What we need for economic recovery, reinvestment and stabilization is not what is now old school, status quo Keynesian economics that ensures the Hamiltonian model of political economy in priority.
Fed Chairman, Bernanke says it is not possible to have large financial institutions that are not too big to fail. While the chairman identifies the problem as an organizational one (and the chair of the nation's primary quasi-public/private financial institution admitting that is quite the coup), he nevertheless will not admit he is resorting to a passe' organizational model that needs to be thrown out.
The Hamiltonian model of political economy is an empirical failure. It always results in the volatile cyclical events that Bernanke decries as inimical to general economic health and social stability with the private sector causing economic crisis with support of the public sector, the tax authority, a quasi-public central banking system, and with the function to manage the effects (the negative externalitites: the retributive value) being neo-classically added. The model has evolved into a systematic complexity that is critical to its survival despite being an obvious empirical failure over and over again.
Bernanke alludes to the complexity of the system as both the problem and the solution, which is the first indication that change we need is not forthcoming. The complexity will be the medium in which to "manage" the system to fit the existing practical model that, while the means can be changed, determines conservation of the ends.
The system of banking, being critical to assessing value, for example, by who gets a loan and for what, is critical for the development of economic entities too big to fail and can, thus, control the value to be assessed and the assessment of the value. It is an absolute power that corrupts absolutely that decides, dictates, beyond having collateral or not, the success or failure of the non-elite with assessing the value of loyalty in service to the overlords, the owners, of the capital. It is an evolved form of feudalism that Thomas Jefferson argued was an unneccesary vestige of an evolving structure of power that the American Revolution and the new democratic-republican form of government was intended to prevent.
The American Revolution represented the expansion of sovereignty to prevent, according to Jefferson, what Hamilton wanted to ensure.
For Alexander Hamilton, the nation's first treasury secretary, the revolution represented an expansion of elite rule with a democratic legitimacy of power that would make the right to rule immune to revolution and beyond the claims of a sovereign, including The People. He set to bifurcating the power structure into public and private domains in which the private sector rules and the public sector supports and legitimizes, always having the support of the king (now The People), the sovereign, by default. It allows the legitimacy of power, the means justifying the ends, and the virtue of what is public or private, to be whatever the power elite say it is with their status or "class" being supra-sovereign.
The elite claim the vulgar status of sovereignty only when the means of power, the consolidation of the wealth, is threatened by action from the public sector, invoking constitutional prohibitions like ex-post-facto laws and bills of attainder that are argued as "punitive" measures designed to unjustly punish success in the private sector.
Hamilton's scheme of bifurcating the power structure, neither purely public or private, is intended to satisfy the element of democracy that verifies its existence, pluralism, with "two" elements of power that, operationalized with elitist control of the banking system and public finance (controlling the assessment of value), ensures the power structure always operates to conserve the collateral and the ability to distribute rewards and deprivations from the private sector based on loyalty to the values of the power elite. Those values extend specifically from the prime value of providing for the welfare of the rich in priority, like we have now. The two elements of power operate to provide a false pluralism acting as one system of power that defeats the distributive benefit of a democratic-republic while maintaining the democratic means (the pluralism) that justifies (verifies) the ends (the distribution) of power.
Hamilton's scheme of a verifiable pluralism in which the public sector (government) ensures the sovereignty of the individual private citizen ensures that some people are more equal than others. It provides the dynamic for crisis that Bernanke refers to as inimical to the general welfare, meaning that Hamiltonianism, despite his corrective measures being consistent with it, is unconstitutional since the general welfare is what the government is in business to provide; but, of course, Bernanke's technical status is "quasi" neither public or private. He is a tool of the private sector masquerading as a civil servant with the legitimacy of public service ensuring Constitutional outcomes with distributive value verified by the means justifying the ends.
While Alexander Hamilton provided us with an ingenious system for democratic means legitimizing the distributive benefit of unequal power so it may be defined as indivisible "with liberty and justice for all," two hundred years of boom and bust is quite enough evidence that the trickle-down model of public finance does not work if the goal is the general welfare. The Hamiltonian model is intended to ensure in priority the economic welfare of a small elite ruling from the private sector with the support and legitimacy of public (constitutional) authority through the cyclical process of boom and bust. The benefit, by definition, cannot be indivisible, and the application of Keynesian measures fits the model perfectly with a much needed element of adaptability to allow the status quo ante to appear as the means of change despite the divisibly distributive benefit.
Arguing that ensuring the welfare of the rich--ensuring the survival of an organizational technique that cannot be allowed to fail--is the general welfare is nonsense. It always has been. It is now! It dooms everyone but the elite to a tyranny of avarice, greed and all manner of stupidity, ignorance and amoral, if not deliberately immoral, behavior all for the "utility" of achieving the greatest good always to be announced with forever innovative means.
The next "ism" of a failed socio-political hypothesis is always lurking just below the horizon, reinvented to extract the economic value that supports the superior right to rule that is otherwise The Constitutional Right of The People.
Thomas Jefferson was right. The revolution is always "occurring." According to Jefferson, Alexander Hamilton's organizational technique of public/private finance that keeps a "reoccurring" debt obligation, with a regressive tax burden, will ensure it, and here we are.
The Fed's latest plan of action keeps the debt in a state of "reoccurrence." Keynesian economics is just an innovative means of recycling the debt, turning the economy into a perpetual-motion debt machine, politically and economically providing the highest return at the lowest possible risk.
Bernanke is not implying that technically organizing to be too big to fail needs to be deconsolidated into firms that are small enough to fail with investment from private equity. It is absurd to think private equity will invest without the no-risk/high return model of too big to fail fully in operation, and so treasury secretary Geitner's plan to "detox" the bad debt with a large leveraged return for private funds and a small simple return for public funds is purely representative of the Hamiltonian model.
It is in the best (divisible) interest of private capital to allow the Fed to inflate the economy with fresh capital (monetize the debt) to liquidate the leverage that became toxic and recycle that bad debt indirectly into the indebted economic rent that keeps the rich rich and the poor poor--Hamiltonianism.
No! It is clear. The Hamiltonian model needs to be junked!
The vast majority of Americans have a clear sense of ethical (indivisible) economic equity that has nothing to do with bills of attainder or ex-post-facto laws. These legal arguments, while appropriate for preventing the abusive power of kings, are being used as a ruse intended to discredit the call for equity and justice as mob rule (the political legitimacy of the Hamiltonian model to prevent the chaos of the ignorant masses). The People do not intend to persecute individuals, but to simply prosecute the systematically unjust, divisible distribution of wealth and power being falsely argued as an indivisible social benefit that prevents, rather than provides, a more perfect union.
The reinvestment to restructure the financial system must come from the existing capital that is consolidated. A progressive tax code is necessary to finance a safe, secure and easily accountable marketplace that is not dependant on the success or failure of any one firm, and is to be ensured by means of public finance in priority.
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