Deficiency of the Use-Value Argument

Deficiency of the use-value argument is readily apparent. The capital is absorbed into hedging the risk caused by not being invested in economic growth and stability.

Continuous use of the capital to hedge the risk--the industry of making markets through derivatives--causes the fractile transformation of risk that justifies the valuable use of consolidating it into an economy-of-scale efficiency. That is, the risk becomes so complex that it must be managed into a form that is characteristically too big to fail.

The use-value of the argument is essentially this: failure cannot occur because the risk is "too big." The argument falsely implies that resolving with alpha risk is tantamount to allowing failure, which if allowed will result in systemic failure (failure in a gamma-risk proportion).

The argument is entirely false. Alpha risk does not exist in gamma-risk proportion. It is unaccumulated risk. The risk is spread to avert accumulation, and if accumulation does occur, it will likely fail if it is an abuse of power in the alpha form without failing the whole system.

No bailouts are needed to conserve the value of alpha risk--the risk of failure. An alpha-risk system (ensuring a free-market legitimacy) is inherently risk averse.

The system we have now is verifiably risk prone.

The risk is caused by hedging it so that causing risk, rather than hedging it, is the reward. Risk becomes fractile and cumulatively unstable with risk being compounded on the probability of the risk. Risk then becomes so overweight that the probability of default is 100 percent (what Germany is trying to avert by inverting the risk hypothesis, or the expected, directed value of the risk).

Timing a market space is then a function of tracking the transference of risk, and who exactly is qualified to do that without gambling with the capital?

If you are not a favorable credit score, you are likely to lose by being positioned to intersect with the transference of risk (by always being "put at risk").

Always being put at risk, or in harm's way, naturally accumulates risk at a higher level that requires a high level of power to manage. The benefit becomes retributively valued and the risk to that value gains a gamma proportion that requires either force or finesse to conserve.

Exercising power in zero-sum does not require political finesse if it is absolute. An inscrutible derivatives market combined with the legitimacy of free-market economics provides finesse where absolute power is not legitimate, like in America where The Revolution rendered absolute power not only crude, obsolete, and unproductive, but illegal.

In the case of a free-market legitimacy, finesse is required where force cannot be legally accomplished without a risk of liability on the zero-sum. Economies of scale, however, operate with impunity because they are too big to fail, which also means they can operate with illegitimate force and stay in business. That is, economies of scale operate with minimal alpha-risk accountability. The risk is transferred, or transformed, into beta and gamma risk.

Financials are currently high beta because they are the target of regulatory reform, having accumulated excessive gamma risk (having excessively reduced the alpha-risk, cost/price-to-accountability coefficient). This is the space where finesse critically operates to prevent disaggregation of the risk to correct for an abuse of the market mechanism (the over-accumulation of risk).

Instruments used to transfer risk accumulate the risk into a bubble. Inflation and deflation of bubbles is accomplished by bundling (combining) the causal factors into the control of the elite insiders, who bundle the products to define the risk. The risk can then be inverted at will, at any particular time, in any particular space, to score a profit. The score is what makes the elite insider more credit worthy, providing the liquidity to hedge, or define, the level of "perceived" risk.

Prop desks of big banks, for example, positioned against bonds they issued for municipals, putting the bonds at higher risk, "making" a short-term profit differential at the expense of both buyers and sellers. The profit generated can only be considered legitimate if the abusive practice can be considered useful, mitigating the perceived loss in zero-sum.

The illegitimately gained benefit actually belongs to the loser, less the useful value which will largely be realized by having reduced the alpha risk. The abuse will survive the marketpace as beneficial because it is "too big" to fail. The abusive firms are not smarter than the losers, just bigger.

While economies of scale are much more credit-worthy, they are much less trustworthy. Replevin is considered to be revenge since they have "successfully" transformed alpha into beta risk. The risk of liability accumulates and transfers into the space of gamma-risk authority where it is managed to legally mitigate the possible loss to the gain, accumulating the gamma risk to a crisis proportion over time.

The perceived risk and market sentiment can be technically changed in a flash. Effective financial reform will have to deconsolidate the risk in order to keep the risk-transfer market being re-made faster than reform.

Accumulated risk must be transformed into an alpha-risk ontology in which the technical indicators reflect the fundamentals rather than the beta-risk mainpulations of collusively consolidated financial entities.

The question is then, will the specific measures offered for financial reform devolve the risk into a more fundamental form of risk ontology, utilizing the collective wisdom of a free marketplace rather than the elite manipulations of plutocracy?