Beyond Binomialism

The practical political-economic model we use now is binomial. It is responsible for the frustration we experience with the republican form of government our founders very deliberately devised to secure the general welfare and promote domestic tranquility.

Our constitutional form of government is deliberately anti-monarchist and more pluralistic. Consolidation of power is, by the wisdom of our founders, based on the historical evidence and their own experience, to be very deliberately avoided.

While a binomial, two-party system looks pluralistic, however, it functions to consolidate power and reduce the ever-present fundamental risk of sovereign power possessed by The People to command and control their fate.

Our founders recognized that sovereignty, even for monarchs, is the baseline risk.

Claiming sovereignty for yourself is a risky business. It is the fundament of power, and its accumulation is contrary to the natural order of things, disturbing to the domestic tranquility, inimical to the general welfare.

The People are constitutionally endowed by nature to rule--to self determine. Our founders correctly recognized this to be a consistently confirmable hypothesis foolishly subjected to self-indulgent legitimacy theories.

Nature does not give a hang about the king's divine right to rule, or the more secular binomial partisan technique used now to secure a popular sentiment with religious fervor.

Where the king once needed a large, loyal bureacratic elite to manage the gamma-risk accumulation, a two-party system has emerged to suggest a legitimate pluralism characterized by the consent of the governed.

Binomialism (a pseudo-competition between Democrats and Republicans, and more broadly the public and private sectors) is needed to reduce the liability of an illegitimate, and detrimental, accumulation of the risk in an environment in which sovereignty is legally deconsolidated and devolved. A bifurcated, partisan loyalty substitutes for the antecedent monolithic allegiance of royalty.

Emerging as the republican form of government, partisan diffusion of the risk innovated its cumulative management. An iron-law, bipartisan, organizational technology evolved along with the strong democratic tendency of the risk to be managed at the fundament by the sovereign power (the natural right) of The People.

In order to avoid the pitfalls of democracy, our founders thought it best to achieve a peaceful and prosperous pluralism through a republican form of government. Although the term "democracy" does not even appear in the Constitution, its operational design is intended to maximize sovereign power at the fundament for a legitimacy of power exercised with the "consent of the governed."

Binomialism reduces the liability of the risk by simulating the consent of the governed and a process of continuous improvement that is the mark, the verifiable proof, of an operant pluralistic process.

Since the management of risk in an accumulated, gamma proportion is political risk subject to electoral sanction, the result of its management is not considered to be a criminal liability. It is absolutely critical for maintaining the Hamiltonian model to keep the management of the risk politically accumulated because of the strong democratic tendency of the republican form of government. This is where Jefferson and Hamilton parted ways.

Hamilton was more concerned with supporting the virtue of a dominant power elite endowed by nature to be the ruling class despite the utopian sentiments of language in the Constitution that suggests a more fundamental power. That language, according to Hamiltonians, is there to empower elite rule with legitimacy. The language is "loosely constructed" to allow the power elite the means to apply power with limited liability, to which Jefferson maintained the Hamiltonians should be held strictly liable.

If they seek to become "the king," which is illegal, Hamiltonians should be held liable by the strictest interpretation of the law, according to Jefferson.

Hamiltonians considered Jefferson's strict constructionism to be impractical if not dangerous. A strict legal interpretation of devolved sovereignty, for example, could lead to a Reign of Terror. To the elite, especially at the time, it was a very real possibility. Anybody could be accused of being a royalist and subjected to all manner of criminal treatment just by trying to accumulate wealth and power (by pursuing life, liberty and happiness).

Of course, the natural right to pursue happiness includes the accumulation of riches, like a king. Resolution of this paradox is at the center of the ideological debate that enslaves electoral politics to a constant accumulation of the risk. The debate (the empirical critique inherent to an operant, pluralistic process of continuous improvement) is constructed to keep the risk in a gamma proportion, motivated by the inalienable, constitutional right to pursue happiness by the strictest construction.

Since the motivational quality of the debate is essentially philosophical, and philosophy is not something most people have a practical command of, the debate lingers in a perpetual limbo of specious reasoning and logical fallacy. How many people know what a post-hoc fallacy is, or care? Their ideology is a psychological condition--literally an object of both classical and operant conditioning. When the bell rings, we salivate; and when that fails, the critical philosopher will be starved into submission, learning his lesson, operantly conditioned, having learned what his happiness really means. Is that not what we are facing as the unemployed face the prospect of no relief until either Democrats extend unemployment or Republicans get their tax cuts for pro-growth investment?

With the probability that we will get a combination, a compromise measure, of both keeps the risk in a gamma proportion, dependant on the directives of a power elite that defies natural law, our Constitutional rights and privileges, by the strictest construction.

Loosely constructed, our natural rights are a philosophical eristic--a tool for gaming the system by psychological manipulation (popular sentiment) just as Jefferson, and Socrates for that matter, critically described and explained it.

Since drinking the hemlock is not the ideal redemption of pursuing "the good life" for most people, popular sentiment is largely limited to a phenomenological interpretation of a power elite, persuading us to run with the herd.

According to bankers, for example, the populist sentiment following The Great Recession is more a nuisance than a force to be reckoned with. The populace, however, is not so naive to think that the compensation of bank executives just appeared out of nowhere. It has to come from somewhere...like the net worth of their own customers.

Despite all the phenomenologizing of expert, Ivy-League economists and pop-media commentators, the value lost and gained that supports bank profits following The Great Recession did not just vanish and reappear out of thin air. It has been consolidated and is being largely distributed to the upper income class. Thus, as Bernanke recently reiterated, we will be in a recesionary trend for at least five more years.

The resulting austerity "derived" from deliberately inscrutible and circuitously indirect means is described and explained by the power elite as the administration of the public good. The People are then rounded up to binomially align, re-align, and run with the herd.

Hamiltonians argue their policies and practices avert the probability the herd will stampede. The herd (the legal sovereign) is a crude, unruly mass that must be ruled by a representative form of government, expressly endowed by the Constitution with the power of any and all means necessary, loosely constructed.

The bailout, for example, and bank profits described as "well in excess of expectations" (not admitting, of course, that the austerity is the source) was sold to The People as a necessary means for securing the general welfare.

We The People must now patiently wait for all that welfare to trickle down, allowing over-consolidated financials to accumulate profits from much-needed austerity.

The market is made for The People to sacrifice as liabilities are settled without risk of criminal liabiliy by too-big-to-fail firms like Goldman Sachs who, after The Great Recession, is only guilty of an omission of information, not commission of a crime.

Despite the glaring miscarriage of justice, The People will be assuaged by the sheer force and legitimacy of public authority described as any and all means necessary having been applied with all due diligence to derive the consent of the governed and secure the general welfare.

Goldman Sachs will publicly disclose its omission, but its admission presents no firm risk because it is too big, by confirmation of public authority, to fail.

Goldman Sachs will continue to be the largest investment bank entrusted with trickling down wealth it only seeks to accumulate (the problem, not the solution).

A concise critique can only describe the public administration of the Goldman case as a tragic farce, not to be tolerated, but it will be.

The outcome reflects badly on the Obama administration and the two-party system. It cannot be blamed on the Bush administration, and the organized alternative is the Republican party. It not only tends to confirm the one-party-system hypothesis, but also provides more evidence the free market is rigged for the consolidation of capital and markets.

At the same time of the Goldman Sachs settlement, Senator Dodd said, not ironically, with full disclosure, following the passage of financial reform, "crisis will happen."

The task now is to organize the consent of the governed, post hoc.

So our choice (falsely constructed) is binomially reduced to either Democrats dictating freedom for the general welfare, or Republicans dictating freedom in the name of the general welfare, to mind the potentially unruly herd. The effect is a net consolidation of the risk, and an aversive consolidation of its value by limiting the risk of liability (the retributive value of the risk--the populist sentiment considered to be more a nuisance than a threat) to political process, managed in gamma proportion.

The binomial processing transforms the alpha risk, accumulating it into a gamma proportion. Elite management of the risk arbitrages the gamma into beta risk that accrues in the form of the current value of the risk.

The TARP program, for example, arbitraged the value of the limited liability to the risk by political, non-market, means. Since the market could not, and still cannot, democratically sanction the bank recipients because of their size, the value of the risk was, and will be, representatively awarded to conserve the value of the risk in the gamma proportion (the value is re-presented and arbitraged as the current value of the risk).

The liability of the banks bailed out by the TARP was inextricably bonded to the current value of the risk, marked to the market. Their failure would have completely reduced the current value to a summary accounting of the risk, suffering the liability of being collapsed, transformed, into an alpha-risk, crisis dimension. While Senator Dodd accurately describes it as an unavoidable risk, the crisis associated with the accumulation of alpha risk can, however, be averted.

While the hypothesis that the elite operated to avert complete economic collapse (complete devaluation of the current risk) is a true statement, it fails to recognize that the means to avert it--gamma risk management of the risk--is what caused it.

Reforming the hypothesis would mean destroying the current valuation of the risk arbitraged into a gamma dimension and returned to be arbitraged in the form of beta-risk volatility, avoiding the alpha risk (the risk of liability).

The Hamiltonian model cycles and recycles the risk, re-presenting its value in a current, useable form, driving the ideological sentiment of the binomial political system into a structured critique of validation rather than the verifiable hypotheses (the successes and failures) of an unfettered, free-and-open market ruled by the herd.

The best way to not be trampled by the herd is to be so big you can't be trampled. It works both politically and economically.

Goldman Sachs and Bank of America are so big they cannot fail; and following The Great Recession, with the market having been even more consolidated and financial reform that assures bigger is better, they only get bigger.

Neither Democrats or Republicans are willing to fix this problem of scale. We have to go beyond binomialism to operationalize the value of the risk with the risk of liability at the fundament.

There is not a political duopoly of power, there is a monopoly of power. Busting this trust requires going beyond the binomial management of sentiment to encourage an alternative independent of bipartisanship.

More powerful than the organizational technology itself is the psychological element operationalized with it. A perpetual lust for dominance is the motive that drives the organizational machinery.

When Democrats and Republicans compete for public sentiment, popular consent is secured in name only (bi-nomially), limiting the liability of the powerful while deriving current value from the aversion of that risk. Deriving that value without true accountability is a psychological trick--it is the risk that is averted.

A true accountability reverts, rather than averts, the value of the risk. President Obama was an ingenius psychological ruse. His rhetoric suggested the subversive reckoning of the risk. The party, post hoc, considers its policies and programs to therefore be the empirical consent of the governed, and the negative vote that disconfirms that hypothesis will be, in the same way, considered by Republicans to be positive verification of its policies and programs.

Breaking the cycle of false induction--to truly test hypotheses--requires a pluralistic mechanism. A binomial party structure is not that mechanism.

The beauty of a free-market mechanism is that it subjects ideology to the rigors, the ethic, the virtue of emirical verification. Its recognition is a transformative process interrupted by eristics concerned with the false efficiencies of consolidated power and the natural predisposition for its pursuit, shaping the sentiment that literally rules the value of our existence.

The transformation is a philosophical one, initiated by recognizing the virtue of an inductive, cognitive process toward realizing the good life of our "natural" existence. It is an ethic to which our founders had been so enlightened, intending a free-market mechanism to be the object of political process (limited government) rather than being subjected to it.

It is time to re-declare independence and re-present the natural rights of sovereign power.

Beyond binomialism is the democratic-republic. It is not one or the other. They are not mutually exclusive practical models, but work together to yield a syncretistic practical effect. Weakness of one is compensated by the strength of the other.

We tend to use an either/or application of the model, however, diminishing the syncretism that would reduce the amount of error toward applying the popular consent of the governed. Instead, there is a deliberate trade off that produces an unstable value of current risk.

The elements for stability are present but ideologically bifurcated to produce a current value of the risk that requires cyclical correction without improvement.

Financial reform, for example, having become law after members of the Republican faction, staging a strong partisan resistance, finally signed to it following a highly technical debate, is a cycle of regulation and deregulation that measurably destabilizes the value of the risk, providing the motive to change it without any real improvement.

Bipartisan compromise is not syncretic, it is discretely binomial, appearing to be an inductive, pluralistic process of improvement. It is idiosyncratic, validating the status quo ante through a deductive process that only looks like confirmation of a popular sentiment ideologically derived.

Popular sentiment beyond the binomial is considered idiopathic and functionally deficient; a psychological disorder that undergoes intensive media therapy to exorcise the radical demons of change from the absolute and uncompromiseable morality of the body politic.

The democratic component of our democratic-republic largely exists in economic form--the private sector: the free-market domain.
From our founding, governance is largely a function of private practice, ensured by governmet in that limited capacity.

Where government acts to ensure consolidation of the marketplace is where we see it beyond its limited capacity (e.g., a multi-billion dollar bailout and a financial reform that accomodates crises its authors assure will subsequently occur).

Free-market economics works, but it requires income to vote in the marketplace. If the income is not present for democratic governance (liquidity crisis), it is well within the limited capacity of government to deconsolidate the capital and provide the liquidity necessary for a democratic form of governance.

The binomial expression of that capacity is bailouts for consolidated banks and compensation for being unemployed.

Beyond the binomial expression is the assurance of a free and unconsolidated marketplace in priority so "We The People" can get down to the business of governing ourselves with the naturally endowed freedom protected by The Constitution of the United States.

Stump'n for Dump'n

With the president out stumping for dumping the Republican policies responsible for the worst economic crisis since the Great Depression, voters must be stumped with policy alternatives that did little to dump the recession and pump a deflationary trend.

The Democratic alternative presents the unfaded image of Nancy Pelosi schleping an oversized gavel to bang-in an oversized healthcare reform bill in the midst of economic turmoil.

While Wall Street was provided with all the funding it needs to plunder Main Street (making markets to produce the "social value" of record debt and massive unemployment), the Democratic party, in a fit of compassionate conservatism, has also been sure to provide a healthcare program. Being poor does not have to mean being unhealthy in the neo-classical, neo-conservative world of capitalism.

The political picture is a farce of monumental proportion, but the consequences are all too tragic and familiar.

Despite the overwhelmingly tragic consequences, and with the political solution being classically reduced to either inflation or unemployment, and both of those being bad for the economy, both parties are nevertheless secure in the binomial domain of a perpetual partisan hypothesis.

"If not this, then always that" is anything but uncertainty. It is a low political volatility that ensures the current value of the risk.

The president's mid-term campaign rhetoric begs the question. If Republican policies are so obviously bad, why is it necessary to feverishly campaign to maintain a Democratic majority? The deficiency here is obviously not Republican.

The current choice (inflation or unemployment) is the classical alternative in neo-classical garb (a deficit or balanced budget). It is a false choice, a self-fulfilled prophecy, providing alternatives that achieve the same result with the false promise of continuous improvement.

Neo-classically, where are we now?

We are currently in a classical, recessionary, cyclical trend with a strong deflationary tendency being resisted with expanded debt.

So, where is the improvement?

What has improved is the complexity of the financial tools used to derive the value from the risk. The technology is made inscrutible to the average voter so that the classical alternative always has the promise of a simple and understandable solution reduced to an either-or hypothesis.

The result is the political eristic we see now, absurdly given the choice of two cross-effective alternatives that always confirms detrimental to the average voter and progressively beneficial in income class (the Hamiltonian model of political economy).

What is the average voter supposed to do when a supposedly wiser government authority always "re-presents" the average voter with the classical alternative, inflation or unemployment (Democrat or Republican)?

The "representative" form of government will either be considered fundamentally disfunctional or, most likely, considered better than alternative models, including democracy, and possible mob rule, a la The French Revolution and The Reign of Terror in which monarchy "re-presented" as the functional alternative.

Faced with one party prepared to inflate the deficit, and the other to deflate it, voters see a compromise coming that requires a whole lot of stump'n now for all the dump'n later.

The classical alternative is a false choice, but there is another choice that is not represented.

Deriving the Value of the Risk

In the quest for short-term profit, means have emerged to derive current value from the perception of future risk.

The perception is not limited to deriving the value itself to assume a useful, current value, but to also control the perceived liability of the distributive risk to the reward.

Mark-to-market accounting, for example, a favorite tool for Enroning your way to success, affects the perception of the risk by projecting it forward with current value.

Though the current value has useful presence, the future is much more uncertain. The feedback can have a disorderly effect from which current value can be derived.

The volatile value of the risk leads to "making markets" and the systemic importance of firms like Goldman Sachs and Bank of America who are so big they can determine the value of risk derived from the markets they make.

It is the size of these firms that makes them powerful, so powerful that they can govern the risk for everyone else. Both investing and trading is reduced to guessing where the big money is going next to make and mark the market, and markets will be made depending on the position taken.

The reason trading ranges are so broad is because the market is being manipulated for the short term gain of derived risk value. If your costs are highly energy dependant, for example, the probability of risk is so high you are likely to engage the market makers to make the market for you. It would be naive to think the market will not be made to your detriment with a liability limited to proving the probability of the risk defended by a firm that has all your money and none of the risk.

The housing market is a visible demonstration of derived risk. Value has been generated on both the up and down side. The price differential has been generated by derivative financial instruments that transferred the risk to future value so that the value differential is simply: long on current value, short on future value.

The risk that generates the value (the boom and bust dynamic) is always present but has current value by the disposition of instruments for deriving value from the risk.

The value of the risk is largely time dependant, and it is the function of risk-transfer instruments (making markets) to time the market with certainty that is limited to the market maker. The result is both a zero-sum profit and a limited liability.

The value derived in zero-sum avoids the risk of liability since the value has the "assumption" of risk. The value derived, however, reflects the value of the risk whether it was actually assumed by the beneficiary or not.

Consider, for example, risk instruments designed to drive up home prices with easy credit without the investment in growth to pay the mortgages. You don't need a PhD to figure out how to derive value from the design (the making of the market) with virtually no risk, especially if the capital is so consolidated that the timing is in your control. The assumption of the risk is a fraud, and fraud is a crime, especially if it causes a detriment like The Great Recession.

Consolidation of the capital is the essential source of the value detrimentally derived, yet legislators consider it to be an asset, not a liability. Financial reform has been expressly identified as not being a function of organizational size. It is only a function of regulation, or the absence of it, according to the reformers.

This is a monumental mistake! The president can give speeches all day about how the Democratic Party's economic plan is obviously more practical than staying the Republican course, but without clearly identifying the size of the firm as the source of the problem, the derivative value of the risk is conserved. Only the timing changes; and since the timing of the value derived will be determined by government regulation, the derivative value will then have the legitimacy of public authority. Not only is the risk of liability reduced, but any retributive value can be blamed on government intervention.

The retributive value of the risk is then freely associated with government intervention and not a fundamental attribution of organizational size, except that government is too big.

What continues to ail us will be legitimately blamed on government intervention in the marketplace, but only as a derivative of that value. The value is actually derived from the allowable size of the firm and the consolidation of the risk.

The Value of Uncertainty

Uncertainty creates value.

Beta risk, arbitraged into short-term profit, fits an investment model that is operationalized with the gamma risk accumulation of that value.

All the "uncertainty" that has pro-growth investment on hold (an unsure tax liability and the level of anti-deflationary stimulus) is being fundamentally attributed to government intervention in the marketplace (the gamma risk).

While the fundamental attribution of risk is correctly gamma, the causal relationship is false, resulting in fundamental attribution error and a psychological affectation we call "market sentiment."

The false sentiment creates a false valuation of the risk. Its current value must be adjusted for the fundamental attribution error. It is an affective disorder--it literally has a disorderly effect--that results in volatility.

The volatility created is transformed by the free-market mechanism into what appears to be an uncertain oscillation of current value based on the future value of the risk. The value is rediscovered with such a high frequency that it appears to be out of control.

The future value of the risk, however, is all but uncertain, and the disorderly oscillation, defying technical indicators to suggest all the uncertainty, is really the deliberate result of fundamental attribution error.

Government does not cause the beta-risk volatility. The argument is a post-hoc fallacy.

Government does not cause the gamma risk, it is the gamma risk. It is the risk that cannot be avoided, only transformed. It is the fundamental risk that never goes away. It is always present, and always presents as the probability of risk. It is a persistent value that cannot be created or destroyed, but accumulated and distributed.

Probable accumulation and distribution of "the risk" is what causes oscillation of its current value, and that value can be manipulated into a highly certain effect with the highly certain value of a stimulus-response affectation.

Derivatives are designed to cause that affective disorder, currently the target of government regulation.

Government is not the cause of the risk associated with "making markets" (vehicles for tranferring "the risk" into a gamma proportion). It is the effect. This is where political-economic philosphers like Ayn Rand fail. If "the risk" were allowed to accumulate without "effective" government intervention, it will self-correct with complete certainty (it will, certainly, implode and catastrophically burst in a gamma-risk proportion).

Government is not what is to be avoided, it is the accumulation of the gamma risk and the beta presentation of that risk in the "certain" value of its current volatility.

The accumulation of value that occurs looks like an ontological uncertainty, but it is not.

Who could have known that trillions of dollars of net worth would be consolidated into the upper-income bracket in the latest cycle of boom and bust?

It happened, but the benefit is really not an act of deliberation. It just happened. Nobody caused it...it just happens. If it were ontologically meant to be any other way, it would be.

With or without government intervention, so the Ayn Rand kind of argument goes, the result is ultimately the same--the winners will win and the losers will lose. However, the argument continues, government intervention to reduce the risk of loss causes a productive deficiency and deflationary crisis, resulting in a dead-weight loss. We are better off just letting the market be (and allow the Enrons of the world to manufacture shortages and commit massive fraud).

Adherence to the Hamiltonian model of government (cumulative management of the risk to a narrowly distributive benefit) makes the value of "the risk" all but uncertain.

Without government intervention that prevents accumulation of the risk, promoting its deconsolidation rather than its consolidation, crisis will always determine its value, and its current (useable) value will always be more determined by the probability of its political than its economic management.

Political management of the risk gives it elasticity. If it is too inelastic, the crisis will have a more uncertain market value.

Since the accumulation of value relies on the certainty of a market legitimacy, it is absolutely critical to maintain the value of that legitimacy. Without it, the value is highly uncertain. The polarity of the current value can change with sentiment, and that kind of retributive volatility presents a current value that is detrimental to the currency (the use value) of a power elite functioning as a ruling class empowered with market value "governed" by political management of the risk.

Political management of crises cycles the gamma risk into beta proportion, preventing an alpha valuation of the risk. When the gamma is too high, as it is now, it transforms into beta risk to be managed by government authority. That authority will be used to prevent the declining rate of profit, presenting a current valuation of the risk that is really anything but uncertain.

Take high-frequency trading, for example. As it becomes apparent that it can "govern" the trading range of equity markets, the loss of legitimate process causes regulatory intervetion. Since trusting self-regulation of the market is a low probability without deconsolidation, government will intervene to "govern" the process, giving the outcome the force and legitimacy of public authority. The value of the risk has been transformed from private to public authority, and conserved as "market" value. The uncertainty (the risk) is still present to produce an alternating currency of value, but easily transformed into a direct currency of accumulated benefit with a low impedance value.

At the macro level, the false uncertainty (the fallacy) creates the value to be arbitraged in the free market which, in turn, resists the declining rate of profit without growth until a favorable tax policy can be extorted or a Keynesian stimulus occurs.

Since there is no deconsolidation into an alpha risk proportion, the elasticity of the risk is "governed" to effect a shortage (slow growth).

By increasing the supply of money in the name of growth, the declining rate of profit is resisted as margins get support.

It appears that government is causing shortage. Profits, then, due to shortage, are "fundamentally" legitimate, not the result of speculative demand, and the proposed financial reform will, by misattribution, kill the formation of capital needed to relieve the shortage government has seemingly caused. Government, then, foolishly kills the hand that feeds it.

The fallacy built into the Hamiltonian model is an ingenious fraud. It stems from an error of known quantity that fundamentally misattributes the risk, and thus the value of that risk, inspiring a false sentiment that keeps the media fully involved with a persuasive but fallacious, post-hoc political ersiticism.

A problem kept fully involved is never likely to be resolved.

The eristic provides uncertainty of a known quantity, and the problem preserved is value conserved.