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The GameStop frenzy has some precedent

For the past year, the word “unprecedented” has been overused to the point of farce. From the pandemic to the final, violent gasps of the Trump administration — and more recently, the presidential inauguration — there has been plenty of cause to trot it out.

To me, the word has come to embody an attitude of clinging to the past in the face of overwhelming change. A shorthand for commenting on individual events without appreciating the wider tide of change that has delivered them.

For that reason, I am loathe to describe the GameStop incident as unprecedented, although I recognize that the social media-driven investment rally is a decidedly new phenomenon. But while the specific market manipulation element is new, the wider pattern — social media undermining the norms and power balance of a crucial institution — is not new, at all. In fact, it has become the defining struggle of our time.

Some context for the uninitiated: GameStop, a video game retailer, has been dealt a one-two blow by the decline of shopping malls and the ubiquity of digital video game downloads. GameStop’s slow lurch toward the brink has made it a popular choice for hedge funds and institutional investors looking to bet against the firm by shorting its stock.

Although analysts do not expect the company to earn profits again until 2023, in recent weeks it has experienced a renaissance of sorts, seeing its stock move more than 700 per cent since mid-January.

By the company’s own admission, there’s no concrete basis for this unheard-of rally. So where did it come from? The same place as so many of the wild tales of our era: the obscure corners of the internet.

For weeks, commenters on Reddit and other social media investing fora have led a frenzied push to buy up commonly shorted stocks like GameStop, Nokia and BlackBerry. They have artificially inflated their value and, along the way, have cost hedge funds with short positions in the firms more than five billion dollars. Melvin Capital, one of the firms targeted by Reddit users, lost 30 per cent of its value and was forced to seek a $2.75 billion bailout to stem the bleeding.

The David and Goliath narrative writes itself. Indeed, it has been taken up with gusto by Redditors who see themselves as the “little guy” fighting back against the hegemony of corporate investors whose inherent advantages represent all that is broken in America.

Commenters have shared how their investment in GameStop has allowed them to pay for family members’ medical treatments and avoid foreclosure related to COVID-19. They egg each other on to “hold the line” and avoid selling in the face of media scrutiny. In short, they reinforce their self-conception as an outnumbered few fighting back against the injustice of the modern world — against Wall Street, the media and “elites.”

We have seen this before. Five years ago, Donald Trump took advantage of a similar democratization — of politics, rather than investing — to subvert the norms of presidential elections. The game, he said, is rigged — and it’s time to fight back.

Many said Trump was simply using social media to go directly to the people. But over time, his use of platforms like Twitter eroded the foundation of political discourse. Along the way, the balance of power in the Republican party was flipped from billionaire donors to everyday people who were given a voice like never before.

Thanks to the rise of cheap and simple-to-use trading platforms like Robinhood, we’re now seeing a similar trend in finance. And as when Trump’s words begat genuine violence, the platforms have had to step in to stem the fallout of the mob’s actions. In the face of an impending liquidity squeeze, trading platforms have suspended trades of certain stocks. They will no doubt incur the same wrath faced by Twitter and its peers.

As with regulation of online political speech, meaningful SEC intervention in the GameStop case is easier said than done. Perhaps it’s time to recognize that while the problems social media have wrought may seem “unprecedented,” they’re not. They are related and endemic to our modern world. And given that GameStop-gate spurred over 23 billion trades on Wednesday — the most ever in a single day — it appears their impact is not disappearing anytime soon.

O’Toole makes Conservative party his own

The ejection of the lamentable Derek Sloan from the Conservative caucus this week marks Erin O’Toole’s most important and consequential moment since his election as party leader. It is the precise moment O’Toole made the party his own.

Think of it as his very own Sister Souljah moment — a deliberately engineered decision that served as a proof point for the rejection of the extremist portions of his party.

For those not familiar with the reference, the phrase originated in 1992, when Bill Clinton seized on remarks by hip hop artist Sister Souljah as a pretense to distance himself from an increasingly radical Jesse Jackson Jr. and affirm his bona fides as a moderate, centrist Democrat.

Forgive the U.S. reference, but it seems especially apt, because O’Toole’s current problems are also American in origin. Ever since the Jan. 6 insurrection at the Capitol, Canadian leftists have worked hard to smear O’Toole and the Conservative Party with the same fascist brush.

This, of course, is patently ridiculous. There is a world of difference between Trump and O’Toole. But the Liberals have run this playbook before, with regrettably devastating success.

However, O’Toole is smarter than all that. He knows he can’t win with just the fringes, no matter how enthusiastic; the math simply doesn’t work.

So, seeking to head off a long-term image problem, O’Toole released an unusual statement on Jan. 17, declaring there is “no place for the far right” in the Conservative Party, which was to be “modern, pragmatic [and] mainstream.” The challenge for O’Toole was that pledge amounted to no more than words on a page.

Then, as fast as you could say “the luck of the Irish,” O’Toole had a now-familiar opportunity fall into his lap.

As first reported by the leftist media outfit Press Progress, MP Derek Sloan had accepted a $131 donation from avowed white supremacist Paul Fromm. Even though the donation was made under another name (Frederick P. Fromm), and was processed by the Conservative Party, O’Toole leapt. First, Sloan was banned from standing for the Conservatives in the next election, and by mid-week, he had been formally ejected from caucus.

Press Progress likely thought they were being clever by releasing this information now. After all, the Conservatives had been under fire post-insurrection, and the attacks were accumulating thanks to the party’s long-running inability to disavow Trump. Then, by twist of fate, here at last was a chance to rebuke the far right in a clear and decisive way, beyond what any written statement could accomplish.

Had the far more sophisticated Liberal PMO strategists been in charge of the timing, no doubt they would have preferred to release this in the middle of an election campaign, when O’Toole would have a much harder time distancing himself from a problematic candidate such as Sloan.

However, as with Clinton’s Sister Souljah moment, there is an element of risk at play for O’Toole. Just as African-Americans are a core constituency of the Democratic Party, social conservatives are central to the electoral fortunes of the Conservative Party.

But again, this is where O’Toole was clever. Sloan was not ejected from the party for his socially conservative views. Were that the case, any one of his previous odious remarks would have been grounds for removal. And so, once again, just like in his leadership campaign where he did not attract one caucus endorsement, Sloan stands alone. Other prominent social conservatives, including most notably Leslyn Lewis, O’Toole’s great leadership rival, have not raised much fuss about his ejection. After all, with Sloan gone, Lewis is more important than ever.

On his way to remake the party in his own image, there may well have been more that O’Toole could have done to distance himself and the party from Trump sooner. Although no one could have predicted exactly how disastrously the Trump administration would end, those videos of O’Toole refusing to disavow Trump won’t be helpful in the pursuit of a “modern, pragmatic [and] mainstream” party.

Sloan’s expulsion is a gift in that regard.

What’s more, the whole sorry episode has demonstrated that, most important of all, O’Toole knows how to be a leader.