Skip to main content

Rigged Markets and a Question from Quora

 



Found on Quora recently: 


Does it make a lot of people angry how "rigged" the stock market seemed in 2020 and lately in 2021? Why or not? How is it true that the stock markets are more rigged than any time in history? 

Let us consider that question. It represents the failure of generations of finance journalist, including your correspondent, to convey to the public any real sense of how markets work. It also represents a stark case of presentism, the impulse to give the latest things the greatest importance, ad all superlative words, so that the latest rigging, whatever exactly it may consist of, must be the most rigged ... ever. 

Our friend may certainly be making reference -- since he has in mind the last year and a half -- to the Paycheck Protection Program and its fallout. As the severity of the pandemic became obvious, Congress passed the CARES bill, including the PPP. As a consequences, hundreds of millions of dollars seem to have been fraudulently allocated. A recipient in Texas poured $1 million of it into cryptocurrencies. More than half of all PPP funds went to just 5% of the recipients, and some of them were large and well-capitalized public companies.

In August 2020, President Trump announced that the government was underwriting a $765 million loan to Kodak, the venerable camera company. This wasn't part of PPP, officially, but it qualifies under "rigging." Trump said that the idea was to bring drug manufacturing back into the United States, so he was helping Kodak with its loans with that goal. The deal would also, he said, create 360 new jobs. Manufacturing jobs. The kind that make America Great!

The number 360 seems pretty micro for a deal on this scale. How much money per job is that? Will 369 new jobs materially shift the global supply chain in pharmaceuticals? 

Kodak's stock price soared, beginning days before the announcement. Bright observers immediately wondered if stock speculators had been tipped off, hose hand they had greased for that end, etc.  

The loan never actually happened. It had accomplished its purpose -- chiefly, allowing a megalomaniac in the White House to act like he was accomplishing good stuff -- and then disappeared. Some people of course made money on the rise and fall of the stock price created by the promise and its non-fulfillment.

So let us answer our friend's question. Yes, stock market rigging takes place, usually with the seal of sovereign approval. Does it make a lot of people angry? Not enough of them, I fear. Why not? in this instance, because the fire hose of news washing us all down through the period made the Kodak story into a mere bagatelle. 




Labels:

Comments

Post a Comment

Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.   We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majesti
7 comments
Read more

Five Lessons from the Allegory of the Cave

  Please correct me if there are others. But it seems to be there are five lessons the reader is meant to draw from the story about the cave.   First, Plato  is working to devalue what we would call empiricism. He is saying that keeping track of the shadows on the cave wall, trying to make sense of what you see there, will NOT get you to wisdom. Second, Plato is contending that reality comes in levels. The shadows on the wall are illusions. The solid objects being passed around behind my back are more real than their shadows are. BUT … the world outside the the cave is more real than that — and the sun by which that world is illuminated is the top of the hierarchy. So there isn’t a binary choice of real/unreal. There are levels. Third, he equates realness with knowability.  I  only have opinions about the shadows. Could I turn around, I could have at least the glimmerings of knowledge. Could I get outside the cave, I would really Know. Fourth, the parable assigns a task to philosophers
Post a Comment
Read more

Searle: The Chinese Room

John Searle has become the object of accusations of improper conduct. These accusations even have some people in the world of academic philosophy saying that instructors in that world should try to avoid teaching Searle's views. That is an odd contention, and has given rise to heated exchanges in certain corners of the blogosphere.  At Leiter Reports, I encountered a comment from someone describing himself as "grad student drop out." GSDO said: " This is a side question (and not at all an attempt to answer the question BL posed): How important is John Searle's work? Are people still working on speech act theory or is that just another dead end in the history of 20th century philosophy? My impression is that his reputation is somewhat inflated from all of his speaking engagements and NYRoB reviews. The Chinese room argument is a classic, but is there much more to his work than that?" I took it upon myself to answer that on LR. But here I'll tak
13 comments
Read more