not something 100% guaranteed, the market has its surprises. What specifically mobilizes the phenomenon of recent days is the paradox it reflects: small investors annoying the Wall Street giants. Almost as a joke, and through the Reddit platform, it was that several individuals spread the initiative to invest in shares of companies like GameStop since many highly relevant investors were betting on its downfall through "short selling." What were shares of 5 dollars, which promised only to devalue, today they reach 300.
This phenomenon was not summed up in a chaos typical of the world of finance, big tech and Biden's own novice administration today finds itself against a rock and a hard place. On the one hand, the big platforms touch again the unexplored field of legal barriers of cyberspace.
Freedom of speech, the American First Amendment, is challenged by various institutions. On the one hand, the dissemination medium of this case, Reddit, but on a larger scale, Google itself and the different applications that work are also involved, aimed at providing space for this type of stock buying and selling business.
Paradoxically, one of these apps called "Robinhood" has recently prevented its own users from generating actions such as those that led to this controversy under the initiative to "protect" its users. While its motto is “Let the people negotiate”, this company today chooses to limit its own members. Some of the essential points to consider, within all the debates that have arisen around this dilemma are: first, that the action used by these small investors is totally within the legal framework of the United States. While the same cannot be said regarding tactics that suppress freedom of action for some, such as Robinhood. It remains to be seen how the legal mechanisms will work in response to this. Which leads to a focus on American political decision-makers and institutions.
The Biden administration so far in this dispute has only responded to a press conference remarking: that "we have the first woman Secretary of the American Treasury" and that President Biden is currently promoting recovery plans for middle class families that have been affected by the damages of the pandemic.
Although the answer says little and no one, there were several representatives of the Democratic Party and the North American left who came out in defense of small investors (see AOC). Finding in this way, a point in common with the republicans who defend the free market and the non-intervention of both the State and the Big Tech.