Hedging the Risk

"Hedging the risk" suggests a protective function. It is supposed to protect us from damages, and originally the financial technology was to do just that, not cause it or predictably inflict it.

The element of fundamental economic certainty the hedge funding technique provides in a free market has been perverted to predictably cause a cost/benefit ratio: to command industry, markets, and prices (the profit or economic rent) to behave with a "certain" cost and benefit.

Consolidation of the capital, however, perverts the protective function to stabilize prices for a planned instability (volatility of buying long then selling short not to stabilize or protect from loss, but to manipulate prices to consolidate the wealth or cause loss for a capital gain) that, if timed, will cause predictable oscillations both micro and macro. It allows for manipulation of market prices, which is illegal.

The hedge fund managers now testifying on Capitol Hill are now engaged in a confidence game of convincing us that their activities are a reflection of fundamental economic realites that stabilize prices and drive investment into peak markets (profits) like capitalism is legitimately supposed to do. It is a fraud.

The hedge fund executives illegally manipulate prices and engage in fraudulent statements to explain price movements that are caused by mere mass movement of consolidated capital in and out of markets (the command). Instead of providing the public good of stabilizing market prices with realistic valuations as they claim, the buy-long-sell-short technique causes volatility and extreme uncertainty of valuation that is nothing but an arbitrary and capricious exercise of market power that violates the free market legitimacy of a pluralistic determination of "fair" market value.

The ability to command market values defines what free-market economics is not, and defines the practitioners of command economics as the criminal element, inimical to the pluralistic process of a collective bargain that legitimately determines what "fair value" is.

Claiming that the ability to command valuations is the result of free-market economics is pure nonsense. It is a fraud. Fraud in the marketplace is a crime against a civil society that values the peaceful processes of a pluralistic legitimacy of power, which is what our Constitution is clearly intended to ensure across all jurisdictional boundaries both public and private. Pluralism is commanded by The Constitution. It is the task of government authority to protect and defend it, to ensure it, in priority.

So President Bush delivered a speech on the benefit of maintaining a free market system that coincides with public investigation of the black-box financing technique, lending a sense of efficiency to what is entirely antithetical and inimical to free markets.

Since the black-box hedge fund technology has not been regulated, being therefore "free," the result is legitimately supposed to be beneficial to everyone. It is beneficial, efficient, by definition because it is free. The means justifies the ends in an unempirical, unscientific, tautology of syllogistic proof that for centuries led people, for example, to "believe" the earth is flat and static at the center of the universe.

Like the complex predcitable utility of Tyco Brahe's proof of retrograde planetary motion in macro physics, Bush's speech representing the utility of the current macro theory and practice of economics should be thrown out, junked, on grounds of complexity alone, much less because its political legitimacy of providing for the General Welfare is empirically disconfirmed in the most obvious way.

Yes, the system of economics Bush claims has the highest utility provides a high level of predictive certainty. It is predictably bad for the vast majority of The People and so complex that it requires elite management that consider themselves, and their expertise, beyond the vulgar accountability of The People, all of which is completely antithetical to the concept of freedom generally and a free-market economy in particular.

Bush's argument is both syllogistically disproven in theory and disconfirmed in practice. It also has been rejected by The People with a popular, legal non-consent of the governed. Bush's argument now occupies space within the circular file of clearly disconfirmed hypotheses and completely ridiculous arguments.

The reason our current economic crisis "is not failure of free markets" is because we do not have free markets. It is a failure of command economics: a failure of a consolidated marketplace commanded by hedge funds, private equity and dependancy on the Wal Mart business model in which an economy of scale is an economy of command.

That organizing for consolidated command and control is the model of inefficiency is why We have The Constitution. We need these hedge-fund managers like We The People need King George!

To argue the general benefit of the economic system and economic techniques now in operation is to publicly make a fool of yourself! We are not talking about a brand of beliefs out of favor here, we are talking about wholesale rejection of a failed theory and practice subject to the rigors of the scientific method in the modern world, easily identifying and separating empiricists from bureaucratic-executive court jestors masquerading as expert logicians arguing the secret knowledge, the exclusive higher understanding, of what freedom is and the path to attainment.

Rendering the financial system a virtual mystery cult of elite understanding is necessary to avoid accountability, legitimacy, something that a free market easily, simply, efficiently provides if We ensure it in priority.

Hedging the risk has become the exclusive knowledge and practice of this mysterious black box that the managers are telling public officials needs to remain the undisclosed, exclusive domain of the experts because it is too complex to be criticized by the ignorant masses, by the uninitiated public and its elected good offices.

Emerging from Plato's allegory of the cave, this is what we see in the full light of day.

Hedge funds function to consolidate the capital--the means of financing what we want and at what price. It functions to make the decision of finance the exclusive domain of the owners of the capital (like King George) who take ownership by "freely" commanding what is supposed to be a free market that checks the consolidation of the power, disallows command economy that cpmmands exclusive class distribution of rewards and deprivations, and determines the efficiency of markets to innovate and grow with full employment and low inflation.

The result of a free market ensured in priority is not indicated by massive debt and liquidity crisis, but by the reverse. It is a hypothesis we now have a mandate to fully test.

This is all about the ownership of the capital that decides what is produced and at what price. If The People own the capital, then they collectively decide by operation of the free and unconsolidated marketplace--a clearly verifiable, tranparent, visible means to ends legitimacy of power.

To make the decision of capital finance "exclusive" in order to ensure an inequity that causes inefficiencies to be managed by elits in crisis requires a technology, a technique, for taking ownership of the capital. It is necessary to consolidate The People's wealth and to do it with an inscrutible complexity immune to a public critique because it is contrary to a free-market legitimacy and declaring yourself of royal status is fundamentally, Constitutionally, illegal.

A system of finance and adminstration is created (Hamiltonianism) in which entities are created too big, complex and intertwined (consolidated) to fail that prey on entities too small, simple and unconsolidated to survive. To survive it is necessary to consolidate, to conform to an economy, a model, of scale so bigger is better and hedges the risk. The economy of scale does not create efficiency, it makes survival more certain and is capable of commanding inefficiencies and abuses that otherwise will not survive the accountability of free-market economics.

The consolidated entity is then "at liberty" to hedge the risk even further and ensure its survival in priority by eliminating the legitimate accountability, including the efficiencies, of a free market mechanics. The capital is consolidated, thus ensuring the continuous innovation of the means, the technological efficiency, of keeping the wealth, and markets, in consolidated command and control.

Where capital becomes "shared" or "spread around," it must be consolidated. So it is now necessary for hedge fund managers to argue the necessity of keeping the data on their operations (the black box) undisclosed. It needs to be undisclosed because manipulating markets and prices on command, and consolidating your savings, your capital, is illegitimate. It is a criminal activity inimical to civil society.

Pensions, IRA's, 401K's do not conform to the economy of scale and the Hamiltonian model until it is consolidated. If you believe that the model yields the highest productive efficiency, the ownership of the capital must be consolidated for the greatest good of society.

Since consolidating the wealth by definition means it must be deprived from its owner, the trick is to make it look like the expropriation occurs by legitimate pluralistic processes both public and private, political and economic. Hedge funds are managed to accomplish this fictitiuos process and are now engaged in the public process on Capitol Hill where its critics will not condone, but will exonerate the fraud with a regulatory reform full of loopholes written into it by experts in the field. This describes The Bureaucratic Model of Power and Political Economy. It attains elite results through a means of decisional power with elite technocrats that suggests a pluralistic, Constitutional, process of accountability in operation.

Instead of the direct accountability and economic efficiencies of a free-market economics, We have an elite determination of what is fair and valuable. The inefficiencies of the command economy and the operation of an economy of scale is preserved to command crisis economics and politics in the future. without the bureaucracy engaged first and foremost to ensure a free and unconsolidated marketplace in priority, crisis is predictably determined to perpetual cycle of boom and bust and the consolidation of the wealth and power.