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.