HARRISON R. T. WARD, 24 March 2021
Without trust, markets break down. The U.S. dollar is a fiat currency, which means that its value is derived from the trust we ascribe to our government; as that trust wanes, Americans turn away from traditional financial institutions. During the 2008 financial crisis, many everyday Americans, unsure of who to trust, took their money out of banks en masse. Large commercial banks began to fail; by 2012, almost 450 banks had collapsed. Today, deep into a historic pandemic and recession marked by political division, Americans’ trust is waning again.
On Jan. 27, a group of amateur traders helped push the stock of struggling video game retailer Gamestop to a price of $347 per share. Alarmed, financial experts took to the air to warn against what Alan Greenspan, former chair of the Federal Reserve, calls “irrational exuberance” — an unreasonable, optimistic view that the market will keep rising. Jim J. Cramer ’77, host of CNBC’s finance show “Mad Money,” was of those exasperated experts — “People begin to think, ‘Are prices real?’” he exclaimed on the air.
During a segment of CNBC’s “Squawk on the Street,” Cramer warns viewers that it is unrealistic to expect the stock’s price to continue rising, while simultaneously, a graphic on the right side of the screen flashes that Gamestop’s stock is up 67 percent from the day before.
Cramer, a Harvard graduate, Goldman Sachs alumnus, and former hedge fund manager, is the kind of man from whom Americans used to seek financial advice. But today, traders aren’t listening to Cramer; they continue to trade Gamestop, and they continue to discount his expertise.
