Inversion Indicators and Practical Organizational Modeling

Legislation that allowed commerce and investment banks to merge precipitated a creeping yield inversion. Many political economists predicted dire consequences, and indicators like the inversion, well before they presented.

Despite warnings that reorganization of the banking model into a practical model of consolidated command and control would bring the tendency of a pre-Keynesian deflationary trend back to life, neo-conservatives dismissed the critique as an ideological (a teleological) argument. It was, nevertheless, as time would tell, an ontological analysis.

After the "Jobs Summit," and at this point in our political-economic history, we should ask if the analysis and the predictive utility of current measures reflects an objective ontology.

Cutting capital gains for small businesses recognizes the causal relationship between organizational type--too big to fail--and the classical, pre-Keynesian crisis of liquidity that occured, very clearly indicated by the yield inversion. The measure is to cause capital formation for small businesses, correcting the effect of the inversion (to leverage capital into speculative bubbles instead of economic growth which expands the money supply and causes the weak dollar).

The weak-dollar-with-a low-interest-rate "phenomenon" (an inversion) is where analysts have been plunged into a virtual vortex of competing phenomenologies. The usual analytics do not make sense in this virtual world of conflicted tendencies...a source of uncertainty if there ever was one.

While this virtual world of analytical ambiguity creates a world of ideas in which anybody's guesse is as good as another's (giving the economy the apparent legitimacy of an undirected, free-market-like ontology), correlations and causal factors are still identifiable, and the truth is still veridically predictable and verifiable. (Oil down today despite draw in inventories, for example. What sense does that make? The inversion does not make sense but it indicates the truth about how the allowed consolidation of capital distorts market fundamentals, clearly indicating the truth of the organizational mode--enabling an illegtimate command and control--with highly predictable effects.)

While encouraging the formation of capital for small business enterprise toward job creation, the capital gains tax cut encourages speculative demand--a bonanza, a gamma-risk coup, for entities that fit the "too big to fail" model.

Capital will be leveraged into small entities and releveraged by these. Jobs will suffer. The declining rate of profit will continue to be financed by support of the unemployment/deflationary trend, which will keep interest rates low. The result will be, and is fully organized, to support the value of capital with minimal gamma risk (the uncertainty of government intervention in the marketplace--the goal, the telos).

The yield inversion is being slowly reversed to look more "normal," and indicates a slow recovery. The building blocks will appear to be reorganized to cause the benefits of pluralizing the maketplace (the change we really need), reversing the trend of consolidation. The stakes will be, nevertheless, conserved with a double-dip recession well indicated by the ontology of measures to reorganize for managing the systemic risk.

Support for the dollar will continue to be by means of regressive, and deflationary, tax measures. Support for a tax on all capital-gains transactions is highly regressive, diminishing the value of capital formed in the hands of small enterprise, advantaging firms "too big to fail" while giving the impression of generally progressing the code to reverse the trend that tends to invert the yield curve.

The Hamiltonian model gets full support, and nothing really changes with a very high degree of predictability. The gamma risk is minimized, and indicated, by an ontology of the organizational type.

The Law of Intended Consequences: Jobs and Economic Growth

Critics of President Obama's jobs summit cite government intervention in the marketplace (the gamma risk) as the primary element of resistance to economic growth and, therefore, jobs.

The critique poses to proffer the empirical evidence that explains the continued resistance to job creation. These same critics, however, fully intend to resist employment by systematic means of a cyclical trend that is falsely characterized as an unmanageable, unintended, ontology. This is nothing but a trick, a rhetorical ruse that phenomenologizes what is empirical truth (truth being whatever it is believed to be in spite of the evidence).

The argument, the ruse, is really teleological: resistance to job creation (economic growth) continues to strengthen because it is the goal of the job creators (the people that manage the economy). Rising unemployment is not the result of a natural, inexorable, unintended ontology foolishly exacerbated by government intervention. It is, rather, a fully intended outcome--the goal of a continuously consolidating command economy extending from a free-market legitimacy. The means to the end is operationalized with government to both legitimately manage it from a central, elitist authority and to serve as the cause of the problem--the fall guy--when the system exceeds its tolerance for managing the risk of achieving its goal--accumulating wealth and power, and keeping it (the accumulation of a retributive value).

What we do empirically know is that this system predictably defaults into ontological crises. The system has evolved, and been selected by design, to predictably effect the goal by default, and the default presents as an ontology.

Systematic pursuit of the goal includes unemployment and the economic benefit it accrues (the accumulation of capital into the ownership of a small, socio-economic elite). The macro result is command and control of the economy with the appearance of an ontological legitimacy, like a free-market legitimacy of process. Plutocracy is shammed with the rhetoric of democracy. The crisis of accumulated capital requiring a distribution to technically correct for it is shammed with the rhetoric of "let it be."

The technical correction needed is not an organizational typology of continued consolidation (state capitalism or state socialism), but deconsolidation into a legitimate ontology of macro pluralism (free-market economics). Then "let it be." The consequences will be what We all fully intend, and government, instead of being the fall guy, is fully free to ensure it in priority.

A jobless recovery only indicates the intention to reorganize the problem into "hope" for "change we really need" always receding just below the horizon. It indicates the intention for recovery to be most effective from the top down, and the benefit will trickle down--what is an empirical failure. For the investor, large caps are squarely in favor for the next 24 months as productivity per worker rises while wages and salaries continue to fall during this consolidation phase of the business cycle.

Employment will not recover until consolidated business entities get tax cuts for employment. Rising employment will then serve to pay the public debt which has been bought by those that have the money accumulated to buy it. That is: the distribution (the correction) required will occur when the only funds available to pay the debt are held by those who own it. This suggests the fully intended "law" for employment policy across all jurisdictional government boundaries: job creation is for creating the tax base. What is not fully stated as the benefit is that it is to cure the assured risk of consolidating capital and markets to destroy the hands that labor to feed it.

Employment will not occur to relieve the burden of the unemployed but to harness them with the burden of paying the public debt. The unemployment trend will be reversed to maintain the Hamiltonian model of power and political economy (a policy of continuous indebtedness and recurrent crises of insolvency that keeps power consolidated and in elitist command and control).

Not only does labor finance the declining rate of profit with its jobs, but the accumulated debt with a regressive tax burden. John Boener, leading proponent of the extremely regressive tax burden that led us into the depths of the current crisis--the Bush tax cuts, said in regard to the Obama jobs summit that the deepening unemployment trend is due to the current administration's tax policy which will raise taxes on businesses to pay the debt.

The only change in tax policy that has occured was the immediate regressive tax to finance the SCHIP, and regressive taxation is deflationary. Nancy Pelosi and the progressives happily added the huge tax increase to an already oppressive regressive tax burden and budget deficit. Pelosi reminded us during the summit that creating jobs will pull more money into "the public till" (expand the tax base) which, she says, is the best way to control the budget deficit (to pay the debt). Thus, the priority for government action is, "jobs jobs jobs!"

The duopoly of political choice, and political will, toward change we really need is fully wanting and clear confirmation of the law, the teleology, of intended consequences. The deliberate consolidation of power is masqueraded as the model of efficiency with the negative effects, like inflation and unemployment, argued to be an ontology of unintended consequences.

The likely conclusion and policy direction suggested by the jobs summit is to provide tax breaks for small businesses which will be few by the time it comes to pass. The tax break will not accrue to entities too small to survive, which defines the efficiency of the business model "too big to fail" by default.

Hedging the Gamma Risk

The bonused employees of bailed out firms too big to fail did not hedge the gamma risk to their income.

It is not that this "talent" did not work hard to earn it. They worked very hard engaging investment practices that brought the entire economy to the brink of systemic collapse.

In order to hedge the risk to their pay, the talent should have made sure there was a benefit that accrued to the system instead of the zero-sum detriment that was to be compensated as a measure of success with public funds, either directly or indirectly.

Bonus-class employees would have to invest in economic growth--a distribution from the accumulation, but that is not what they were hired to do. They were hired to continue the accumulation with little-if-no economic growth to control employment costs within "the system" (accumulating capital gains with little-if-no-inflation). Thus the systemic crisis and the bail-out funding that was applied to mitigate the systemic risk which allows the accumulation phase to continue, staving off the needed distribution in the name of "capital formation (unemployment and reduction of net worth--deflation).


The systemic risk was not properly hedged, so the gamma risk was not properly hedged.

Since managing the gamma risk is considered a political function, not economic (like investing in growth), it is not within the job description of the bonused employees below the upper-echelons of corporate classification. The corporate elite failed to protect the compensation of the lower class employees which entirely fits the elitist model of capitalism, the consolidation of power, in operation.

Oooops... everybody loses, and for the corporate elite, more losses to come in the form of a distribution which, if the gamma risk would have been properly hedged, would have been a win-win for everyone.

The way it is now, the system is organized (consolidated) for a dead-weight loss. So much for the touted efficiency of consolidated industry and markets (the economy of scale) to hedge the risk.

Productivity Gains

Recessionary trends reduce both purchasing power and net worth of consumers.

Readily apparent is that reduction of buying power makes for a worsening crisis begging for a technical correction. What is not so apparent is what happens to the net worth.

Reduction of purchasing power has a very near-term, deflationary effect, reducing inflationary pressure by reducing demand. As prices fall, monetary assets appreciate in a zero-sum relationship. Losing monetary assets--losing a job or a house that was leveraged into cash--by liquidation under deflationary pressure prevents participation in the benefit.

Reduction of net worth has a longer term effect that disconnects, and disassociates, the cost with the benefit. Net worth just seems to evaporate, and that is the way it is described by the vast majority of economists and analysts that have access to popular media outlets, reinforcing the apparent and popular understanding of it. However, the understanding is an affirmation and not a confirmation of the phenomenon.

Now that the Dow has retraced to 10k, the big question is, "What needs to happen to get the retail investor back in the market?"

When retail investors had a job, savings went into the house and the stock market. Where did all that value go?

Throughout the period of conservative resurgence small investors were told that trickle-down economics would trickle (retail) into an individual's retirement account and appreciate the value of homes. Small investors subsequently fell to the macro-economic reality of the business cycle. Rather than sharing in the wealth, they were providing it to be consolidated.

Sharing in the accumulation phase of the cycle, the retail investor was marked to market as the wealth to be accumulated, not to accumulate wealth. What would have happened if Social Security funds would have been put into the market, as conservatives strongly advocated, prior to the Great Recession as well?

The promise of sharing in the wealth by investing in it before it trickles down is not only seductive but also provides the productive incentive to generate the income to invest. It is the perfect retail marketing scheme evolving from a distrust of trickle-down economics touted to provide the greatest good for the greatest number. Wages and salaries can be leveraged into wealth rather than providing mere subsistence. That would give credibility to the beneficence of accumualting capital. Capital formation is then not simply an expropriation of value produced by labor.

Rather than being alienated from the wage and salary earner, productivity is value gained by labor in the form of capital. The value is being verifably appropriated, instead of expropriated, as the value of labor's investments tick up. The value is being reinvested for continuous accumulation (not economic growth) rather than retributed by a gamma-risk distribution, stabilizing the cyclical macro trend and avoiding crises. Socialism? No need for that. Free-market economics? No need for that. Consolidation of capital, industry and markets benefits everyone...it is the model of maximum efficiency!

The new and improved model of capitalism is a touted utopia with labor sharing in the capital gained.
Neo-conservative reconstruction is to demonstrate that the classical model of capitalism can be modified to be veridically utilitarian. That it is not verifiably utilitarian, but systematically yielding a highly exclusive benefit, is the perennial problem of capitalism and the systemic risk to be managed. Managing that risk is in full mode at this time with an estimated retributive value of approximately $10 billion by the year 2010.

The retributive value has been accumulating since the dawn of capitalism. Perennial (cyclical) liquidity crises keeps the capital consolidated and functions to mitigate the declining rate of profit, preventing deconsolidation and resisting the natural tendency to free-market pluralism.

If capitalism does not consolidate (accumulate) into "too big to fail," the capital will reorganize (resolve) into small, pluralistic entities that are both capable of succeeding and not too big to fail the system into a crisis mode if some do. The systemic risk is managed by process of a pluralistic, continuous improvement.

Since the improvement (the correction) is not allowed to happen, the declining rate of profit technically presents as productivity gains. The declining rate of profit is borne by wages and salaries--income that is not technically considered capital gained, but its primary cost. Distribution of the cost determines the accumulation--to whom the benefit accures.

In a consolidated marketplace, the cost accrues as a debt, and the benefit accrues as a profit. The result is the jobless recovery we have now with the declining rate of profit being absorbed by the vast majority of consumers in the form of reduced wages and salaries and working more for less--productivity gains.

The expropriation is described as "capital formation." The loss of net worth is gained in the form of productivity gains. Each member of the family having to work two or more jobs to pay the profit margin, like it has been for twenty years or more, will be considered an improvement over massive unemployment.

Expropriation of the value--the zero-sum distribution of net worth from the bottom to the top income class (the constant, non-pluralistic accumulation of wealth and power)--appears as an unconnected cost and benefit. The cause and effect appears disconnected so it cannot be rendered a function of a problem/solution resolve.

Rising wages and salaries and full employment is considered to be the problem, therefore it is not the solution, which is what we have now. It is no accident.

The only reason the stock market is a leading indicator of recovery, and employment is a lagging indicator is because the capital gained (the consolidation of net worth--the formation of capital) has deliberate priority over employment (purchasing power and equitable distribution of net worth). It is what capitalism is intended to do and is supported in every way right down to the classification of wage and salaried employees.

Why is it that the controversial compensation of too-big-to-fail institutions are considered "bonuses" and not a typical laborer's wage or salary? Why is a medical doctor's pay considered in a different class than a typical laborer's fee for service? It is because it has an elite status with all the rights and "privileges" of achieving that status. Chief among the privileges is the exercise of power that is emblematic of status, like tyrannizing liberties, or expecting to be paid whatever fee is commanded for service in the name of public health.

The reason health care reform is so difficult is not because health needs to be determined a right or a privilege, which reduces to a matter of opinion, but whether it will be provided at an accumulative, and fully verifiable, cost. It is a struggle for economic power and political dominance.

The stakes for preserving the empirical measure of status are very high, as well as the costs for the vast majority of The People in which the choice is health care or bankruptcy and no reason to believe reform will change a system that supports accumulation over a distribution of power.

Relinquishing economic status is to relinquish and share power. The medical profession does not want to be subjected to the rigors of free-market economics because it "crudely" relinquishes status by disinflating the price (the profit) and the probable accumulation of wealth that confers status and power (health as well as wealth).

Health insurance companies want a special monopoly status and be allowed to consolidate to prevent free-market competition because a free market model means the firm MUST be pluralistically accountable in every possible aspect of public propriety. The firm is accountable on demand, which is a function of pluralism, rather than dictate the market on command, which is a function of elitist authority.

As long as the healthcare sector can function without being subjected to the rigors of free-market economics, it is more able to command the bid. The bid is whatever the provider asks and accountability becomes a function of litigation with high monetary awards from the deep pockets of the market's commanders.

The need to sue to get what the free market is likely to otherwise affordably provide indicates command economics and an elitist model in operation, not the failure of free-market economics.

Free-market pluralism provides accountability in the fullest and most immediately direct measure. It is inimical to market tyranny, holding would-be tyrants directly and immediately accountable by consumer bid in the marketplace.

Ensuring free-market economics provides tort reform beyond the consumer being left with no recourse, which only benefits the market providers--the economic elite--and will do nothing to control costs for consumers, only adding to the profit margin, and power, to command the bid on the bottom line.

In a free-and-open unconsolidated marketplace with no barriers to entry, a business enterprise, or a doctor, that has achieved a high status of profitability in the marketplace is an entity that consumers both want to do business with and invest in. Both can happen at the same time with the most direct, immediate, and easily verifiable accountability--exactly what litigious elitists, busily defining what is a right and a privilege, do not want.

One model is democratic, the other authoritarian. Which one do We choose to ensure freedom and liberty for all beyond the ephemeral determination of what is a right and what is a privilege?

A person does not have the right to, or the privilege of, anything if it is unaffordable. This is what a free-market economist refers to when describing and explaining the ontology of the distribution of power. Nature is completely ignorant of the right thing to do. There is nothing profane. All it knows is the truth. All We have to do is find it. There will be found the peaceful prosperity We are All looking for; and for the people that are more concerned with engineering the truth to a self-satisfaction than finding it, it will find you, much to your dissatisfaction. It is self-correcting, oblivious to propitiatory gestures and retributive rituals either ancient (like making sacrifice to the gods of providence) or modern (like retributing accumulated value in the form of a public debt).

The right to health and wealth is only verifiable by doing it, and the means to ensure it is the maximum pluralism, the maximum possibility beyond structured probabilities, free-market economics provides.

Ontology of the Moral Argument and Technical Analysis

There is no difference between the moral question and the practical question when analyzing economic trends.

When, for example, the analyst observes that the accumulation phase of the business cycle is followed by a distribution, it is critical to also observe that the latter phase tends to structure into a political process that confirms the distribution of power, dominated by argumentation of "the right thing to do." If the majority of The People do not have the economic power (the income) to exercise choice in the marketplace because it is in an accumulation phase, they will look to political means for a distribution.

To say that a distribution MUST occur is an ontological argument.

What happens if the distribution does not occur because the practical philosophy of ensuring a constant state of accumulation ensures the the greatest good for the greatest number? The outcome is always a demand for a distribution.

The deprived, who are a necessary condition of accumulation, are not the sole source of the demand. The beneficiaries, who realize the necessary condition for accumulation, must also demand a distribution to pay the accumulated debt of deprivation. Thus we have cyclical trends--boom and bust--both short and long.

While the empirics of the process ontologically presents in the natural world, it is inextricably linked to teleological influence and provides a predictable sentiment for the analyst.

For the greatest number of The People who must be deprived to provide the utility of the accumulation, the failure of expectation is at its highest level, and is an empirical measure. The measure will be empirically acted on with the effect of a distribution to satisfy the demand. The empirical measure has the moral import of providing the greatest good for the greatest number: an equilibriating, stabilizing, distribution of power that minimizes the retributive value.

The retributive value is approximately the value that must be monetized into a public debt if it is not distributed directly to The People (the greatest number) to either pay the debt or cause the economic growth (the distribution) to render the debt unnecessary by satisfaction of the demand (an increased savings rate that pays the debt and supports the dollar rather than causing deflation).

While arguing that accumulation is, and should be, sustainable is empirical nonsense, it is persistently argued in error nevertheless. Its practical application is not a function of reason but the sheer force of accumulated wealth and power.

The distribution must, and will, occur in the short and long term. The depth and breadth of the deflationary trend is dependant on the length and strength of the accumulation phase and the organized ability to price the consumer out of the market, causing a declining rate of profit.

The declining rate of profit is mitigated by continuous consolidation into "too big to fail." Without the consolidation, equity value is not gained, and sustained, in the form of accumulated capital (and we now see the Dow back up to 10,000 with financials scoring record profits).

The organized accumulation of power, both politically and economically, runs a high risk, however. The demand for distribution is prepared for a facile switch to a socialist legitimacy (the legal authority) to retribute the accumulated value on command.

While the utilitarian moral obligation may eventually present as socialism by historical ontology utilizing the practical means of an organized consolidation of power, the failure of expectations has no recourse beyond the force and legitimacy of public authority. The "greatest good for the greatest number" is whatever the technocrats declare to be a verifiable hypothesis, much like what we have now with a very high degree of failed expectation.

Not expecting the Ivy-League "talent" to be bonused in record amount for wrecking the economy, for example, is not in any way unreasonable. Proponents argue, however, anyone that does not see the moral utility of bonusing the best and the brightest from record profits is not fit to be one of them because they are not initiated to see this deeper, secret knowledge: productive capacity is ensured by profiting from the deprivation of others. (Could that be because it does not make any sense!) The reward (the moral utility) is supposed to be from expansion of the pie, not the deprivation of it. The deprivation and the profit are verifiable, the deeper truth of the moral utility is not...it is the realm of true-believing, and over-compensated, automatons of consolidated power.

Keep in mind as well that compensation is decided by the boards of directors, not the stockholders. The elite, of course, have that secret knowledge to rule in the best interest of the plurality--a moral argument that indicates the probable trend of executive compensation as well as the source of executive recruitment from Ivy-League schools.

High-leverage finance, and the high compensation for executing it, will continue to trend despite being described by opponents as providing a "perverse" incentive which, again, indicates recognition of a moral hazard. Eventually, given the depth and breadth of the recession, the hazard is likely to sublate into a pay incentive that executes growth, rather than consolidation, in order to be profitable. The fundamentals will then be likely to drive the trend both short and long, turning this trading market into an investment market.

The longer the accumulation phase, the longer the recession. Resistance to the distribution, accumulating in the form of the public debt, determines the probable outcome: a double-dip recession with a weak-dollar recovery.

Resistance accumulates by moral argument: avoiding the risk of not ensuring continued accumulation. Socialism (unproductive and inefficient command economy) is the risk to be avoided.

The result of resistance is an accumulating debt that sublimates (and simulates toward a socialist sublation) a distribution, but it has the utilitarian moral capacity, so the unsublated capitalist argument goes, of productive incentive that allows capital to be gained for investment in economic growth.

Avoiding the moral hazard of a government-forced distribution (the gamma risk), the moral argument then becomes: providing the greatest good for the greatest number is by deprivation, identifying just exactly what is irrational about the marketplace we have now.

It is not The People who are too irrational to act in their best interest, it is the elite of power. The ontology of the moral argument is clearly indicated.

Predicting the Short-Term Trend

Back in 2008 when it looked like Obama would be president and the economy languished in recession, I predicted that his election would indicate a bull market. The suggestion met with much disagreement from short-term analysts who were expecting the deflationary trend to be like all the others but with an Obama adminstration worsening the trend.

That was wrong. The bull market occured with a worsening deflationary trend because the money was there to support it and the Obama administration added to the money available to drive the bull market to its current level.

Probable deviation of the short-term cycle was indicated by the unprecedented amount of money accumulated into the top income class. This meant that the Obama administration was likely to add quick liquidity in an unprecedented amount (a gamma-risk distribution). The result was to support the contradiction of no purchasing power and too big to fail (the classical contradiction of the declining rate of profit caused by accumulation of the capital rather than a competitive disinflationary and distributional pressure on profits).

The support for equities is a false positive, however. The gamma-risk distribution has been focused mainly to manage the systemic risk, leaving the fundamental risk to continue accumulating with continued support for the accumulation phase of the business cycle.

An accumulating lack of purchasing power, of income consolidation, supports the deflationary trend. Stimulus funds have been largely captured by firms with earnings power; the funds did not trickle down, but were earned by firms big enough to survive this deeper-than-usual recessionary phase of the business cycle. The fundamental, alpha risk of supporting the deflationary trend, however, will eventually present as a declining rate of profit, precipitating another crash led by commercial real estate defaults which result from a lack of retail purchasing power (continued accumulation and consolidation of income). The pressure will then be overwhelming for a gamma-risk distribution targeted at the fundamentals, signaling a secular recovery.

The Declining Rate of Profit

At this stage of the long-wave business cycle, there are conflicting analyses that drives short-wave volatility.

On the one hand, consolidation of failed businesses, assets and market share by firms big enough to survive--with an accumulation of power to command as too big to fail--gives them an accumulated value reflected in their earnings power.

Pricing power (the ability to deflate the economy) is considered a premium to be priced into equity shares which have also been accumulated by the deflationary trend.

The deflationary trend presents the other hand of the short wave. It is the classic "declining rate of profit" identified by all classical economists.

Neo-classical economists tend not to identify the declining rate of profit without it being safely embedded in describing the benefits of capitalism to consolidate markets into a networked efficiency of scale, or what is "too big to fail."

Classical theory also provides that the ontological consolidation of wealth and power will result in a "natural" switch to socialism, then communism (an ultra-macro distribution phase, or the ultimate gamma risk).

For capitalists, preventing the natural consolidation of markets and the accumulation of wealth and power is a moral hazard. For communists, preventing the natural consolidation of wealth and power is also considered a moral hazard. Both regard the accumulation of power to result in the best practice of distribution on command.

The declining rate of profit is a trend reversed by distribution. That keeps the cycle dynamic and unpredictable on command, and since the declining rate is caused by the accumulation (the source of the power to command), a distribution MUST occur, which suggests a "natural," ontological tendency.

Looking for that ontological tendency, the short-wave analyst is more likely to identify the secular bull indicator before anyone else. Big, consolidated entities know when the bull market is long on the ticker because they are commanding it. Everyone else has to predict when that will be, and probably will before it is in command.

When the gamma risk is so high that deconsolidation of the capital is considered to be a solution to the declining rate of profits (remember that the rate is declining because the ability to pay it has been consolidated), the probability of a long-term distribution is virtually 100 percent.

Problem-Solution: Health Care Reform

Health care reformers advocating the public option have stated the problem this way: health care is a right and not a privilege.

Empirically, it is necessary to clearly identify the hypothesis to be tested.

Is health care being "a right and not a privilege" a testable hypothesis?

Of course not. That is largely why the problem, and the solution, tends to be framed in a political, qualitatively normative way.

To test the normative hypothesis, there has to be a way to measure the change.

If the problem is to make health care more affordable, and thus the measure of verification is how many people receive health care because they can afford it, the problem (the hypothesis) is strongly stated in a clearly verifiable way--financed from the consumer up, not the top down.

Alternatively, the problem is weakly stated as "a right and not a privilege" because the objective (the teleology of the argument) is to rig the price without really making it more affordable. How much wealth is accumulated and consolidated--the real measure of affordability-- is not the hypothesis to be tested. Consolidation of wealth and power then has the moral--the normative--force, or strength, of the argument. The cause of the problem is falsely confirmed to be the right thing to do by a process of validation.

Taxing the value added to health care and returning the revenue to fund a free and unconsolidated marketplace is the testable solution. Not only may health care be affordably provided, but free of political (gamma risk) manipulation verified from the bottom up. It is something that can be clearly measured or verified with a strong immunity to the anachronism of pure rhetorical artifice.

The normative argument "right and not privilege" can be rendered a verifiable hypothesis from the bottom up. A person participates with the full capacity for an exchange of value: with the disinflationary capacity to demand or not demand rather than just the aggregate inflationary pressure, and the deflationary consequence, of a massively monetized insurance policy.

Monetizing in the aggregate from the top down, rathering than empowering the consumer, serves to ensure providers get rich enough to retire at fifty, causing a shortage of doctors instead of creating the incentive to add supply in a profitable market.

Rendering the normative argument a verifiable hypothesis from the bottom up provides an effective means of controlling costs instead of consolidating wealth and causing the crises that deprives affordability of goods and services. Deprivation in the name of natural right over privilege is a ruse of days gone by.

Empirics is the order of the day, not the same old rhetorical tricks of the normative trade. Just like when the monarch claimed to be the absolute arbitor of what is righteous and good, favoring the republican form of government over real and directly verifiable democratic solutions to our problems is an anachronism.

The elitist model, with clearly verifiable deprivational qualities, is clearly passe'. The absolute is obsolete when reform is in demand.

The organizational typology is the strong predictor of the probable outcome, not partisan rhetoric and duopolistic schemas that innovatively reinvent the problem as the solution in the guise of the empirical process of continuous improvement.

To explain the necessity of centralizing the market in the name of reform (making health care a right and not a privilege), the medical profession is said to be over-specialized and too expensive. The result is a system of rationing that deprives the right to goods and services, rendering health care a class commodity--an emblem of status or privilege. Depriving people of what they need is categorically wrong.

While the normative sentiment is veritably agreeable, it is not verifiably rigorous considering that consolidation of power into the privilege of conferring it, rather than democratically sharing it, is the problem, not the solution.

The solution is not to confer the privilege, but to democratically ensure the right to freely participate in a way that maximizes a person's individual utility which, in turn, determines the profitability of the health care providers and insurers, not the other way around.

Did Sub-Prime Lending Cause the Liquidity Crisis?

Reviewing last year's events toward the precipitous liquidity crisis there is a tendency to identify the sub-prime lending market as the primary cause.

Sub-prime debt was securitized so that it all looked triple A in the aggregate, but that did not cause the crisis. The crisis was caused at the fundament: a lack of income to support the value of the debt instruments, thus called "sub prime."

Buying and selling the sub-prime debt was predicated on a theory of economic investment and growth that fails, or nulls, its hypothesis in every case.

Trickle-down economics always nulls its hypothesis. It accumulates and consolidates the value, the income, needed to cause the growth and distribution of income to pay the debt. Pretty simple!

Rejection of making permanent a public policy plagued with a continuously nulled hypothesis was definitely worth voting for in the last election cycle.

In retrospect it is time to confirm what the truth is by very simply rejecting what it clearly is not. This is a function of critique: testing the hypotheses of theoretical models, and this particular model of trickle-down economics has been thoroughly tested negative for the results it promises. It caused the sub-prime liquidity crisis because it does not work.

The solution is very easily, very simply, induced from the evidence: if you want to prevent liquidity crises, do not use trickle-down economics.

Making sub-prime loans did not cause the crisis. The accumulation of wealth to trickle down to pay the debt caused the crisis because "accumulation" and "trickle down" (distribution) are antithetical. Remove the contradiction--what conservatives say requires a secret knowledge to understand why it really works--and the problem is actually solved rather than continuously reinvented in the guise of empirical improvement.

It is no secret that the trickle-down hypothesis is continuously nulled.

Slow growth plagued the Bush administration despite record budget deficits that will continue well beyond its eight years. During that time, growth was most robust when tax policy favored the middle class. When those middle-class tax cuts expired, so did the more robust growth.

Growth--expanding the pie--supports the dollar and a "fundamentally" low interest rate. Instead, the rate was "technically" low to support the trickle-down theory with positive confirmation.

Of course, truth kicked out the front door just comes in the back.

The funds provided by the "technical" rate, instead of adding liquidity to be trickled down, were retained at the top. The funds remain there, in a steady state of accumulation, which is why the economy is on a slow slope to recovery.

The funds to support the trickle-down hypothesis (an extra-large buget deficit AND a low interest rate) were technically provided but used to finance the over-leveraging, and consolidation of the wealth, to a larger-than-usual crisis proportion.

(Hedge fund managers called the over-leveraging "the magnifier effect" which technically indicated the deviation from the normal distribution would not be a random event.)

All the indicators were technically there to prevent the magnitude and precipitousness of the crisis, but that does not allow for the gratitude the little people should have for the technical elits that saved us from the folly of their own devices.

The wealth, even with a record budget deficit, did not trickle down to cause growth. Instead, it accumulated and caused the most severe deflationary trend since The Great Depression.

More disturbing is that the crisis was so easily predictable, indicating how entrenched a lack of empirical methodology is for the development of public policy. It is like living in the Middle Ages when the earth was flat and at the center of the universe.

Even after the crisis and an election cycle with a clear mandate to make application of the truth permanent instead of the Bush tax cuts, we persist with a failed model of political economy that is methodologically no less akin to what Galileo faced with his observations.

Secular economic reality is the remaining legacy of the empirical heresy.

Limitations of the Data

The first thing any empirical analyst should learn is to identify the limitation of the data for predictive utility.

Recognizing the limits is not just for the data itself but also for the analytical modeling.

A mathematical model, for example, that allows for leveraging assests with little-to-no-risk because the "system" is "self-correcting" incurs a risk of ignorance of a monumental proportion.

The most recent example of invoking a pluralist legitimacy, and low risk, of the outcome through consolidated means very clearly demonstrates the moral hazard of trying to hard boil an egg with dry ice. It is "hard" alright, but not legitimately boiled.

The frozen liquidity of the easily predictable crisis of most recent record operated with a free-market (democratic) legitimacy through non-free-market (undemocratic) means. The crisis was inevitable and the correction (the recession) is anything but a beneficial exercise in empiricism (the philosophy of inductive, continuous improvement in which pure modeling has a continuously verified limitation).

If modeling the economy into crisis over and over again is not considered a mistake, then it is considered the intended outcome. The analyst is able to fully and accurately predict the outcome based on the public policy designed to manage the gamma risk.

A single-payer system for health care is a good example.

If government provides the pluralistic check to private-sector enterprise (the gamma risk), when government becomes the provider, or the payer, where is the check and balance? The "risk" to the pluralistic process is so high to warrant a clear demand, a confirmation, of pluralistic processes over singular (consolidated) forces of legitimacy.

The polarity has not just been reversed with a single-payer system because government is an entity of ultimate authority--it presents the "gamma" risk that cannot be avoided or checked.

Government should be there to ensure the plurality of the marketplace in priority, not absorb it to check the accumulated power of private sector entities. Solving the problem with the problem is an illusion suffered by the perfect abstractions of mathematical modeling intentionally masqueraded as the ontology of an empirical truth.

Risk Factors and the Short Wave

The increasing gamma risk should have affected the short wave indicators significantly.

Iran can very significantly disrupt the supply of oil by intimidation in the Persian Gulf region. The increasing gamma risk with a very high probability will keep fuel prices under support pressure. The support does not have to be anything but an aggravation and intimidation factor, and that will affect the short-term trend, keeping the economy in a deflationary tendency.

Deflationary risk in high probability supports a continued accumulation phase of the business cycle. The cash accumulated from cost reduction revenues (unemployment) will be used for mergers and acquisitions, providing some support for equities. The short-term trend will not reflect the gamma risk and will be susceptible to unexpected reversal of investor sentiment from the big market movers.

The geo-political gamma risk conveniently provides an excuse for continuing the accumulation phase of the business cycle while the government engages in expansionist, distribution-phase politics. The value being provided by government will be consolidated by the big financials engaged in activity that is emblematic of "too big to fail." That will increase the earnings of financials while depreciating the fundamental value of the distribution--economic growth, which supports the value of the dollar and reduces the incentive for gamma-risk support of oil prices.

The antinomy of inflationary/deflationary pressure creates havoc for short-wave analytics with the predictors being squarely determined by the big commanders of market movements. The big movers rely on the short-wave indicators to falsely signal a trend to be commanded in reversal, but with the good reason, the excuse, of the gamma risk.

Not including the gamma risk is a critical error that keeps small investors following rather than predicting probable trends. Rather than predicting sentiment, the indicators cause it. Keeping the accumulation phase of the cycle alive functions, then, as a means of consolidating the plurality of value that makes for free-market economics and "cures" the problem of "too big to fail."

The Gambler's Fallacy

When the Dow broke 8000, it was a question of why, which begs the question.

When things do not make good sense and there is the variable of human caprice involved, the question becomes, "why not?"

There is only one good reason for the Dow to retrace to nearly 10k and technically suggest a secular bull market without fundamental support: because the money was there to drive it.

The money available to drive equities into a technical-looking bull market is largely money consolidated by the recessionary (deflationary) trend. This is net worth literally lost and gained in zero-sum from a plurality of small investors (including the unemployed who invested their labor at a net loss) to a few big financial players.

(For the unemployed with a lot of debt and no savings, the negative equity was reversed positive with the sudden macro reversal into liquidity crisis. Their credit score is ruined, but that is largely a measure of insufficient income. It is a detriment suffered all along and is to be included in the total amount of money that was "irrationally?" leveraged into crisis.)

Leveraging into a bull market trend with recessionary tendencies is not an irrational exuberance (nor was the previous round of overleveraging into a general liquidity crisis). It is a rational, technically measured means to ends.

Small investors riding the current upward trend are gambling, and because the technicals call for a continued bullish trend, the sentiment is established for a likely buy after a dip. They are being set up for continued consolidation.

Sentiment can be made a function of technical indicators, assumed inherently rational and true, to produce an outcome that is deemed irrational--"surprisingly"exuberant, or emotional--in retrospect. It all seems so technically rational at the time the regression is unfolding.

The technicals are too easily manipulated to be reliable unless you are the manipulator, and that is a function of allowing consolidation of value to win over pluralism. For the plurality, investing becomes a game to be played rather than a vehicle for preservation of value and growth, and the game is rigged so that the house always wins.

Since the technical measures assume the probability to be a function of random variables, and the technique of manipulation--of surprises--fits the property of random reversals, it would seem the technical indicators would be the only way to go. That plays right into the manipulator's game.

The tendency to rely on the law of averages is very strong because the short direction of the trend is largely dependant on how the retail investor is positioned. If the big players cannot manipulate the trend and the technicals that indicate it, then they will not play the game and "risk" a deconsolidation of the capital. The empowering determinant that wins the game would be at risk. (The outcome, keep in mind, cannot legitimately be considered winning if it is rigged, so rigging the market entails a legal liability--a gamma risk that must be politically managed).

For the technical analyst in a constant bemusement of unindicated reversals, or surprises, in a consolidated (unpluralistic) market in which the fundamentals do not much matter, the law of averages is a reliable constant of last resort. The market is "due for a correction" defines the gambler's fallacy. It is not a matter of if, but when, and the long wave is the most reliable technical indicator to avoid the allure of the fallacy.

Analytically, the best technical indicator is to recognize that it is not a free market. Reversals are easily induced from the consolidation of capital.

The different assessments offered by different members of the Federal Reserve board recently indicates why the short-wave technicals are unreliable.

The non-fundamental bull market will be reliably reversed in the longer trend with a re-inflated dollar which, while improving the macro fundamentals, will cause a reversal in equities because it is being driven with money not being borrowed for economic growth, but the accumulation of the capital.

The distribution phase of the long trend will force interest rates up, causing a fundamental reversal (correction) of equities prices, and the law of averages will be at that time the reliable constant.

The surprising reversals that consolidate value, both micro and macro, are the result of deceptive practices that the concentration of value makes possible. The correction is the emergence of the truth. Thus, we have the saying, "the technicals do not lie."

Technical corrections do more than suggest the truth in a retrospective regression. It projects the future and a responsibility of knowing what the proper course of action is.

The technical analyst has a responsibility that goes well beyond individual profit. The reversal of fortune that causes massive unemployment and untold suffering is the resonsibility of the knowing to prevent, not to just predict and capitalize on.

The Re-Inflation Dollar and Short-Wave Analysis

Independent investors often see a direct relationship drawn between the value of the dollar and commodity prices, like oil.

Currencies are akin to a commodity, providing a safe haven for preservation of value that, for a concentrated capital, is mostly an evasion of the gamma risk.

Evasion of gamma risk is not a reflection of fundamental value--it does not measure a causal relationship between the dollar's value and the price of commodities, for example. What it does measure is the determining effect of capital consolidation in the current economy.

A few analysts in popular media do have occasion to recognize that the relationship between the dollar and commodities is not a fundament of value (not money seeking the best value, but the value is caused by seeking it). The value is an effect, meaning that the value is affected by the movement of the capital alone and not a reflection of a fundamental investment that effects economic growth and economic recovery. In other words, the value of the currency and commodities presents significant false indicators for the manipulation of prices and, therefore, the predictive capacity of technical trend analyses.

For short-wave analysts, the fundamental attribution error can be a critical failure. The latter part of the accumulation phase of the business cycle is where short-wave analysis tends to false indicators because the causal determinants are a function of a long-term over-accumulation that results in a short-term arbitrary valuation of risk that can be the dollar today, gold tomorrow, and oil the next. It appears as randomness, but it is not. Running short regressions to induce the evidence of a trend is just an exercise in randomness unless, of course, you are controlling, commanding, the capital that causes the trend.

Analysts generally agree that the technical indicators lose predictive capacity in the kind of economic, and political, environment we have now with volatile beta (mergers and acquisitions, for example), and gamma (possible policy alternative), risks.

The macro modeling indicates the probable short-term trends.

The re-inflation dollar is highly probable to minimize the gamma risk to the consolidation of the capital. Treasury secretary, Geithner said today, for example, that time should not be allowed to lure the system into a false sense of security.

The re-inflation dollar will buy the time to minimize the gamma risk to the high systemic risk/reward still in place. With interest rates to remain below 1 percent for an extended period, according to Bernanke today, not only will the dollar be poised for pro-growth to assist demand for goods and services but for the overleveraging that causes demand reduction (unemployment). It is the formula for stagflating into the next liquidity crisis and forgetting about the high systemic risk/reward that causes it.

Keynesian expansion of the economy out of the recessionary (demand deflation: unemployment) trend will inflate the value of the dollar. The re-inflation will fuel the "happy days are here again" sentiment that Geithner is warning us about (and that is a good piece of public service that speaks truth to power...I wonder how long he will be able to keep his job if he keeps doing that).

The re-inflation dollar will be the counter-measure for not allowing the high risk/reward ratio of the embedded systemic risk to be correlated with the high unemployment measure. Rather, the high risk ratio will be argued the cause of the "growth" that will not be growth at all, but simply a retrace of the cycle; the argument will be a material misrepresentation--a fraud--that is endemic to the corporate (bureaucratic) organization and management of the economy.

The short-wave analytic will be conflicted with the inflationary and deflationary tendencies working together. The dollar inflates and seeks value in commodities which will deflate demand by increasing costs. The economy is essentially right back where it started supporting the deflationary trend and a high risk/reward benefit that is largely financed with a high unemployment number (demand reduction that supports a low interest rate).

Rigging the market for a low interest rate keeps financials profitable despite the overleveraging that causes demand reduction with slow growth investment. Thus, profitability without employment...it is capitalist heaven!

Utopian plutocracy is with a false free-market legitimacy, however. It is a dystopic risk (the gamma risk) that runs ever higher. It is an accumualtion of risk that plutocrats must continuously manage politically in the name of what a free-market economic system would otherwise legitimately provide: The General Welfare.

Who is Buying the Dip?

Any analyst that sees the Dow at 11000 anticipates professionals moving funds out of commodities into equities. The retrace in commodities will give equities a fundamental support because it supports economic recovery over the deflationary trend.

The mass movement of this wholesale capital is short term, however. It creates a sucker's market at the retail level, then it will be time to massively move back into commodities and support the deflationary trend.

Key to predicting the trend and the timing is who owns what when.

Who is buying the dip is critical to predicting the movement of mass capital (capital that is consolidated into "too big to fail" and thus becomes the predictor of a trend's direction and timing).

For the professional, the retail money is whatever is added to the pot. The retail money is easily indicated and signals a buy or sell reversal to consolidate that money.

Predicting rather than following the trend is a winner for the small, independent investor and also indicates the efficiency of democratic, demand economics.

A free market system is not the consolidation we have now, and that concentration of power and wealth is falsely attributed to free market mechanics to justify the inequitable, and destabilizing, outcome.

The instability we have now, whether banking, energy, health care, is attributable to the lack of a free-market mechanics in operation. The proponents of consolidation argue the value of minimizing risk when, empirically, the risk was systemically maximized. Technically correcting for the high risk probability of 100 percent required a $15 trillion government investment to "save" the system the way it is; that is, supporting the risk into the future and clearly indicating the long-term trend.

Who is buying the dip? The question begs to ask, who is in control? Without ensuring a democratic plurality in the marketplace, the economy fails the free market legitimacy. The failure is empirically indicated by the cost (benefit) figure of controlling the externalities, the largest of which is the systemic risk, and the most beneficial dimension of incurring that risk to the consolidation of the capital is high unemployment.

What would trillions of dollars to directly bail out the millions of unemployed rather than assist the consolidation of the financial sector do for economic recovery? The reason it does not happen that way is not because it MUST come down from on high, but because unemployment provides for the consolidation of the wealth. This is where the accumulation is paid for and, subsequently, the employed pay for the distribution--the cost of the recovery--as well.

Wages and salaries finance the retrace of the macro cycle (the crises) of accumulation and distribution that consolidates the wealth, and political power. The People finance, empower, the secular gods who decree "the way things are," or the natural order of things, from on high with the force and legitimacy of public authority. Questioning that authority is tantamount to a secular heresy worthy of a popular inquisition of fundamental values in which righteousness is decidedly conservative.

Just because the benefit, the payoff, of the risk taken is not analytically recognized to be connected in a causal relationship does not absolve the analyst, or society, from the truth. The truth persists in spite of its perception and a false sense of pluralism will assuredly, empirically, result in crises.

Identifying the trend is everything to do with recognition of the truth. Who is buying the dip and supporting the bullish trend in equities? If it is a consolidated capital looking to further consolidate the wealth, it is not a bullish trend at all but an extension of the accumulation phase of the business cycle.

Small, technically shrewd investors that have avoided consolidation of net worth, the time is nigh. False technical indicators will be the small investors' undoing unless they are willing to recognize that pluralism, not consolidation, ensures the profit of their long-lived prosperity and the production of wealth.

The Tobin Tax

Discussion of the Tobin tax gets little discussion in U.S. pop media because, first of all, pop media outlets are controlled by a consolidated capital which proponents of the tax argue needs to be controlled.

The tax has a progressive, proportional quality because it is targeted at high finance. However, the tax also has a regressive quality because many income classes do engage in the transactions the Tobin levy proposes to tax in order to control the perils of speculative demand (the classic peril of causing liquidity crises and a deflationary trend that consolidates the capital and benefits the primary "class" of the tax's target--those who largely own the capital and apply the peril/benefit).

The tax will not solve the cause of the problem. The income necessary to demand the markets remains consolidated to command it. It is just another Keynesian-like symptomatic treatment. The revenue will be used to fund the welfare state, empowering the bureaucratic model and the elitist technocrats that run it for the power elite in the name of democracy.

The income policy necessary to actually solve the problem of algorythmic, recurrent liquidity crisis is a purely progressive tax: the higher the income, whatever the source, the higher the tax. The retributed revenue puts the "demand" back in the market quickly and easily, defeating the classic benefit of the deflationary trend to keep the capital, and power, consolidated.

The Tobin tax will be falsely sold as a progressive tax measure to falsely satisfy the need, the demand, for that measure. The tax is only "progressive" because it conforms to policies and programs of the progressive era of politics.

The progressive era represents the emergence of a new middle class of elits that aspire to the ruling class, legislating all manner of limits to liberty and raising huge tax revenues that supports their sense of an upper-class status. This cohort largely disguises themselves as "liberals."

The liberal description of progressivism is false. It is an endeavor to tyrannize society with the always-better-judgement of elite authority. It is a tendency that is inimical to a free and civil society and gives credence to the consolidation of wealth and power. It is the problem, not the solution.

"Resolving" the Crisis

Popular media outlets report that the experts agree the recession is over.

Both the Federal Reserve and the Treasury refer to their role in facilitating the recovery and preventing the double dip as "resolving" the causal determinants of the crisis.

To ensure the recovery is "V" shaped, the Fed and Treasury are assuring investors that the gamma risk will be surely applied. The organizational model of "too big to fail" will be resolved (deconsolidated) to prevent a "W" shaped recovery.

Acknowledging that a deconsolidation must occur to prevent stagflating into the next crisis (the "W" shape of the regression) is a significant reversal of policy (gamma risk) sentiment. The reversal will regain the confidence lost in financial markets that precipitated a perilous liquidity crisis, but will it prevent the same organized consolidation of capital that caused it?

A deconsolidation is a necessary condition for ensuring a free-market plurality of the system in which the consumer has sufficient income to demand the market over the ability of producers to command it.

A system that ensures more demand or more command is where the organized practical model is actually macro "resolved."

In the 1990's when employment was high enough for many employees to have enough control in the marketplace to make demands, neo-conservatives were motivated to revenge the classical model and re-establish a command and control. The revanche was validated by judicial review and ironically declared public policy by popular consent in the 2000 election.

The Clinton administration's more progressive tax burden allowed for a more substantial distribution on the accumulation than conservatives cared for, but his administration also allowed for the consolidation of financial entities that led to the worst liquidity crisis since the Great Depression.

On a macro scale, the political-economy is organized neo-conservatively, and this "jobless recovery" indicates just exactly what is actually being "resolved."

Allowing financials to consolidate increased the gamma risk, and political economists that identified the risk were told by both parties they were fringe-radical ideologues that did not know what they were talking about. That neo-conservative critique persists despite the acknowledgment that "too big to fail" may need to be "resolved."

The ambivalence suggests a probability: enough deconsolidation to pluralize the system into more of a demand economy is highly improbable, and resolving the system to maintain the classical model (reducing demand through unemployment) by neo-conservative means (Keynesian economics) is being ensured in priority.

The up-tick in net worth as assets appreciate with the gaining confidence in the stability of markets is more than offset by gaining unemployment. It is a deliberate and measured "resolution." It is the empiric that spites the revanchist rhetoric.

We should fully acknowledge the empirical resolve that transforms ideology from the subordination of belief into the freedom to gain the truth in which to truly profit.

The "New Normal"

Treasury secretary, Geithner describes the "new normal" of the business environment after last year's liquidity crisis to indicate where we go from here. The implication is that the well-trodden path is to somehow be different.

With unemployment continuing to rise, more foreclosures in the offing, and continued consolidation of net worth, the "new normal" is the old Keynesian reinvention of the old classical model and dynamics of capitalism. Nor is the global economy anything all that new.

The type of modeling predicts future trends.

Capital, industries and markets will continue to consolidate into the business model of "too big to fail" which bodes well for earnings and explains the steep rise in equities despite the prospect for economic recovery being very bleak by the same measure.

It used to be, classically, that earnings will not improve unless there is a distribution on the accumulation, causing employment. The gamma risk was virtually non-existent. Now, however, neo-classically, the money supply is maintained to allow for profits to lead employment (refered to as "capital formation") in a stagflationary trend. It is largely the result of managing a burgeoning gamma risk that is the "demand" for government action, substituting for the lack of demand (a deflationary accumulation) in the marketplace.

Geithner is indicating that, despite the rhetoric for a high gamma risk, the classic macro model will be the predictor for micro trends.

Since the classic model calls for continued accumulation, a double dip is highly probable. The gain in equities will retrace by at least half.

A macro distribution will not occur and pull the economy out of recession until commodities reflect the fundamentals with another sharp dip that will sustain a disinflationary trend and bring the consumer's dollar back in to support a secular, macro recovery instead of supporting the accumulation phase of a classic cycle.

What is new, or neo-classical, is the size of the money supply. It is so large that its consolidation allows just a few large entities (too big to fail) to manipulate, if not command, critical global markets, like energy, and cause the length and breadth of trends (and if you can cause it, you can certainly predict it).

M&A activity will increase in the second dip, indicating the end of the accumulation phase of the business cycle and a secular bull market to give the mergers and acquisitions value.

When the retributive value on so much value accumulated gets so high that the gamma risk becomes critical to profitability, commodities will lose support and a macro distribution will occur. Maintenance of the organizational model, and the big earnings, of being too big to fail gets support. The support will be the "ethic" of the marketplace despite Geithner's call for a "new business ethic" to guide us forward.

Ethics is mere rhetorical legitimacy if the economy is organized for command manipulation. The ethical reality, the legitimacy, is just whatever the outcome is (a false ontological legitimacy of the ends justifies the means as opposed to a true free-market ontology in which the means justifies the ends). The outcome is mitigated by rhetorical artifice and lengthy political processes resulting in apathy and anomie, reducing the gamma risk without reducing the retributive, economic value, which would defeat the value--the purpose--of the practical (predictive) dynamic model.

A distribution phase that reduces the gamma without retributing the value puts tension in the system to be managed. The result will be stagflation into the next crisis as the Fed and Treasury manipulate the neo-classical, Keynesian money supply to accommodate (resolve) low inflation and high employment within a deflationary (accumulative) organizational model of too big to fail.

What ultimately fails, and is resolved, is employment, accumulating the retributive value, strengthening support for the gamma risk, bringing the preferred organizational model into question. The risk is not likely for at least the next four years, and the market trends will be very similar to the last four. Hardly a "new" normal, just new gamma-risk rhetoric to support the norm.

Market Demand and Collective Action

A dynamic logic occurs when market participants seek to control costs.

Mancur Olson describes "The Logic of Collective Action." When, for example, the cost of health care becomes unaffordable, due to inelasticity, and incomes are accumulated into the hands of the providers, the reduction of demand (the ability to pay) logically prompts providers to seek another source of income to achieve the moral imperative of providing health care for everyone. The imperative is categorical (universal) because the demand (the need) is relatively inelastic.

President Obama, acting on that categorical, moral imperative is set to provide universal insurance coverage (thus demonizing insurers) while providers of care are seeking to source the funds that increase the ability to pay without redistributing the accumulated income (the retributive value). That source is government, providing in the name of the moral imperative.

Objecting to this system of finance is characterized as being anti-imperative (illogical), despite that it perpetuates what is wrong with it--burgeoning costs--which is the call for the reform. The public very clearly detects the "illogic" of this action being made in the spirit of collective action toward the public good.

Offering the problem as the solution is illogical in spite of the logical imperative of providing liquidity (the ability to pay in the form of government mandate and public finance) as soon as possible.

While the "public option" may be a point of departure for actually achieving the distribution of income necessary for health care to be universally affordable, the very striking lack of measure to control the cost suggests a willingness to design policy that keeps the income in a mode of continued consolidation that does not fit the imperative.

The consumer's imperative is to control the cost; $900 billion to start does not exactly fit the imperative.

The consumer's logic is to co-op, or organize, to collectively bargain to trust bust the power of the AMA. A doctor or hospital will have to disclose prices and be subjected to a free-market legitimacy to be economically successful, as opposed to the government being co-opted to pay undisclosed prices on command, if not now, sometime in the future (perhaps after everyone goes to the public option--the Wal Mart model of doing business).

The logic of collective action to counter organized monopolistic entities, like the AMA, for a fair and equitable price is a market mechanism concommittant with the "freedom" to act. The public option defies this logic. Once the option makes collective economic sense, the incentive to merge it with the provider to command, and collect, the price that caused the option will be overwhelming.

The probability the public option will not be corrupted is very low. The logic will then be to pluralize the system for a more direct and easily verifiable democracy to control the cost. The demand, without any encumberances to the logic of this action, will then be for a free-market system.

No Demand for the Moral Imperative

Forty-six million Americans are currently without health care insurance. They do not have the income to demand it, yet the cost continues to rise in a deflationary trend. Just exactly how is that?

The SCHIP, for example, provided funds for price increases. It pulls up the cost without providing the income necessary to demand the cost come down. Rather, the tax funding provides for unconditional payment of the price; that is, without any demands. The income that is being provided is to command the price up, and that distribution deprives the income necessary to demand the price come down.

A market demand of 46 million is surely enough to demand the price come down if they have the income to demand it. Government providing the income by tax and subsidy does not, very clearly, demand the cost control needed to reform the system.

Paying the price on command is being masqueraded as a moral imperative.

Every American deserves health care, and every American deserves the income necessary to demand it at a an affordable price determined by the logic of collective action in a free and unconsolidated, competitive marketplace.

Ensuring a free-market mechanism in priority includes the pricing and organized practices of health care professionals and the AMA, as well as insurers. That will be the reform that both controls costs and satisfies the moral imperative.

Healthcare: Innovation or Reform?

In a free-market system, rising costs demands innovation, reversing the trend of declining incomes, minimizing the probable effect of liquidity crisis.

In a non-free-market system, the consolidation of liquidity is added on command (Keynesian economics). The declining income, consolidated by the rising cost, is leveraged with a budget deficit, spread out over time, to be paid by the tax burden, maintaining the command price and the increasing cost.

The proposed reform is really an innovation to maintain the rising cost (and the illiquid distribution of income) without depriving the population of healthcare, which has a relatively inelastic demand (we need to have enough health to serve up the consolidated wealth and demonstrate power, as well as verify the noble beneficence of its accumulation).

The lack of elasticity is reasoned to be the cause of the persistently rising cost. The free market is reasoned to be an ineffective means of controlling the cost, otherwise it would, which begs the question.

What is to be reformed is this: a professional class and a business sector increases the cost, the government pays whatever is commanded, and the taxpayer with the highest tax burden, after all the exemptions and deductions, pays most the cost. The result, of course, is liquidity crisis, and a persistently overleveraged system.

The innovation occurring here, government-provided healthcare, is the means of maintaining the rising cost. It is a reinvention of the problem offered as the solution; just exactly what Obama supporters "hoped" would be pragmatically passe'.

The first thing the Obama administration and the Democratic delegation did was pass a regressive tax burden to finance expansion of healthcare insurance (SCHIP). It is a not-too-bright deflationary tax policy in the midst of recession, supporting illiquidity. That support is likely to continue. The current congress and administration simply does not have the will, or the understanding, to deter, but to innovatively abet, rising costs.

Mandating Healthcare Insurance

Don't be fooled by the drop in the health insurance sector.

I can see it coming. We're headed for a mandate. Both doctors and insurance companies are going to be able to command a person's income into oblivion on something you have to have. The inelasticity of demand will be chiseled in stone.

Let's say you go to Barf Burger and order a super-size infarction burger. "That'l be $2.50."

"$2.50! What do you mean. This thing is gonna kill me and you want me to pay too much for it too!"

Not buying the burger is to "demand" the price be lower.

Mandating is a way to rig, or command, the price; exactly what healthcare does not need if we are to control the cost.

Demand is more than what pulls the price up. It can also pull it down, but we are not apt to discuss that because it is disinflationary--it maximizes the ability to demand the price and minimizes the ability to command it.

Organizing for demand economics maximizes the consumer's income and minimizes the probability, if not the severity, of liquidity crises. Organizing for command maximizes accumulation and concentration of income and always causes liquidity crises.

Which should we choose to organize for in priority, choice or mandate?

Let's say the price of an infarction burger is disinflated or "demanded" lower. The cost of healthcare is included in the lower price. If buying two instead of one kills you twice as fast, the demand is rendered more elastic.

Dictating, or mandating, the marketplace is just a bad idea.

The choice here is whether we all have freedom or allow the means for a few want-to-be tyrants to accumulate the wealth and power to dictate it.

Income and Capital Formation: Paying for Healthcare

The call for healthcare reform is a call for choice and affordability, and the objection to the proposed reform is the lack of it.

Americans are not clueless. Once healthcare is in the sector of public authority, where choice is "subjected" to the force and legitimacy of that authority, the supremacy of choice (democracy) is subordinated.

Voting with dollars in the marketplace is a direct and immediate democracy with direct and immediate authority that is directly and immediately verifiable. The choice is not "subjected" but objectively applied to fit the liberal taste and preferences of the individual. That is called freedom. That's why we want it!

The proposed consolidation to make healthcare universally accessible because it is fundamental to human existence is in fact a declaration that liberty and freedom must be diminished to attain the greatest good.

Soundly rejected!

The consumer knows that public sector consolidation of the system is as much to conserve the accumulation of wealth that makes healthcare unaffordable as to universally provide it.

Whether public, private, or public and private, organized consolidation rigs the price and concentrates income, which is argued to be the efficiency of capital formation for investment.

Does the cure for rising costs have to be the formation of concentrated capital (demand reduction)? We certainly have plenty of that (recession).

Controlling costs is a demand-side factor as well as a supply-side factor.

Cost control also comes in the form of ensuring adequate distribution of income (dollar votes) in order to demand it.

Public policy is needed that ensures adequacy of income to participate in the marketplace, not a system that ensures an accumulation of that income in the name of an efficient capital formation.

Consolidation of wealth and power is not a necessary condition for provision of the public good.

The current administration and congress seems to prefer, however, ensuring financial adequacy from the top down, a system that has failed "We The People," preventing the full and stable operation of democratic economic means, for over 200 years.

Conservatives argue that ensuring consolidation of wealth and power (low-to-no taxation for the wealthy--the regressive tax burden of the Hamiltonian model) is the stability we all want and need.

Is it?

If a lack of income prices Americans out of the healthcare market, how does ensuring the lack of income price them in?

The income that has been accumulated needs to be distributed to allow for participation in the marketplace. That will provide the demand that not only pushes the price up, but can be applied to "demand" the price come down.

Where healthcare does not rely on public finance in which the industry is paid whatever price it commands, consumers are more able to demand what is considered a fair price if they have the dollar votes to demand it.

In order for the healthcare industry to increase its income, it will be necessary to lower the price and allow for maximum participation (completely different from the budget-busting public option of assuring the highest participation at the highest possible price).

Even in the case of a life-saving medical procedure (a relatively inelastic demand), being held hostage to the price is a function of spreading the risk which, again, is mitigated by exposure to the ability to demand affordable insurance premiums to spread that risk.

A lower price increases income. Increased income increases the capacity to participate, and the need for more providers (employment and a share of the income), which spreads the risk to demand an affordable price (on a limited supply of available funds) rather than just paying what a limited number of providers command (on an unlimited supply of public funds).

A budget deficit to finance whatever the provider commands concentrates an accumulation of wealth. The redistribution of income reduces the amount of money available to spread the risk and demand the price without progressive taxation.

We are being told the free-market model of "demand" economics is impossible. It is a rhetoric applied to rig the price--to command the price rather than demand it.

What is impossible is to continue allowing for an overaccumulation of income if we want a healthy economy, and affordable healthcare.

Energy Markets: Gauging the Risk

Let's say you are a prince sitting on a giant pool of oil marketed by cartel. The accumulation of capital that resulted from manipulation of the commodity into an inflated, non-free-market price has deflated the demand, which also "puts" deflationary pressure on the price. What are you going to do to support the price and hedge the risk against the rate of subsitution?

The prince sees a whipsaw in the making: high prices, largely the result of speculative demand of a consolidated capital (the great recession), are reducing the fundamental demand with a concommittant deflationary trend that will not be fundamentally reversed without a deconsolidation of the capital--not likely to happen--and support of the rate of substitution at the same time.

The prince's predicament, the result of a non-free-market organizational technology, is the result of incurring (creating) a gamma risk.

The risk to be managed is rendered political. It is not the alpha and beta risk that occurs with the organization of economic fundamentals in a free-market system.

Organizing to command the price has externalities to be managed politically, so the prince is likely to say... political policies designed to support the long-term rate of substitution (despite the deflationary pressure on the price) is inimical to the short-term self-interest of consumers because it hacks me off.

The threat here, of course, is purely political (organizational), and the risk to both consumers and producers is gamma.

Ironically, the prince makes the case for organizing a free-market economy, and ensuring it, in priority, obviating the probability for gamma-risk distortions that make markets fundamentally unpredictable, resulting in maximum probability for conflict resolution instead of the peaceful, stabilizing process of a free-market legitimacy.

(more at griffithlighton.blogspot.com)

The gamma risk demands management of equal measure. (The type of risk-management is "demanded," as opposed to commanded, because there is still a "choice" that can be made.)

The cartel can be dismantled to operate without gamma risk (free market economics), but that requires a deconsolidation of the capital and giving up the ability to command the price despite economic fundamentals.

Since being in command not only controls the determinants of the fundamentals, but also makes you lots of money by command (by hedging, or magnifying the profit margin) within speculative, derivative markets, the detriment of organized deconsolidation would be equally magnified.

The only choice is to maintain the gamma risk. The alternative is to effectively pluralize the system and allow the price to increase on the fundamental demand (not on command). The rate of substitution (and the profit margin) will "freely" emerge as a measure of fundamental economic reality, not the unpredictable trends of arbitrary command and control that consolidates the capital into the hands of a few players that predict the trends, and profit, by causing them.

There is no better way to effectively gauge the risk to you if you are organized to cause it and, thereby, effectively manage it.

Organizing to Control Costs: Healthcare and Energy Markets

The tendency to organize into horizontally and vertically integrated, monopolistic entities to distort valuations into the realm of the irrational was strongly argued against and identified as inimical to free markets by Adam Smith, founder of classical economic theory.

Smith argues that organizing into ever larger entities consolidates power in the marketplace and creates false indicators (the irrationality). Smith's solution is to be sure capital, industry and markets are deconsolidated. The profit margin is then a more accurate measure of future expectation (the trend) that is less likely to become a failed expectation and a sudden shock (the crisis) that further consolidates the wealth and power (systemic risk management).

According to Adam Smith, it is the job of government in priority to ensure the marketplace is free and unconsolidated. That, according to his theory, will effectively manage the systemic risk we are now grappling with. The government, then, according to classical theory, is in the business of creating jobs and wealth by ensuring it in priority despite the rhetoric of neo-conservative propagandists.

Notice that there is little to no evidence of government operating to apply Smith's prescription of deconsolidation.

Healthcare relies on the "public option." Energy relies on the regulation of derivative markets, like futures, which will innovate to avoid the gamma risk. Both elicit the need for progressive taxation to keep capital from the overaccumaltion that causes a deflationary trend with inflationary, monetarist counter-measures (stagflation).

The "need" for the progressive tax is obviated by organizing for a free-market system in priority. The need for a more progressive tax code is an accurate measure of extant free-market (democratic-economic) modality: the more the economy is organized for free-market mechanics, the less need for progressive taxation to technically correct for over-accumulation (liquidity crisis, or the systemic risk).

Government has operated largely to encourage and protect the organization of consolidated entities to the point of absurdity, irrationality, we have now: economic entities that are too big to fail and paying outrageous bonuses to business elits that have clearly managed the system into what is considered an illegitimate failure by the vast majority of Americans.

(The ultimate ignominy is to pay the devil a bonus for making you miserable! Is that the ultimate con game or what? The con is systematically organized to convert and consolidate value without legal liability. The liability is purely political. It is the gamma risk with a retributive, economic value.)

Current econmic policy clearly indicates a strong tendency to support state capitalism--a command economy with private consolidation of the wealth bureaucratically managed to protect the interests of the wealthy elite in "the public interest." Just enough pluralism is allowed, like a "public option," to give the consolidation of power a popular legitimacy.

The pluralistic legitimacy is really false. It is a Hamiltonian trick that keeps being reapplied in the name of democracy and self-determination.

Despite the freedom to pursue success and fully enjoy its reward without taxation, according to the conservative argument, the accumulation of wealth and power is nevertheless endowed. It is a legitimately necessary condition endowed by the god in which We all trust. The outcome is ontological--it just "naturally" happens. Thus we have the conservative concept of the Rights of Man: the utilitarian free pursuit of happiness with a naturally endowed outcome that if technically corrected for is contrary to the natural order of things.

Any attempt to correct for the accumulation of power and wealth that causes crises is considered to be an unnatural tyranny imposed on the natural order of things. That, according to the conservative argument, is the cause of perennial, systemic crises, like the deflationary trend we are experiencing now.

Not allowing for the naturally endowed tyranny of those with the secret, elite knowledge (the noble character to rule which, as far as I can tell, is merely the capacity to be corrupt and self-seeking in the name of the public interest) is an unnatural tyranny that causes crises. It is a self-fulfilled, teleological argument masqueraded as an ontology. It is a lie, a polemic, a lawyers trick, a sanctimonious, self-serving profanity that keeps the wealth, and power, legally consolidated as an act of God. Deconsolidation, then, is considered not only illegal, but a constitutional deprivation of the Rights of Man that is fundamentally evil.

Yes, deprivation of the Rights of Man is fundamentally bad. It results in crises and all manner of humanity's inhumanity to itself. It is an illogical, irrational, condition. It is an irrationality that mirrors the Hamiltonian ontological argument.

The Hamiltonian ontology is nothing but sophistry, later in history embraced as a moral ontology (an objective, untranscendable truth to be scientifically acknowledged) "beyond good and evil," as Nietzche described it.

The power elite is fallaciuosly argued to be a breed beyond the masses with a secret knowledge that is the public good...the general welfare. Why does Goldman Sachs give exclusive information, "tips," to its most privileged clients? (Recognize that the word "privilege" is a combination of the words private and legal).

The masses can never know, then, what the public good is because...it's a secret! It is entirely antithetical to a popular (pluralistic) legitimacy. The contradiction is not reconcilable, but historically it is ontologically played out in the natural order of things in which the truth naturally prevails over the lies.

The need for a progressive tax code to correct for an over-accumulation is considered by conservatives to be inimical to the public's best interest. It is therefore necessary to hide the wealth with innovative investment vehicles that are only accessible by the wealthiest clients (the consolidated capital).

The consolidated capital cannot be progressively taxed to correct for the over-accumulation if it is hidden. It's a secret. Can't tax what you can't see. All in the public interest.

It is then up to the Ben Bernankes of the world to save us all from the ontology of ourselves; from the mindless consolidation of power beyond good and evil, armed with the philosophy that conserving, rather than preventing, what is too big to fail will "reliably" effect the crises. If the effect is predictable, the risk can be "effectively" managed and predictably trended, which is what Keynesian economics does.

If the element of uncertainty is eliminated, the systemic risk can be effectively managed to keep the patient alive while we ontologically play out the proper diagnoses.

Rather than deconsolidation, government operates to regulate and technically correct for the lack of free-market mechanics (collective, direct democratic legitimacy).

The technical corrections (the gamma risk) plagues small investor analysts with a complexity that suckers them into following trends rather than predicting them. It is a furtive, systemic racketeering (yielding a privileged--a legally secret or private--benefit) that, as small investors found out, will result in reduction (consolidation) of net worth that supports a long deflationary trend, like we have now.

Until the means of deconsolidation is applied--a progressive tax code and reinvestment to pluralize consolidated markets and entities--small investors must always be on the defensive. They must protect themselves from trends commanded and controlled by entities too large to fail by applying an effective counter-tyranny in the marketplace.

Always being opposite the big money momentum (predicting the trend) is essential for capital preservation (to keep assets from being consolidated). It is a lesson to well be learned by the Obama administration and the current congressional delegation as we watch the stimulus money being consolidated into paying state debt and overpriced medicare bills, but that its leadership is unwilling to learn, much less apply. Changing that would be change we really need.

It is important to understand that, for example, what the Obama administration is recognizing as a necessary command and control of the futures markets by regulating the purpose of its participation is to control the ability to command the deflationary trend. Understand that both the problem and the solution are the same thing--command and control, not free-market economics.

At the same time, understand that the objection to the proposed action by the CFTC to remove the buyers (the speculators) dark marketeers say is needed to make futures markets operate with optimal efficiency to hedge the risk is not in any way supported by the evidence.

Physical users of the futures markets are penalized by the mass movement of private equity and hedge funds into futures contracts, driving up their costs and deflating the economy--the consequence (the trend) in command, and "the risk" to be controlled in "the public interest" (We, the ignorant mass of The People, can't be sure what that is, of course, because it's secret, privileged, knowledge).

We cannot legitimately measure the success of managing the risk by the depreciation or appreciation of income because it all happens by the secret knowledge of elite authority. All we supposedly know is challenging that elite authority, like allegorically realizing what causes the shadows on the cave wall, is inimical to our self, the public, interest.

Medical professionals, for example, have the esoteric knowledge of what drives the unlimited cost of healthcare. Talking about what a particular medical procedure costs is an uncivil questioning of authority (questioning the legitimacy of commanding the price).

Demanding the price is considered by the elite to be an ignorant act of defying civil authority. The equilibriating effect of a democratic, free-market economics on income will destroy the natural ability of the best and the brightest to protect the public's interest. Of course, it will not. The protection will be best afforded by not impoverishing the protected.

Controlling costs will be a function of ensuring economic democracy--free-market economics--in priority. As long as the price is commanded, either by public or private means, fair value is not empirically, legitimately, verifiable for either producers or consumers.
Incomes as well are not measurably fair and equitable without ensuring a free-market economics in priority.

We often hear conservatives say it is no one's business what their income is, and conspicuous consumption distributes the wealth fairly and equitably. The crisis that ensues from overaccumulation is falsely attributed to government intervention (the gamma risk) that distorts the free market. The cure, according to conservatives, is laissez-faire.

The reason income is a desireable "secret" is because it is an empirical measure of inequity. That inequity is retributive in value that must be protected. It is a risk that must be managed to be conserved (...sshhh... that's supposed to be an analytical secret well hidden within the dirty bowels of academe where obsequious conformists fear to tread). If the value was not retributive, no one would care what your income is, and you wouldn't care if it was a secret.

Empiricism is by definition to know, not to not know. It is antithetical to the privilege of the elite and why they resist free-market, demand economics for command economy. It is why income should be secretive and should not be considered the object of public policy to distribute it by free market means or any other means, but to conserve it.

Focusing on controlling costs is to focus on incomes and the legitimacy of those incomes. Costs have less to do with the esoteric knowledge of doctors, lawyers, business professionals... than with having the organized, systematic ability to command prices, and economic trends.

Controlling costs is a function of controlling the ability to command the price (ensuring a free-market mechanism in priority).

Controlling the ability to command the price is not accomplished with the ability to command the cost, like the public option does, or like the big box-store model does in which the provider commands the price and the consumer picks the quantity, but by The People having the power, the income, to democratically demand the price and thereby legitimately control the cost unless, of course, there is some secret knowledge I am unaware of.

Ensuring in priority a free and unconsolidated marketplace is to organize to control costs, and policy focused on income, rather than reorganizing the effects like a public option, is essential to ensuring it.