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.
Thursday, October 22, 2009
Tuesday, October 20, 2009
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.
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.
Thursday, October 15, 2009
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.
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.
Wednesday, October 7, 2009
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.
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.
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.
Tuesday, October 6, 2009
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.
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.
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