Bonding the Risk

Another sucker's market in the making, the bond markets are playing off Geitner's sentiment for a more progressive tax code to reverse a strong deflationary tendency and an exploding budget deficit to support demand and, more important, recycle the debt.

The gamma risk is getting too high--so high that even some of the wealthiest people are calling for a more progressive tax code.

To reduce the gamma risk and recycle the value in a classic form, it is necessary to bond the value to the risk taker. With a $500 billion move into municipal bonds so far, and the bubble growing, for example, there is plenty of money to buy the debt, but where is the money going to come from to pay it? Keep in mind that most of the federal stimulus money has been earmarked for state consumption--a public good being financed by monetizing the debt at the federal level and appled at the state level at around a seven-percent yield.

In order to keep the risk distributively valued in the form of a public good, the lost value to assets, like housing, incurred by the average income will be recycled in the form of a generalized benefit, operationalized with a "bonding authority" to convert the lost value into a consolidated gain. That gain, of course, is to be taxed at a low marginal rate to ensure economic growth which, again, invokes the detriment (the lost tax revenue that will be monetized into public debt) as a generalized benefit.

The objective is to regress the burden of the public debt, reversing the empirical expression of retributive value presenting a gamma-risk ontology (risk--a liability--that cannot be avoided). The risk must be restructured to ensure its future, accumulated value. Debt will be restructured, bonded, and recycled to achieve that objective. It is a process the Fed and Treasury are now engaged, facilitated by major bond brokers like Pimco who suggest recycling real estate debt with a new thirty-year bond at six percent.

(Hmmm... how about three percent... or maybe one percent considering that too-big-to-fail financial institutions leave the mortgagee with all the risk!)

Rather than write down the losses, and retribute the value, big banks are looking to turn this liability into an asset, engaging in all manner of technical analyses along the way to narrate the regressive burden as bonding with the general welfare (turning around the housing market), gaining large amounts of arbitraged value, derived from the gamma risk ontology.

While the risk bonded to The People is sold as a public good, it actuates a consolidated benefit that accrues to the upper-income class of the private sector. It is a fraud to be perpetrated without risk of liability, accumulating even more gamma risk, which is dangerously overaccumulated now, indicating a high-frequency, accumulation-distribution oscillation that makes a double dip look like wishful thinking.