The speculative tape is overbought. Just about worn out. Capital is so consolidated, all big money managers can do is fake a trend and bake a sudden reversal like so much pop'n fresh dough yielding a baker's dozen.
Despite all the innovative ways cooked up to buy and sell, suggesting a healthy appetite for capital being prepared for economic growth, providing the fundamental fare a hungry tape needs, the low volumes, however, suggest a fare that smells like bull but tastes like bear.
Now, Americans are being told the bull they've been fed is really bear, (as if we didn't know the difference?), but bull is still on the menu.
The Fed downgrades the economy, but extends monetary easing. Bear is being served, but there's bull in the oven.
Though the waft of baking is in the air,
Bear is still the common fare;
And if even more
We should forbear--
To tax and spend the common fare,
Make no mistake,
It's no fake,
The People are happy
To just eat cake.
Over-levening provided by the master baker between 0-.25 percent will quickly make a cake. Over-leveraging, however, will put growth on a slow burn, yielding plenty of time to fake the bake and take the cake.
Quickened bread
Provided by the Fed
Is a famonous feast
Provided for the least.
Consolidation of the capital yields slow growth and the ambivalent flavor of the bitter with the sweet. Inflation and deflation tug of war, never fully resolved without a deconsolidation.
Unfortunately, deconsolidation is a side order, served-up on the table of finacial reform in only the smallest amounts.
Maintaining if not increasing the level of consolidation is the main course, indicating it gets worse before it gets better, as the FOMC has suggested.
Without our daily bread makes fat
Bank of America
And Goldman Sachs;
And though reform is cooked post haste
To cleanse away
The after taste,
The recipe change for common fare
Is like Blankfein with
A head of hair.
Pending financial reform is just more fake n' bake. The bad economic numbers indicating a floundering outlook that resembles the previous eight years is no mistake since the financial system's structure and incentives had not changed.
Lawmakers face mounting pressure to reform. The stimulus had largely been absorbed by the problem--it had been quickly consolidated. It has to "trickle down" and bake-in to be effective.
The reform will not avert impending crisis, but manage around the problem that causes it. The benefit, like consolidation of the stimulus, will be conserved, resulting in an accumulation, rather than a distribution.
More stimulus will be needed but exhausted. Budget-deficit exhaustion is the impending crisis--the austerity that bakes our daily bread by deprivation.
Unemployment benefits?
That's not kosher;
But extending tax cuts
Will give us cloture.
Job one, by unanimous consent, is being sure big financials have plenty of cake to bake, but the truth be told, more likely fake.
And as we kneed our daily bread,
We're sure to keep
Uncommons fed,
Who stand and fight
By natural right
To satisfy their appetites.
If, by chance of course, it all be fake,
There surely must be
Some mistake.
The truth is out there,
But it must be hide'n,
Can it be found,
Obama-Biden?
Averting crisis is a fake,
The best of promise is
Slow bake.
It will not give us
Less volatility,
With the promise of growth
A low probability.
Beta volatility indicates an overaccumulation in need of distribution, being withheld for favorable tax policy that conforms to the Hamiltonian model.
While the model does not expect government authority to cause a distribution without market distortion, Hamiltonians literally bank on it nevertheless.
Kneeding the dough for favorable tax policy bakes up the same old fare for public consumption.
After the bread and circuses
Of stimulus and reform,
A volatility
Is sure to take shape
That will give real meaning
To "let them eat cake."
The reform we need
Should not be like poetry,
Rich in concept
That works metaphorically.
Monday, June 28, 2010
Monday, June 21, 2010
Risk Aversion and Financial Regulatory Reform
Democrats argue Republicans stand opposed to a resolution fund financed by big banks because Republicans are allied with the banks.
Republicans argue the resolution fund is essentially a bailout fund that backstops bad behavior (the risk) the specific measure is supposed to avert.
Both arguments are essentially true and indicate a congress allied with big banks, supporting a bigger-is-better corporate model.
While the theory of the specific measure is that big banks will behave like small banks, or maybe even divest into smaller entities to avoid the cost being imposed on the risk, the measure resists proliferation of small business entities nevertheless.
Both Democrat and Republican policymakers know that firms want to grow big in order to avoid small-firm risk (the alpha risk). The specific measure makes it appear lawmakers are trying to ensure a legitimate level of alpha risk in priority without sacrificing the dubious benefit of firms big enough to take the "big risk."
Sacrificing the "big risk" would be undubiously beneficial, but since the big risk takers can afford to innovate better than small firms, our Hamiltonian legislature seems to think, regulatory measures can support big firms to enhance innovation without increasing systemic risk. Regulation will supposedly increase market efficiency by reducing the risk (the risk of failure) the alpha risk provides.
While there is no better incentive to innovate than survival, reducing costs to increase profit without sacrificing employment, it makes more sense to support proliferation over consolidation, reducing the risk of both inflation and unemployment.
The specific measure for resolving and averting the risk of systemic crisis is, however, not risk averse at all. It is risk prone.
The large profits generated will provide a huge margin to be taxed, transforming capital into public goods to be distributed by government authority. The goal is to stabilize the market.
Transforming alpha risk into gamma risk does not, however, reduce beta risk at the micro or macro level. With the financial market, for example, evermore reliant on government administration, the proposed resolution measure will pro-cyclically increase beta volatility.
Who and what is too big to fail? Will big firms really be allowed to fail despite the systemic risk? Will small firms organized into a large counter-party network of externalized risk be allowed to fail?
Capital markets will be a constant traders' market, more interested in plundering than economic growth.
As government transfers payments in support of demand to resist deflation (the declining rate of profit), prices will inflate supported by a supply in plunder. Plenty of profit will be available to tax and spend on supporting the fundamental supply-demand differential. Of course, all the plundering accumulates risk to a systemic, crisis proportion, fractionalized into securitized debt until the only counter-parties left solvent to pay the debt are, pro-cyclically, the creditors.
Supposedly, redemption of the risk will be bought and paid for by the risk takers as per the specific legislative measure for funded resolution. Valuation of the risk in excess of the funding requirement will result in failure of the firm.
Rather than being averted, the risk will have been perverted with an ill-fated Democrat/Republican gaming of the system, leading to an accumulation of gamma risk that will rival The Great Recession.
The risk aversion game conserves the present value of accumulated risk (the gamma risk).
Increasing capital requirements and requiring contributions to an expensive bonding authority in order to take "the big risk" will encourage rather than prevent market abuse via structured (risk transfer) products.
Engaging in risk transfer requires a big ante up. In effect, it codifies the activity of externalizing risk into a gamma proportion, applying an empirical, categorical, measure that limits the liability of the firm to the available ante (the categorical imperative of the Hamiltonian model). It is hardly a measure to encourage internalization of the risk. The value of the risk will be monetized in crisis mode just as it was before.
It is not a random walk. Big financial entities deliberately invest the market for consolidation. The effect is not a random ontology that presents as unpredictable, uncontrollable, cyclical trending.
The value of the risk accumulated is highly retributive, not exculpatory, and regulation that does not resist the accumulation supports the probability of the crisis to be averted.
Republicans argue the resolution fund is essentially a bailout fund that backstops bad behavior (the risk) the specific measure is supposed to avert.
Both arguments are essentially true and indicate a congress allied with big banks, supporting a bigger-is-better corporate model.
While the theory of the specific measure is that big banks will behave like small banks, or maybe even divest into smaller entities to avoid the cost being imposed on the risk, the measure resists proliferation of small business entities nevertheless.
Both Democrat and Republican policymakers know that firms want to grow big in order to avoid small-firm risk (the alpha risk). The specific measure makes it appear lawmakers are trying to ensure a legitimate level of alpha risk in priority without sacrificing the dubious benefit of firms big enough to take the "big risk."
Sacrificing the "big risk" would be undubiously beneficial, but since the big risk takers can afford to innovate better than small firms, our Hamiltonian legislature seems to think, regulatory measures can support big firms to enhance innovation without increasing systemic risk. Regulation will supposedly increase market efficiency by reducing the risk (the risk of failure) the alpha risk provides.
While there is no better incentive to innovate than survival, reducing costs to increase profit without sacrificing employment, it makes more sense to support proliferation over consolidation, reducing the risk of both inflation and unemployment.
The specific measure for resolving and averting the risk of systemic crisis is, however, not risk averse at all. It is risk prone.
The large profits generated will provide a huge margin to be taxed, transforming capital into public goods to be distributed by government authority. The goal is to stabilize the market.
Transforming alpha risk into gamma risk does not, however, reduce beta risk at the micro or macro level. With the financial market, for example, evermore reliant on government administration, the proposed resolution measure will pro-cyclically increase beta volatility.
Who and what is too big to fail? Will big firms really be allowed to fail despite the systemic risk? Will small firms organized into a large counter-party network of externalized risk be allowed to fail?
Capital markets will be a constant traders' market, more interested in plundering than economic growth.
As government transfers payments in support of demand to resist deflation (the declining rate of profit), prices will inflate supported by a supply in plunder. Plenty of profit will be available to tax and spend on supporting the fundamental supply-demand differential. Of course, all the plundering accumulates risk to a systemic, crisis proportion, fractionalized into securitized debt until the only counter-parties left solvent to pay the debt are, pro-cyclically, the creditors.
Supposedly, redemption of the risk will be bought and paid for by the risk takers as per the specific legislative measure for funded resolution. Valuation of the risk in excess of the funding requirement will result in failure of the firm.
Rather than being averted, the risk will have been perverted with an ill-fated Democrat/Republican gaming of the system, leading to an accumulation of gamma risk that will rival The Great Recession.
The risk aversion game conserves the present value of accumulated risk (the gamma risk).
Increasing capital requirements and requiring contributions to an expensive bonding authority in order to take "the big risk" will encourage rather than prevent market abuse via structured (risk transfer) products.
Engaging in risk transfer requires a big ante up. In effect, it codifies the activity of externalizing risk into a gamma proportion, applying an empirical, categorical, measure that limits the liability of the firm to the available ante (the categorical imperative of the Hamiltonian model). It is hardly a measure to encourage internalization of the risk. The value of the risk will be monetized in crisis mode just as it was before.
It is not a random walk. Big financial entities deliberately invest the market for consolidation. The effect is not a random ontology that presents as unpredictable, uncontrollable, cyclical trending.
The value of the risk accumulated is highly retributive, not exculpatory, and regulation that does not resist the accumulation supports the probability of the crisis to be averted.
Friday, June 18, 2010
Fianacial Regulation: Black Box or Skinner Box?
Some of the most prominent features of pending financial reform support the problem to be solved.
According to congressman Barney Frank, for example, Chairman of a House subcommittee on regulation of capital markets, the size of the firm does not matter.
The debate is more about negotiating what the problem is rather than solving the problem. If the size of firms that are "too big to fail" is not the problem, then the problem reduces to the fear of failure.
Avoiding failure is a characteristic of small firms. Too-big-to-fail firms do not fear failure because they are too big.
The entire finreg debate avoids considering deconsolidation of the risk. Without transforming risk into small-firm alpha risk, the risk conserves in an aggregated gamma proportion.
The debate suggests we can turn a rogue elephant into a chicken in a Skinner box. Risky behavior can be operantly conditioned, turning the elephant into a big chicken, confronted with the risk of failure.
An elephant-sized chicken is not exactly the vision of reduced risk. This chicken is so big it is likely to go rogue, and when we try and kill the chicken it just gets bigger.
The regulatory "box" being constructed to modify the behavior of firms that are too big to fail will, according to behavioral economists, conserve the economy-of-scale coefficiency without systemic risk. Of course, the coefficiency (the risk/reward ratio) is the externalized accumulation of that risk.
Hypothetically, substituting the reward of systemic risk with the risk of failure will internalize the risk. Managing the externality--the risk getting bigger if failure does occur--will be by means of an orderly resolution authority. The coup will be burning down, but with an orderly evacuation of the chickens.
If an orderly resolution of failure means the corporate, and the margin, just gets bigger, what is the incentive not to fail?
Going from the black box to a Skinner box is to set us up for failure.
Left with mega firms and a mega government authority to manage them, we have nothing but a public and private entity of networked externality that is too big resist (too big to fail). The only available, operant, answer in this box is "yes!" It is the tyranny that we are supposedly trying to box out, by boxing it in.
The Skinner box makes the black box look good.
According to congressman Barney Frank, for example, Chairman of a House subcommittee on regulation of capital markets, the size of the firm does not matter.
The debate is more about negotiating what the problem is rather than solving the problem. If the size of firms that are "too big to fail" is not the problem, then the problem reduces to the fear of failure.
Avoiding failure is a characteristic of small firms. Too-big-to-fail firms do not fear failure because they are too big.
The entire finreg debate avoids considering deconsolidation of the risk. Without transforming risk into small-firm alpha risk, the risk conserves in an aggregated gamma proportion.
The debate suggests we can turn a rogue elephant into a chicken in a Skinner box. Risky behavior can be operantly conditioned, turning the elephant into a big chicken, confronted with the risk of failure.
An elephant-sized chicken is not exactly the vision of reduced risk. This chicken is so big it is likely to go rogue, and when we try and kill the chicken it just gets bigger.
The regulatory "box" being constructed to modify the behavior of firms that are too big to fail will, according to behavioral economists, conserve the economy-of-scale coefficiency without systemic risk. Of course, the coefficiency (the risk/reward ratio) is the externalized accumulation of that risk.
Hypothetically, substituting the reward of systemic risk with the risk of failure will internalize the risk. Managing the externality--the risk getting bigger if failure does occur--will be by means of an orderly resolution authority. The coup will be burning down, but with an orderly evacuation of the chickens.
If an orderly resolution of failure means the corporate, and the margin, just gets bigger, what is the incentive not to fail?
Going from the black box to a Skinner box is to set us up for failure.
Left with mega firms and a mega government authority to manage them, we have nothing but a public and private entity of networked externality that is too big resist (too big to fail). The only available, operant, answer in this box is "yes!" It is the tyranny that we are supposedly trying to box out, by boxing it in.
The Skinner box makes the black box look good.
Friday, June 11, 2010
Short-Term Modeling and Political Risk
Economic modeling that technically manipulates risk for short-term gain (flash trading being the most extreme example) yields increased political risk.
Democrats and Republicans are now clamoring to turn the zero-sum economics of the Great Recession into a political game of partisan gain. Playing the game conserves the risk within predictable parameters of bivariation.
Democrats blame Republicans for our woes while Republicans warn it gets worse from here if we do not stay the course. We all know, however, that the compromise will do little to change the course, but anchors the risk to its current value.
Gaming voters with rhetoric that is overwhelmingly tired if not complex would usually result in apathy and anomie, reducing the risk to the binomial, Democrat or Republican alternative.
Now, however, not enough time can pass for voters to forget the source of the zero-sum--the depreciated net worth of the average income--if the cyclical trending that supports it occurs with such a short-term frequency, increasing the political risk.
Short-term, cyclical accumulations (beta volatility with little growth) is indicated well into the future with expert technical analysts apprehending a long, jobless recovery. The detriment is being fully disclosed to minimize the risk of failed expectations, but not without increasing the fundamental risk.
A highly frequent and causally recognizable trending phenomenon that easily correlates the accumulative detriment with the benefit does not allow enough time within the cyclical space to operationalize with bivariate realignment.
The risk is not as credibly reduced and gains a gamma proportion. Its management is likely to be more tyrannical, associated with systemic risk (controlling the cost of health care with an unpopular reform, for example), and more prone to organized consolidation when less is needed (merging banks and requiring higher capital requirements to leverage the risk).
With such a short frequency, bipartisan (binomial) gaming for votes is effective with only the most strident supporters, posing a significant political risk. The risk is being buried in complex issues like financial reform and being correlated with an urgency for economic recovery.
Even the Laffer Curve has been pulled off the junkheap of disconfirmed hypotheses.
After twenty years, an eristic like the Laffer Curve has an allure for conserving the present value of the risk.
Despite its tarnished past, producing record budget deficits in the Reaganomics era, the artifice has been derelict long enough to be polished up for some current use.
Laffer's technical argument for marginal tax reduction can be the eristic for a balanced budget without reference to continuing "the Bush tax cuts." Knowing that it does not work is, nevertheless, well within recent memory, and even more disconfirmation is gained with a long-term memory trace.
More of the problem is obviously not the solution. Artifices clothed in the credibility of technical jargon will entrench resistance to binary, Democrat-versus-Republican politics. At this point, especially with an economic outlook that calls for a jobless recovery, old eristics are not only annoying, but enraging.
Short-term economic risk models present a significant political risk that tends to the fundament. If the primary parties do not merge non-partisan demand for change into their binary, risk-management model of conserved accumulated value, third-party pluralism become more probable. The beta risk will transform into alpha risk.
The binomial party system is designed to resist an alpha transformation of political risk.
With political, gamma risk being Constitutionally endowed (being of an unavoidable, "constitutional" nature) rather than economically determined, Hamiltonians rely on a republican form of government to keep gamma risk from transforming into alpha risk. Instead, it is transformed into a beta-risk variation--partisan gaming of the risk to conserve its value.
While a two-party, republican form of government presents a continuous, but spectrally fused, ideological platform that conserves the present value of the zero-sum, high-frequency accumulation presents a much trickier risk volatility beyond the normal beta bivariation.
Frankly, it is more than Ivy Leaguers can successfully handle. Volatility, for example, is being increased to avoid the political risk. Increasing complexity with quantitative abstrusity just increases the risk being avoided.
Using wisdom and intelligence to pepetrate a detriment is an ignominy that ultimately revanches. The security of the reward is as delusional as the assumption of the reduced risk.
Independents are poised for significant transformation of the risk without sacrificing the easily verifiable accountability and productive capacity of a free-market legitimacy, empirically defining what limited government really is by doing it, rather than always gaming the hypothetical.
Democrats and Republicans are now clamoring to turn the zero-sum economics of the Great Recession into a political game of partisan gain. Playing the game conserves the risk within predictable parameters of bivariation.
Democrats blame Republicans for our woes while Republicans warn it gets worse from here if we do not stay the course. We all know, however, that the compromise will do little to change the course, but anchors the risk to its current value.
Gaming voters with rhetoric that is overwhelmingly tired if not complex would usually result in apathy and anomie, reducing the risk to the binomial, Democrat or Republican alternative.
Now, however, not enough time can pass for voters to forget the source of the zero-sum--the depreciated net worth of the average income--if the cyclical trending that supports it occurs with such a short-term frequency, increasing the political risk.
Short-term, cyclical accumulations (beta volatility with little growth) is indicated well into the future with expert technical analysts apprehending a long, jobless recovery. The detriment is being fully disclosed to minimize the risk of failed expectations, but not without increasing the fundamental risk.
A highly frequent and causally recognizable trending phenomenon that easily correlates the accumulative detriment with the benefit does not allow enough time within the cyclical space to operationalize with bivariate realignment.
The risk is not as credibly reduced and gains a gamma proportion. Its management is likely to be more tyrannical, associated with systemic risk (controlling the cost of health care with an unpopular reform, for example), and more prone to organized consolidation when less is needed (merging banks and requiring higher capital requirements to leverage the risk).
With such a short frequency, bipartisan (binomial) gaming for votes is effective with only the most strident supporters, posing a significant political risk. The risk is being buried in complex issues like financial reform and being correlated with an urgency for economic recovery.
Even the Laffer Curve has been pulled off the junkheap of disconfirmed hypotheses.
After twenty years, an eristic like the Laffer Curve has an allure for conserving the present value of the risk.
Despite its tarnished past, producing record budget deficits in the Reaganomics era, the artifice has been derelict long enough to be polished up for some current use.
Laffer's technical argument for marginal tax reduction can be the eristic for a balanced budget without reference to continuing "the Bush tax cuts." Knowing that it does not work is, nevertheless, well within recent memory, and even more disconfirmation is gained with a long-term memory trace.
More of the problem is obviously not the solution. Artifices clothed in the credibility of technical jargon will entrench resistance to binary, Democrat-versus-Republican politics. At this point, especially with an economic outlook that calls for a jobless recovery, old eristics are not only annoying, but enraging.
Short-term economic risk models present a significant political risk that tends to the fundament. If the primary parties do not merge non-partisan demand for change into their binary, risk-management model of conserved accumulated value, third-party pluralism become more probable. The beta risk will transform into alpha risk.
The binomial party system is designed to resist an alpha transformation of political risk.
With political, gamma risk being Constitutionally endowed (being of an unavoidable, "constitutional" nature) rather than economically determined, Hamiltonians rely on a republican form of government to keep gamma risk from transforming into alpha risk. Instead, it is transformed into a beta-risk variation--partisan gaming of the risk to conserve its value.
While a two-party, republican form of government presents a continuous, but spectrally fused, ideological platform that conserves the present value of the zero-sum, high-frequency accumulation presents a much trickier risk volatility beyond the normal beta bivariation.
Frankly, it is more than Ivy Leaguers can successfully handle. Volatility, for example, is being increased to avoid the political risk. Increasing complexity with quantitative abstrusity just increases the risk being avoided.
Using wisdom and intelligence to pepetrate a detriment is an ignominy that ultimately revanches. The security of the reward is as delusional as the assumption of the reduced risk.
Independents are poised for significant transformation of the risk without sacrificing the easily verifiable accountability and productive capacity of a free-market legitimacy, empirically defining what limited government really is by doing it, rather than always gaming the hypothetical.
Wednesday, June 9, 2010
Macro Trend of Accumulated Risk
Deflation is an accumulated risk that presents with a macro trend.
Progression of the deflationary trend has been tracked in these articles. The indicators mix and match with changing investment vehicles, but the effect is essentially the same.
Neo-classical means operate to a classical effect. The result is a deflationary trend that eventually confirms a clear presence of value.
The "de-risking" analysts refer to is the emerging salience of a macro-risk ontology classically referred to as the declining rate of profit. It is a risk to the present value of the capital accumulated that reduces to the value of the risk.
Accumulation of risk into a gamma proportion tends to be resisted by the underlying alpha risk.
Since fundamental risk cannot be avoided, only averted, displaced in time and space with derivative vehicles of investment, including provision of public goods like bailout funds, the value of the risk goes beta (the uncertainty of government policy within the economic space valued with the presence of time).
To conserve the value of the risk with a predictable presence of value, the rate of profit in decline will be offset by unemployment and consolidation of declining asset valuations, confirming the classical model of capitalism. That confirmation dominates the policy space, giving "the risk" a certain presence of value that is, at this point, shammed with beta volatility to suggest the operation of a free-market ontology. That legitimacy of the risk is false.
The false free-market legitimacy has to be supported by management of the gamma risk. The value of the risk is conserved by a bureaucratic model of power, operationalized into a predictable macro ontology that transforms alpha into gamma risk.
As the chairman of The Federal Reserve today described the present value of the risk, for example, he very clearly defined that value with sustained unemployment. Describing the conservation of the value as "painful," that pain, that sacrifice, is cast in the light of a free-market legitimacy. No one person or cohort decided who will experience the pain and make the sacrifice. The implication is that the market decides, and the risk of liability to the reward is "decidedly" none. The value of the risk is conserved with a macro ontology derived from the fundament.
Being derived from the fundament, the risk to the accumulated value is forever present. Despite the derivative presence of value, risk to the future accumulation of value is, however, virtually none, resulting in accumulation of gamma risk.
Accumulation of gamma risk results in catastrophic events. In the past, world war revanched accumulation, reducing accumulation of risk to an alpha-risk ontology on a macro scale. With the emergence of the bureaucratic model of power, the revanche is methodically slower, but allows for an accumulated value of the risk nevertheless.
There is an attempt to technically quantify the accumulated value into an empirical (predictable) macro ontology in which micro trends predictably derive. As we have seen again and again, attempts to transfer accumulated risk to the future in order to secure short-term value will fail. It will result in catastrophic devaluation and devolution of the risk.
Consolidation of power into centralized management of gamma risk will devalue the risk, but it will not be devolved. Such a triumph will result in tragedy, much as Hegal described it, with the value of the risk equilibriating whether we like it or not.
Nature is indifferent to the delusions of our grandeur and the value will revanche into an historically proper proportion.
If we do not "choose" to manage the macro trend "at" the fundament, rather than accumulatively derived "from" the fundament, nature will very painfully make that correction for us.
Catastrophic reduction to the fundamental value of the risk is both inevitable and avoidable. It is a persistent paradox perennially present in its fundamental valuation. That value reduces to a moral intelligence, defining us as a species. Are we economic animals guided only by basic, emotive instinct, like fear and greed, or the motive of recognizable freedom reflected in the ensured processes of an alpha risk ontology?
Security will not be found by consolidating risk into a too-big-to-fail organizational ontology. Economies of scale are not the solution, but the problem, reducing the risk of liability to a drawn-out, tiresome debate, slowly digested within the bowels of government authority rather than resolved with the immediate influence of an alpha-risk accountability.
The immediate presence of value appears to be no choice. Accepting an economy of scale appears to be a necessary condition for taking the risk. Debate over the limits to the liability of BP's Deep Water Horizon well, for example, reduces to the value of an economic efficiency that is too big to fail. If the disaster is confirmation of that hypothesis, what incentive is there to avert disaster without the operation of fundamental, alpha risk (not being too big to fail)?
While we are focused on the liability in a specific case, we fail to recognize the liability of the general case.
We do have a choice in the macro-ontological case. An economy of scale is not a given modality of efficiency endowed by nature. It is a choice made to accomplish a task in every specific case--to limit liability and conserve the valuation of accumulated risk.
In the case of BP, the retributive value of the accumulated risk has become apparent. That value will be externalized into a macro-trend that is directed to prevent the declining rate of profit (deflation) rather than internalized into an alpha-risk proportion because BP is too big to fail.
The problem is not dependance on fossil fuel or the need to drill in risky places, it is the organizational size of the firm.
The size of the firm critically affects all the other risk variables, like the risk of inflation due to dependance on one source of energy, which results in a deflationary accumulation of value (increased macro risk). That risk does not warrant consolidation, but deconsolidation.
The inflationary value of economies of scale (pricing power) increase the deflationary value of the risk by reducing its disinflationary value (the alpha ontology).
Reducing the detrimental value of the risk requires revaluation with an alpha risk, macro ontology. The risk of cyclical trending will redefine with the certain value of a popular consent. Liability will be limited only by the valued efficiency of that immediate and proper consent supported by maximum plurality, rather than consolidation, of industry and markets.
Progression of the deflationary trend has been tracked in these articles. The indicators mix and match with changing investment vehicles, but the effect is essentially the same.
Neo-classical means operate to a classical effect. The result is a deflationary trend that eventually confirms a clear presence of value.
The "de-risking" analysts refer to is the emerging salience of a macro-risk ontology classically referred to as the declining rate of profit. It is a risk to the present value of the capital accumulated that reduces to the value of the risk.
Accumulation of risk into a gamma proportion tends to be resisted by the underlying alpha risk.
Since fundamental risk cannot be avoided, only averted, displaced in time and space with derivative vehicles of investment, including provision of public goods like bailout funds, the value of the risk goes beta (the uncertainty of government policy within the economic space valued with the presence of time).
To conserve the value of the risk with a predictable presence of value, the rate of profit in decline will be offset by unemployment and consolidation of declining asset valuations, confirming the classical model of capitalism. That confirmation dominates the policy space, giving "the risk" a certain presence of value that is, at this point, shammed with beta volatility to suggest the operation of a free-market ontology. That legitimacy of the risk is false.
The false free-market legitimacy has to be supported by management of the gamma risk. The value of the risk is conserved by a bureaucratic model of power, operationalized into a predictable macro ontology that transforms alpha into gamma risk.
As the chairman of The Federal Reserve today described the present value of the risk, for example, he very clearly defined that value with sustained unemployment. Describing the conservation of the value as "painful," that pain, that sacrifice, is cast in the light of a free-market legitimacy. No one person or cohort decided who will experience the pain and make the sacrifice. The implication is that the market decides, and the risk of liability to the reward is "decidedly" none. The value of the risk is conserved with a macro ontology derived from the fundament.
Being derived from the fundament, the risk to the accumulated value is forever present. Despite the derivative presence of value, risk to the future accumulation of value is, however, virtually none, resulting in accumulation of gamma risk.
Accumulation of gamma risk results in catastrophic events. In the past, world war revanched accumulation, reducing accumulation of risk to an alpha-risk ontology on a macro scale. With the emergence of the bureaucratic model of power, the revanche is methodically slower, but allows for an accumulated value of the risk nevertheless.
There is an attempt to technically quantify the accumulated value into an empirical (predictable) macro ontology in which micro trends predictably derive. As we have seen again and again, attempts to transfer accumulated risk to the future in order to secure short-term value will fail. It will result in catastrophic devaluation and devolution of the risk.
Consolidation of power into centralized management of gamma risk will devalue the risk, but it will not be devolved. Such a triumph will result in tragedy, much as Hegal described it, with the value of the risk equilibriating whether we like it or not.
Nature is indifferent to the delusions of our grandeur and the value will revanche into an historically proper proportion.
If we do not "choose" to manage the macro trend "at" the fundament, rather than accumulatively derived "from" the fundament, nature will very painfully make that correction for us.
Catastrophic reduction to the fundamental value of the risk is both inevitable and avoidable. It is a persistent paradox perennially present in its fundamental valuation. That value reduces to a moral intelligence, defining us as a species. Are we economic animals guided only by basic, emotive instinct, like fear and greed, or the motive of recognizable freedom reflected in the ensured processes of an alpha risk ontology?
Security will not be found by consolidating risk into a too-big-to-fail organizational ontology. Economies of scale are not the solution, but the problem, reducing the risk of liability to a drawn-out, tiresome debate, slowly digested within the bowels of government authority rather than resolved with the immediate influence of an alpha-risk accountability.
The immediate presence of value appears to be no choice. Accepting an economy of scale appears to be a necessary condition for taking the risk. Debate over the limits to the liability of BP's Deep Water Horizon well, for example, reduces to the value of an economic efficiency that is too big to fail. If the disaster is confirmation of that hypothesis, what incentive is there to avert disaster without the operation of fundamental, alpha risk (not being too big to fail)?
While we are focused on the liability in a specific case, we fail to recognize the liability of the general case.
We do have a choice in the macro-ontological case. An economy of scale is not a given modality of efficiency endowed by nature. It is a choice made to accomplish a task in every specific case--to limit liability and conserve the valuation of accumulated risk.
In the case of BP, the retributive value of the accumulated risk has become apparent. That value will be externalized into a macro-trend that is directed to prevent the declining rate of profit (deflation) rather than internalized into an alpha-risk proportion because BP is too big to fail.
The problem is not dependance on fossil fuel or the need to drill in risky places, it is the organizational size of the firm.
The size of the firm critically affects all the other risk variables, like the risk of inflation due to dependance on one source of energy, which results in a deflationary accumulation of value (increased macro risk). That risk does not warrant consolidation, but deconsolidation.
The inflationary value of economies of scale (pricing power) increase the deflationary value of the risk by reducing its disinflationary value (the alpha ontology).
Reducing the detrimental value of the risk requires revaluation with an alpha risk, macro ontology. The risk of cyclical trending will redefine with the certain value of a popular consent. Liability will be limited only by the valued efficiency of that immediate and proper consent supported by maximum plurality, rather than consolidation, of industry and markets.
Friday, June 4, 2010
Job Creation: Taking the Risk That Floats the Boat
According to the captains of capital finance, entrepreneurs own and operate businesses, and get financing, to make money, not to create jobs.
Safe to say that today's disappointing jobs data supports that hypothesis; and with the capital in control of the private sector, the argument that government is to blame lacks the proper proof of sound deductive reasoning (one minus one always equals 0) unless, of course, there is some missing variable to evidence some other possibility.
The captains of finance argue there must be some reason for massive unemployment other than because it is what they want, especially those that steer ships too big to sink in risky waters.
That unemployment is the inteneded application of the capital is an easily verifiable hypothesis: equities have risen steadily since the Great Recession. Where did the value come from?
There is a point of diminishing returns, however: the deflationary trend indicated by the accumulation of gamma risk (the risky waters the captains are now navigating).
At this point of the business cycle, the captains claim government roils the troubled waters, increasing the risk of investment while the trouble pours in over the bow with a deflationary headwind. At the same time, however, they argue the ship will sink without being bailed out with an inflationary pump priming.
Having confirmed that the captains float a bigger-is-better boat and sail the ship with a willing and able Ivy-League crew, throwing the passengers overboard to keep the ship afloat with an accumulating treasure in the hold, the deflationary trend now threatens them. The captains, to avert a mutiny of the bounty, realize they need the passengers to pay the freight and the crew to keep the ship afloat in regulatory waters, or go down with the ship.
"The risk" must be taken not only to keep the ship afloat, but to keep it sailing in the right direction.
Safe to say that today's disappointing jobs data supports that hypothesis; and with the capital in control of the private sector, the argument that government is to blame lacks the proper proof of sound deductive reasoning (one minus one always equals 0) unless, of course, there is some missing variable to evidence some other possibility.
The captains of finance argue there must be some reason for massive unemployment other than because it is what they want, especially those that steer ships too big to sink in risky waters.
That unemployment is the inteneded application of the capital is an easily verifiable hypothesis: equities have risen steadily since the Great Recession. Where did the value come from?
There is a point of diminishing returns, however: the deflationary trend indicated by the accumulation of gamma risk (the risky waters the captains are now navigating).
At this point of the business cycle, the captains claim government roils the troubled waters, increasing the risk of investment while the trouble pours in over the bow with a deflationary headwind. At the same time, however, they argue the ship will sink without being bailed out with an inflationary pump priming.
Having confirmed that the captains float a bigger-is-better boat and sail the ship with a willing and able Ivy-League crew, throwing the passengers overboard to keep the ship afloat with an accumulating treasure in the hold, the deflationary trend now threatens them. The captains, to avert a mutiny of the bounty, realize they need the passengers to pay the freight and the crew to keep the ship afloat in regulatory waters, or go down with the ship.
"The risk" must be taken not only to keep the ship afloat, but to keep it sailing in the right direction.
Wednesday, June 2, 2010
Averting Disinflationary Risk: Avoiding the Value of Assumed Risk
The previous discussion describes and explains how value is determined by the assumption of risk.
The entity that assumes the least risk gains the most value through an economy-of-scale coefficiency that externalizes risk.
Since the legitimacy of value gained is supposedly dependant on the amount of risk taken, gaining value by externalizing risk harbors a civil if not a criminal-like liability. The value gained then presents a risk of liability (a retributive value).
Since the retributive value cannot be reduced without being redeemed, only averted, the value gained is always uncertain and presents as beta-risk volatility. Government is then employed to stabilize the value of the risk.
Transforming beta risk into certain value involves the force and legitimacy of government authority (the gamma-risk transformation).
Once the gamma-risk transformation occurs, risk is externalized and assumes the form of public finance. Various sub-forms emerge that process the externality into a public good. For example, the funding made available to bail out the financial system is a public good applied for the purpose of averting a deflationary trend. Stimulus funding was then provided as a public good to re-inflate the economy (the financial bubble, or the over-leveraging of externalized risk) that caused the deflationary trend, not to dis-inflate the economy with economic growth.
(Funding provided in the form of public goods is not considered "capital" because it is public finance. The private sector is where the risk is assumed for the reward of capital finance.)
Where government acts to avert deflation the private sector acts to avert disinflation. The difference is the value of assumed risk.
For example, big financials used the bailout funding to buy treasuries. The probability of risk (economic growth) is zero. The risk is still assumed in the public sector, externalized into the certain, empirical value of the public debt. The elite largely buy the debt, and the non-elite largely pay it.
It is a re-emergent form of feudalism in which little value is created, only to be plundered.
Rather than averting scarcity, capitalism has been organized into an economy-of-scale efficiency that increases margin without growth. Wealth accumulates with the least amount of risk to the capital invested.
Scarcity, rather than resisted, becomes the objective because it supports prices and the margin. Wealth is then plundered in the form of default and foreclosure and resold at a profit as economic growth.
Scarcity, rather than being averted, is churned, recycled, into the hands of feudal lords competing to plunder with evermore political-economic elegance that masks a zero-sum accumulation of wealth without a legitimate assumption of the risk. The risk is to be assumed by all the other under-classes (the non-elite) in service to the ruling class.
The ruling class (the Iron-Law overlords) is determined by the economic advantage of controlling the rate and distribution of economic growth through an economy-of-scale coefficiency and public goods provided to support the re-cyclical trending in the guise of re-distribution. The macro trend forms an historical ontology that is presumed unavoidable. The presumption itself, however, renders it unavoidable and persists in the form of an assumed risk (the vestigial risk of the non-elite conserved in the Iron Law) inherent to the formation of the capital.
Accumulation of the profit with minimal alpha risk and maximum beta and gamma risk results in a strong deflationary trend. Counter-cyclical Keynesian measures vector the trend (the risk) into a stagflated trend in which the value of the risk is uncertain. Today the risk may be weighted deflationary, tomorrow inflationary, but rarely, if ever, disinflationary.
Avoiding disinflationary risk is accomplished by insuring the value of the risk derived from its accumulation. Capital (the assumed risk) is not invested in growth, which increases alpha risk, but in externalizing the risk into counterparties where it is finally internalized by the public debt in the form of a gamma-risk ontology. Thus, we have a sovereign debt crisis with an increased risk of deflation, which provides the "big" benefit to economies of scale who are organized too big to fail.
(Consider, then, who is "sovereign?" If by natural, constitutional right "The People" are sovereign, they are the debtors. The creditors are then catgorically supra-sovereign. The accumulation of wealth then becomes a struggle for power--sovereign versus supra-sovereign. It is wealth versus the accumulation of the risk transformed into public finance; and since public finance is not considered capital, but public goods, vulgar and inefficient by nature, ensuring the preferred share of the elite is categorically imperative by nature. British Petroleum, for example, will use its economy of scale not to assume all the risk of Deep Horizon, which is the "big risk" the scale supposedly provides, but to accumulate the risk, and limit the liability, in the form of a public debt.)
The volatility that occurs is over the retributive value of the externalized risk. Whether the risk is at a premium or a discount determines which side of the market to be on (discovering the value your risk).
Inflationary policy puts the risk at a premium. Deflationary policy puts the risk at a discount.
There is a risk ontology associated with deflation that threatens the legitimacy of the profit margin (of externalizing the risk, like a bailout). The risk to the legitimate management of risk into an externality (the systemic risk), is to be averted. Keynesian policy presents as this aversion, providing enough demand liquidity to prevent depression, but not enough to finance disinflation.
The money supply is manipulated to maximize the economy-of-scale benefit of deflation (being too big to fail) without internalizing the associated risk ontology (transforming gamma-risk management into alpha-risk management).
(If the accumulation of risk is not transformed into an alpha ontology, it will be managed as a public good in the form of gamma risk. The risk will not be disaggregated and will not be internalized. Instead, it will be massively oppressive to provide the security of public goods, picking winners and losers in zero-sum not unlike what we have now, but could be worse, if we want to assume the risk.)
With a deflationary trend, like we have now, having been well indicated by the level of gamma risk, demand is reduced, and the risk averted, for a disinflationary investment of the capital (economic growth) which would increase the inherent level of internalized risk that comes with a free-market, alpha-risk ontology. It is a Keynesian management of the money supply, relieving the pressure of externalized risk, disaggregating the risk enough to support a pro-cyclical trend that consolidates the growth that occurs.
We see then, for example, Europe being strongly averse to deflation with a strong inflationary tendency. If deflation is not reversed, the trend presents a risk of growing gamma proportion. The value of the risk (the margin) may be discovered and recognized to be illegitimately externalized, which runs the risk of discovering the value of alpha risk over an economy-of-scale efficiency.
Alpha risk is presently valued in the form of externalized gamma risk. The threat of an alpha distribution of the risk results in a high beta presentation of its present value. The result is a highly volatile valuation of the risk that is an accurate measure of a free-market that has been consolidated to externalize the risk.
Deconsolidation will internalize the risk and stabilize markets with an empirically verifiable ontology, the transparency, needed for an economy that allows for a person to get rich, but without the risk of insecurity that always leads to tyranny.
Getting rich does not have to be at the expense of security. The Iron Law is a false ontology confirmed with the continuous test of an alpha-risk hypothesis, resulting in continuous improvement and a stable presence of the risk fairly valued and legitimately derived for a peaceful and prosperous future.
The entity that assumes the least risk gains the most value through an economy-of-scale coefficiency that externalizes risk.
Since the legitimacy of value gained is supposedly dependant on the amount of risk taken, gaining value by externalizing risk harbors a civil if not a criminal-like liability. The value gained then presents a risk of liability (a retributive value).
Since the retributive value cannot be reduced without being redeemed, only averted, the value gained is always uncertain and presents as beta-risk volatility. Government is then employed to stabilize the value of the risk.
Transforming beta risk into certain value involves the force and legitimacy of government authority (the gamma-risk transformation).
Once the gamma-risk transformation occurs, risk is externalized and assumes the form of public finance. Various sub-forms emerge that process the externality into a public good. For example, the funding made available to bail out the financial system is a public good applied for the purpose of averting a deflationary trend. Stimulus funding was then provided as a public good to re-inflate the economy (the financial bubble, or the over-leveraging of externalized risk) that caused the deflationary trend, not to dis-inflate the economy with economic growth.
(Funding provided in the form of public goods is not considered "capital" because it is public finance. The private sector is where the risk is assumed for the reward of capital finance.)
Where government acts to avert deflation the private sector acts to avert disinflation. The difference is the value of assumed risk.
For example, big financials used the bailout funding to buy treasuries. The probability of risk (economic growth) is zero. The risk is still assumed in the public sector, externalized into the certain, empirical value of the public debt. The elite largely buy the debt, and the non-elite largely pay it.
It is a re-emergent form of feudalism in which little value is created, only to be plundered.
Rather than averting scarcity, capitalism has been organized into an economy-of-scale efficiency that increases margin without growth. Wealth accumulates with the least amount of risk to the capital invested.
Scarcity, rather than resisted, becomes the objective because it supports prices and the margin. Wealth is then plundered in the form of default and foreclosure and resold at a profit as economic growth.
Scarcity, rather than being averted, is churned, recycled, into the hands of feudal lords competing to plunder with evermore political-economic elegance that masks a zero-sum accumulation of wealth without a legitimate assumption of the risk. The risk is to be assumed by all the other under-classes (the non-elite) in service to the ruling class.
The ruling class (the Iron-Law overlords) is determined by the economic advantage of controlling the rate and distribution of economic growth through an economy-of-scale coefficiency and public goods provided to support the re-cyclical trending in the guise of re-distribution. The macro trend forms an historical ontology that is presumed unavoidable. The presumption itself, however, renders it unavoidable and persists in the form of an assumed risk (the vestigial risk of the non-elite conserved in the Iron Law) inherent to the formation of the capital.
Accumulation of the profit with minimal alpha risk and maximum beta and gamma risk results in a strong deflationary trend. Counter-cyclical Keynesian measures vector the trend (the risk) into a stagflated trend in which the value of the risk is uncertain. Today the risk may be weighted deflationary, tomorrow inflationary, but rarely, if ever, disinflationary.
Avoiding disinflationary risk is accomplished by insuring the value of the risk derived from its accumulation. Capital (the assumed risk) is not invested in growth, which increases alpha risk, but in externalizing the risk into counterparties where it is finally internalized by the public debt in the form of a gamma-risk ontology. Thus, we have a sovereign debt crisis with an increased risk of deflation, which provides the "big" benefit to economies of scale who are organized too big to fail.
(Consider, then, who is "sovereign?" If by natural, constitutional right "The People" are sovereign, they are the debtors. The creditors are then catgorically supra-sovereign. The accumulation of wealth then becomes a struggle for power--sovereign versus supra-sovereign. It is wealth versus the accumulation of the risk transformed into public finance; and since public finance is not considered capital, but public goods, vulgar and inefficient by nature, ensuring the preferred share of the elite is categorically imperative by nature. British Petroleum, for example, will use its economy of scale not to assume all the risk of Deep Horizon, which is the "big risk" the scale supposedly provides, but to accumulate the risk, and limit the liability, in the form of a public debt.)
The volatility that occurs is over the retributive value of the externalized risk. Whether the risk is at a premium or a discount determines which side of the market to be on (discovering the value your risk).
Inflationary policy puts the risk at a premium. Deflationary policy puts the risk at a discount.
There is a risk ontology associated with deflation that threatens the legitimacy of the profit margin (of externalizing the risk, like a bailout). The risk to the legitimate management of risk into an externality (the systemic risk), is to be averted. Keynesian policy presents as this aversion, providing enough demand liquidity to prevent depression, but not enough to finance disinflation.
The money supply is manipulated to maximize the economy-of-scale benefit of deflation (being too big to fail) without internalizing the associated risk ontology (transforming gamma-risk management into alpha-risk management).
(If the accumulation of risk is not transformed into an alpha ontology, it will be managed as a public good in the form of gamma risk. The risk will not be disaggregated and will not be internalized. Instead, it will be massively oppressive to provide the security of public goods, picking winners and losers in zero-sum not unlike what we have now, but could be worse, if we want to assume the risk.)
With a deflationary trend, like we have now, having been well indicated by the level of gamma risk, demand is reduced, and the risk averted, for a disinflationary investment of the capital (economic growth) which would increase the inherent level of internalized risk that comes with a free-market, alpha-risk ontology. It is a Keynesian management of the money supply, relieving the pressure of externalized risk, disaggregating the risk enough to support a pro-cyclical trend that consolidates the growth that occurs.
We see then, for example, Europe being strongly averse to deflation with a strong inflationary tendency. If deflation is not reversed, the trend presents a risk of growing gamma proportion. The value of the risk (the margin) may be discovered and recognized to be illegitimately externalized, which runs the risk of discovering the value of alpha risk over an economy-of-scale efficiency.
Alpha risk is presently valued in the form of externalized gamma risk. The threat of an alpha distribution of the risk results in a high beta presentation of its present value. The result is a highly volatile valuation of the risk that is an accurate measure of a free-market that has been consolidated to externalize the risk.
Deconsolidation will internalize the risk and stabilize markets with an empirically verifiable ontology, the transparency, needed for an economy that allows for a person to get rich, but without the risk of insecurity that always leads to tyranny.
Getting rich does not have to be at the expense of security. The Iron Law is a false ontology confirmed with the continuous test of an alpha-risk hypothesis, resulting in continuous improvement and a stable presence of the risk fairly valued and legitimately derived for a peaceful and prosperous future.
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