Demand and Disinflation

Using the stock market as a measure of relative common wealth, retail investors fear being in the market. It's too noisy for an unhedged risk tolerance.

By focusing on the fear factor, professionals (the hedgers) want to minimize the loss of wealth being the primary reason retail investors are not "in." It is the hedged risk that retail investors really fear, however, which has and will reduce their net worth if put at risk.

Small, retail investors are not "big" enough to survive the business cycle (the current deflationary trend). They cannot be "in big" like the hedgers with wealth accumulated by deflationary trending which in the current case began back with the Bush tax cuts.

Combined with the Bush-era tax cuts for the rich (fitting the Hamiltonian model), consolidation of the financial sector along with lax regulatory oversight and market accountability predictably caused a great recession. Small investors (small businesses generally) have experienced consolidation of their net worth (exactly what the Hamiltonian model is supposed to do). The result is wealth being much less common and is the deflationary trend being experienced (the demand reduced), verified with a low consumer sentiment.

More than the fear of risk, the retail investor does not have the money to be invested, and what they do have they cannot, or will not, risk. Flash trading, for example, manipulates prices and technical trends (stops and limits) with high frequency and massive volume that defines (technically delimits) what it means to "be-in big." The large size and momentum causes the deflationary risk that accumulates the wealth and consolidates the risk for government management (and thus the uncertainty that supposedly keeps capital from pro-growth investment to make the wealth more common and reduce the deflationary risk). For the retail investor...the risk is "off" (which means the gamma risk is "on") for a very long time.

Low volume in the equity markets simply indicates a massive consolidation of the wealth. The wealth is much less common, and that reduction is empirically verified by the the low volume combined with the length and depth of the recessionary trend. It is less a function of fearing the risk than not having the funds to risk because all the risk has been consolidated and is being presented in the form of massive public debt. (Keep in mind that if the Bush tax cuts are extended the risk is assigned to the least able to take it--the least able to pay, or the highest credit risk that cannot get a loan to supply the demand--which will extend the recessionary trend and the budget deficits needed to provide the missing demand.)

Wall Street analysts are reluctant to describe and explain Main Street's lack of participation as lost net worth because it suggests an accounting of where it went (and the need for a massive public debt). Of course, mainstream economists maintain it does not exist in zero-sum but just vanishes into thin air. However, that would not explain the support equity prices are getting at low volume.

To avoid accounting for where the lost value went, support for equity values tends to be described as a function of QE--cheap money leveraged into investment instruments--inflating and deflating asset classes at high frequency, which keeps what retail money is left away. Retail investors, however, cannot afford the risk because their net worth is being used against them.

The level of risk present to the retail investor is a warning sign--the market is too consolidated. Until the deflationary risk is transformed into a more disinflationary risk (more alpha and less beta and gamma risk), professional investors are head-to-head in a zero-sum game.

QE, instead of expanding supply and adding alpha risk, is being used to accommodate its consolidation. Money keeps being added to be quickly consolidated by professional investors who are not waiting for it to trickle down to the retail investor, but taking a capital gain right out the discount window and onto the trading floor.

Instead of big, institutional investors being reduced to a competitive, alpha-risk dimension that relies on economic growth to produce a capital gain (having arbitraged and "derived" their own fate into competition over the spoils--i.e., the declining rate of profit), the risk is reduced to a gamma-risk dimension dependant on public finance.

Public finance of the risk proportion inflates the money supply. Gold, for example, being priced into an asset class (a store of current value) means investment is not being made to add supply (economic growth). Disinflation is being resisted, adding deflationary (gamma) risk and the need for more public finance, instead. The result is a debtor-financed recovery, building a huge bubble (a crisis proportion) just waiting to burst and send us into a hair-raising double dive.

Inflation of the money supply is not being used to a disinflationary extent. It is being used to support a deflationary extension of the risk. The result is continued demand reduction--the double-dip proportion that is the subject of so much speculation and largely dependant on the extent of political risk (the gamma risk proportion).

A high gamma-risk proportion bodes bad for Main Street because it measures the current value of deflationary risk (demand reduction). As long as the gamma is kept in high proportion, the disinflationary risk is proportionately reduced. Deflation will be extended until the economic environment is so hostile to small business survival the tax incentives made available for economic growth will be consolidated, which supports the problem.

The risk is rendered entirely political for both Wall Street and Main Street. We are head-to-head; and considering income determines the level of self-determination, the probable value of the risk is well consolidated.

After the value of the risk (capital) has been consolidated to the fullest extent, it is then converted into wealth (private property). The stored value (wealth) is retailed (converted) to investors in the form of working capital (a common good), but not without a big short on the long bond, ensuring the disinflationary risk (the probable commonwealth-valuation of the gamma risk--the demand needed to reverse deflationary trending) in the smallest of proportions.

Healthcare: Disinflation or Deflation?

First of all, on the political side, Democrats argue that people don't know what is in the healthcare bill, and when they find out, it will have their consent (an apt description of tyranny in the republican form of governance).

On the economic side, the beauty of the healthcare bill assumes people will forget what is wrong with buying insurance in the free marketplace. Maybe we will forget buying requires adequate income, and if costs are going up (inflation) and your income is going down (deflation), your income, by definition, is verifiably inadequate. The problem, then, rather than not having adequate income, is not having insurance, and the solution is to provide it without adequate income (without self-determination).

There are nothing but speculative promises from Democrats and Republicans (the party) to increase income and reduces costs. The Bush tax cuts, for example, will not be voted until after the mid-terms, which will significantly determine the income side and the ability to pay for healthcare costs, for example.

Like Warren Buffet was recently quoted as saying, "if you need to pay for something, you have to go where the money is." So Republicans "pledge" to extend all the tax cuts of the Bush era (of the Great Recession) to provide the income (the demand) the economy has been deprived.

The vast majority of Americans have to wonder how the more-immediate conservative element of "the party" can successfully sell an obviously failed economic policy. The detriment is so extensive, and still growing, Republicans cannot reasonably expect the "Pledge" to be a credible expression of a populist political program. There must be some other expected benefit, or there is really nothing to lose by clinging to a failed policy platform if the popular vote is fully expected to cycle back to it, and choose the detriment.

It is absurd, of course, but voters are binomially determined to the detriment. All voters immediately have is a negative vote that applies a false consent to a risk (the Great Recession) that is all-too-well known. Just being aware of the probable detriment does not infer consent if the means are fixed to prevent it. Detecting the detriments of tyranny does not make it any less tyrannical.

To reduce the political dissonance (the extreme absurdity), Republicans will use the new healthcare legislation as a distraction. A controversial healthcare reform bill made to be so large and complicated that it will require a master's degree to administer makes more sense in a binomial, electoral context.

The impending fight over healthcare reform will be the distraction needed to continue applying the deflationary risk, which supports the double-dip hypothesis.

Healthcare reform itself provides plenty of deflationary support despite its being touted as a disinflationary, price-reduction program. (Remember that disinflation is price reduction that increases income and demand, while deflation reduces income and demand.) Combined with the binomial tendency to support the macro-deflationary risk, demand will be too reduced to support the equity valuations now being anticipated to rally with or without QE-2.

While support will be provided for healthcare-sector incomes to supply the demand, without reducing the barriers to entry, the supply will not be added. The disinflationary effect is dependant on the ability to enter the marketplace, but according to popular wisdom there is more efficiency in consolidation, which will reduce the price.

Since barriers to entry and rising prices are attributes of consolidation (along with unemployment and demand reduction), the detriment, instead of being reduced, is reorganized and re-extended. Deconsolidation is required to produce a disinflationary effect, reducing prices without reducing demand. The price support, then, provided healthcare-sector incomes to add supply will, instead, have a deflationary effect, reducing discretionary income, supporting the recessionary trend.

There is not much disinflationary benefit to passing tax incentives for creating small businesses, for example, that will be crushed under the weight of consolidated entities.

Without a highly deliberate deconsolidation of the healthcare market, the distribution is decidedly trickle down. It is a verifiable means of supporting the general detriment of inflation-deflation risk modeling that has most recently resulted in the Great Recession.

Since repealing the healthcare bill will be a generally disruptive action, it will be important not to throw out the good with the bad. Key to a commonwealth representation, however, are measures added to deconsolidate the marketplace, yielding a reform that provides a disinflationary benefit by denying a deflationary accumulation of income that will not add supply.

When demand exceeds supply--inflation; when the inflated income is accumulated and not reinvested in adding supply--deflation; but when supply is added with a distribution from the accumulation rather than borrowed in a crisis-recovery mode--disinflation occurs. Supply is added from the accumulated capital in a sustainable, non-crisis proportion; not by reducing demand, like we are doing now, in a deflationary, crisis-of-overproduction (gamma risk) proportion, condemning the commonwealth to an unnecessary and foolish process of deliberate deprivation.

Taking the "Pledge"

To take the Republican's "Pledge" is to take the risk. It is an attempt at risk novation with an inferred consent of the governed.

It is a spurious political measure that yields an inflationary-deflationary economic detriment with a populist tone.

It is a reapplication of social contract theory like "The Contract With America."

The People need to make it perfectly clear: The Constitution of the United States is "The Contract." Its terms do not need to be renovated or renegotiated. The proposition, however, does indicate a critical deficiency--a dissonance between the ideal and the expectation of its attainment; and the expectation, We the People do declare, is not negotiable.

It is critical to understand that our Constitution categorically, with the strictest clarity, condemns and renders illegal a social contract that subjects The People to tyrannical forces. Extra-legal contractual arrangements are not only prohibited, their proposal indicates a clear intent to corrupt our God-given rights with the uncivil aspirations of tyrants.

"A Pledge to America" may seem to be just another political platform providing the base for the latest round of faux competition, but it also attempts to reshape the revanchist sentiment into a faux consent for a status quo ante that goes back to the reign of constitutional monarchs.

Constitutional plutocracy is not the ideal form we should pledge the empirical proof of a popular vote, binomially derived or otherwise, tricked and trapped into the detriments of an uncivil authority.

Reclaiming the foundation of our heritage is to reclaim The Revolution, rejecting pledges of loyalty that our Constitution strictly forbids in defense of the Rights of Man.

While few legislators may be analytically aware of an historical dialectic, policymakers do act to prevent a synthesis, keeping a negative progression back to the future. Even with over 200 years of resistance, however, the tendency to a commonwealth persists and continues to gain the support of a popular consent.

The Bourgeois Revolution

There is a spectre haunting America--the promise of free-market economics.

All the bourgeois values handed down from the days of mercantilism--hard work, industry, commerce, honesty, strength of character, sacrifice, self-determination--now haunts the distributive value of capitalism.

A revanchism now populates the empirical sentiments of a popular consent. The middle class, not to be robbed of their hard work and fortitude, are beginning to demand an accounting of categorical imperatives that categorize the value they produce as value to be deprived (to form the capital) in their self-interest.

Now, as it was with the emergence of a bourgeois class in opposition to the crown, passing the wealth through a power elite for redistribution in the form of debt is not exactly the ideal arrangement. Now, as it was then, pledges will be made to render a more ideal proportion, but The People, at this point, are not likely to buy it.

The revolution is not quite as dramatic as haunting specters or as logically linear as historical dialectics, but there is a significant revolutionary spirit that retraces the historical memory of what it means to be a constitutional republic that protects and defends the inalienable rights of man.

As I pointed out in previous articles, when the risk attains a critical proportion (the gamma proportion that cannot be avoided), a logical critique occurs that assesses the current valuation of "the risk."

Following what is being called "The Great Recession," there is a growing popular perception that the business cycle is not as much an ontological risk as it is a deliberate confiscation of property by an elite of power (much as Jefferson described in his critique of the Hamiltonian model).

Where once the crown and its subjects exchanged pledges of risk and reward, the business cycle derives value and accumulates wealth and power by more highly technical means that literally double hedges the risk to its subjects without consent.

Being "subjected" to risk, rather than consenting to it, is not only an arrogant offense of dignity in priority, but subjecting The People like the crown is strictly forbidden by the Constitution. Subjection is not a legal form of governance.

Prosecuting the free-market system is becoming more than a function of identifying ponzi schemes and busting trusts with a criminal intent. It is taking on a revolutionary aspect. We are now more prone to identify sources of systemic risk and prosecute that risk with empirical value (who wins and loses in dollar amounts). The risk ontology is being taken off its abstract head and put on its empirically verifiable, materialistic feet.

It is in no way a fiction or a passing fancy. This is the real thing. Its time has come, which means its resistance just strengthens its cause.

The assumption of risk will not be re-chartered with ponderous political promises and the puerile pledges of pampered potentates. The People are too sophisticated for that. They are ready to re-assume the risk in an entirely new form of self-determinism that empirically verifies the consent of the governed.

The People are ready to realize "the capital" (the value of accumulation) as a means of liberation rather than the value of exploitation.

Democracy and Disinflation

Political-economy analytically models the interaction of politics and economics. What seems random, spurious, and confounding in one dimension can be explained by its interaction with the other.

An analytical trick is to treat the two dimensions independently to deduce the evidence for supporting particular hypotheses (what logicians call, a Procrustean bed). Wholistic analyses avoids the analytical tricks inherent to political and economic arguments, policies, and evaluative measures.

If self-determination is a primary political objective, for example, what does an inflationary or deflationary economic environment indicate? What then, both politically and economically, is the measure of success?

Disinflation, for example, is an economic risk to be avoided but politically indicates a high degree of self-determination. Both producers and consumers self-determine their fate, obviating authoritative, political management of risk, indicated by a disinflationary economic environment.

We often hear disinflation spuriously equated with deflationary risk, confounding it as a political measure of success. When producers consolidate to gain more self-determination than consumers (or labor), the risk of disinflation is reduced and measured by the rate of inflation. As the value (the risk) accumulates to the producers, the deflationary risk (the declining rate of profit) increases and presents as purely political, gamma risk. Evaluative measures are now the object of ideological debate, spurious and confounding.

The more disinflationary risk is minimized, the more political risk accumulates. It is then necessary to consolidate the accumulated risk to manage it. The Fed, for example, manages aggregated risk to a distributive effect that is measured as either inflationary or deflationary. While it considers these measures to be purely economic, they are together, nevertheless, the measure of political success.

So, for example, multi-million dollar businesses file S-corporation tax returns that "pass through" income to a "small" number of owners. Nominally increasing the number of small businesses empirically verifies that increasing the number of small businesses (deconsolidation) does not have a disinflationary effect since we are currently fighting deflation (consolidation). Spuriously inferred is the conclusion that disinflation is a deflationary risk to be avoided. The political measure of the economic risk is effectively confounded.

A more fundamental example is tax-policy risk which fundamentally combines the political and economic dimensions.

Since tax policy entails a classification of risk, the measure of success is equally classified. Higher incomes, hypothetically, require favorable tax policy which reduces the risk for lower classes. This is the Hamiltonian hypothesis and its measure is political stability that comes from economic prosperity (higher incomes which allow for more self-determination--i.e., discretionary spending).

After more than 200 years, the Hamiltonian hypothesis has serious confirmation problems. The risk the Hamiltonian model supposedly reduces has become so overaccumulated and consolidated it can no longer be avoided. It has become fully gamma.

That we have a republican form of government is confirmed with every election cycle. That we have a free and open, democratic form of economics (a free-market system) is disconfirmed by the very classification of risk that determines tax policy.

At this point in our political-economic history, the argument that lower incomes subsidizing upper incomes benefits the lower classes has reached the fullest extent of disconfirmation. The political risk (the gamma) is, at this point, unavoidable.

How can the political risk be avoided at this point?

Look no further than the fundamental, economic measure for democracy and self-determination--disinflation.

Disinflation will continue to be ignored...avoided by every possible means. We will never hear either Democrats or Republicans, the Fed or the Treasury, the President's economic advisory or any other mainstream policy advocacy public or private talk about the value of disinflation.

The debate will focus on something like "The Pledge to America." The debate, both public and private, will be largely political to avoid economic measures that indicate the level of risk to Main Street. The risk, then, will be applied (or, more accurately, economically derived) by the fact of its accomplishment and bureaucratically managed to mitigate the liability without the consent of the governed.

Political artifices like the Pledge to America engages the party system in a re-novation of risk assignment. The novation occurs in a legally representative form, sanctioned by a political process that only remotely figures a disinflationary economic measure.

Since small businesses have been significantly reduced in number due to the deflationary trend, for example, what is left (pass-through businesses with assets that are anything but small) not only get bigger by cyclical default but also get a tax subsidy that would otherwise cause a disinflationary measure. The tax subsidy, ex-post-facto, renews the inflationary and deflationary valuation of the risk. While this process is characteristically capitalistic, without a significant disinflationary effect, a free-market mechanism is not confirmed.

Without ensuring a free-market mechanism in priority, public policy resists the democratic compliment to our republican form of government. Contrary to Rand Paul's argument, for example, that our form of government measures up to be too democratic, the effect of burgeoning budget deficits (inflation), public debt, and economic contraction (deflation) indicates the missing means of the market mechanism to render a more pure, democratic form of governance.

Rand Paul's theory of the constitutional republic yields the inflation-deflation indicators that effectively crowd out disinflation as the measure of political-economic success.

Disinflation and Deflation

The Fed, after its FOMC meeting, said it will discourage inflationary pressure in line with its mandate.

While deflation is the larger threat, the committee recognizes the potential for inflation. In a Keynesian environment, this kind of potential volatility indicates the capital, despite being copiously added to "accommodate" growth, is too consolidated.

If disinflation, rather than deflation, was the current trend, the Fed's FOMC meetings would not be so noteworthy and the meetings themselves more about how the wife and kids are doing, and maybe what you had for breakfast. Instead, we hang on every word to detect the probable tension and volatility between inflationary and deflationary trends. Unfortunately the fate of millions of Americans hangs in the balance--hardly the pluralistic model of self-determination.

The more probability of disinflation, the less probability of deflation. Why is it then the Fed is always preoccupied with the probability of inflation or deflation, but not disinflation?

Disinflation is the result of ensuring a free and unconsolidated marketplace. The less consolidated it is, the more open it is.

Since disinflation is the result of an open market, it seems like the Federal Open Market Committee would be more preoccupied with producing a disinflationary effect. The Federal Reserve, however, is more interested in controlling the instability than effecting stability.

The instability is conserved to the practical effect of, ironically, closing the market enough to minimize the probability (the general benefit) of disinflation.

Disinflation has a commonwealth benefit. Since providing for the commonwealth is at the expense of consolidation and the benefit it provides (recessionary consolidation of the wealth like we are experiencing now), the Fed tends to resist disinflation and support inflationary tendencies (to the extent of its mandate) that are the result of consolidation. The way it is now, for example, the deflationary threat is so pernicious that inflation is an acceptable alternative, but only if disinflation is not a probability.

The best way to avoid deflation and inflation is to try and prevent it. Instead, the Fed, and the regulatory authority generally, "accommodates" the instability because it arbitrages (arbitrates) value in zero-sum to create capital gains by hedging the risk the instability represents.

For example, if ETF's collapse under the weight of its double-hedge creation vehicles, it will be the Fed (the taxpayer) to bail it out. Since the profits generated up to the point of collapse are not at risk of being retributed to a resolution, more money is added to the supply (accommodative Keynesianism). The risk of deflation is traded for inflation to yield a stagflationary effect.

The market is being rigged (hedge funded) so the unhedged risk (main street) is left holding the bag (the detriment in a zero-sum proportion). Since this occurs with the highest order of intent (the consequences are not ontologically unintended or unforeseen), the reward is retributively valued and liable for the risk assigned to the risk-bearer without consent in zero-sum.

Assigning, or transferring, risk to unconsenting parties is not a sophisticated business strategy, it is an ignoble, cowardly criminal act every bit worthy of prosecution to conserve the openness, the credibility, the virtue, of a free market. The credibility of a free-market legitimacy must be prosecuted to the fullest extent or it will perish leaving nothing but the tyranny it would otherwise prevent if allowed to obtain with a disinflationary effect.

Transferring risk is a legitimate business practice for controlling costs, not for merely gaining capital derived in the dark behind closed doors to manage the risk into a deflationary or stagflationary effect.

The Fed, for example, is keeping the market open for practices that close it. Main Street should consider that completely unacceptable, and there is a growing popular movement to open the market in a meaningfully visible (accountable) and unobstructed (unconsolidated) way.

A free and unconsolidated marketplace is openly accountable with few if any barriers to entry--it is disinflationary.

It's time for controlling inflation by the most direct means possible and prevent the production of profits without the prior consent of our full, free-and-open participation as mandated by The Constitution of the United States!

Shorting the Long Bond

The probability the price of the long bond would be lower at this point of the cycle has been nearly zero. Discounting the risk, the rate is at a new low, and if you had been following the risk-modeling presented on this site, the discount has indicated being long on the bond.

Throughout the articles I have presented on risk analyses and assessments, I have identified an unwillingness to accept models among the mainstream that present non-pluralistic assumptions. This is largely because it presents a dissonance. The political rhetoric analysts use to justify policies and practices have clearly diverged from the touted benefit. Not only does this present a significant lack of analytical credibility, but an increased risk of liability for the mainstream's clientele.

As I pointed out in the previous article, for example, continued QE is not an inflationary risk. The deflationary trend is so strong (the gamma risk is so high), the probability of inflationary risk is nearly zero.

Paradoxically, the only reason inflationary risk is not fully discounted to zero is because of the high risk for commodity price inflation. The high gamma risk is driving this trend, but remember it is the nature of the gamma dimension to stop and reverse this trend by political fiat.

In an over-accumulated condition, commodities are overbought, and the effect is deflationary. The inflation accumulates counter-cyclical, stimulus measures, leaving consumers with less discretionary income like tax increases on the middle class.

Since commodity inflation occurs by the pressure of an over-accumulated and organizationally consolidated capital that reduces consumer demand and the risk of disinflation at the same time, the result is cheap money and the high long-bond price (which is a non-pluralistic economic modeling). Money is cheap to buy commodities and make a profit, but money will not be cheap if there is a demand distribution and higher employment. The value yielded is non-distributional, presenting a persistent deflationary (high gamma) risk.

Eventually the non-distributional bubble will burst with the gamma risk becoming so overweight--the burden of debt so overwhelming--that a distribution must occur to reduce the level of dissonance. That is when you short the long bond, indicated by non-pluralistic modeling which also serves to indicate what ails us.

The Keynesian alternative allows the risk a seemingly infinite extension, but we are beginning to measure its practical limits in the form of an accumulated and organizationally consolidated gamma-risk proportion.

Investors should keep in mind that although the high probability of middle-class tax cuts will reduce the gamma risk and support equities, QE will then lose support. However, as the distribution is quickly accumulated and consolidated (absorbing the counter-cyclical benefit), QE could regain support in "short order."

Bankrupting the Nation

A popular revolt has raised the question,
is the government bankrupting the nation?

Today's FOMC meeting will tell us just exactly how "open" the market really is, for example, which should indicate how bankrupt we are and are going to be with the highest degree of technical certainty. (Keep in mind, of course, that an "open" market is a non-exclusive, democratic process, and a "federal committee" implies a governance resolved to ensure it.)

Since bankruptcy renders an incapacity for economic participation, the Federal Reserve is entrusted to keep us solvent, literally keeping capital (useful current value) in reserve to prevent the crisis of insolvency (liquidity crisis), and keep the market open.

There are essentially two options for keeping the market open in a credit economy: extending it, or forgiving it. There is, however, only one option the Fed uses--buying and selling debt. The Fed is not empowered to forgive debt, but is empowered to retire it.

Paradoxically, when the Fed retires debt, it expands the money supply. When it is too "forgiving," let's say, the debt paradoxically becomes overextended. There is more money to spend, but it buys less as prices rise to reduce (consolidate) the supply of money (to reduce the risk of competition through economy-of-scale). Instead of reducing debt, it increases it, and the result, paradoxically, is liquidity crisis. It would seem, then, the antidote is to not be so forgiving, but the difference is whether the extent of the crisis is a recession or a depression. Currently, for example, while the vertical extension of the crisis has been averted, it has been horizontally extended.

If the Fed keeps interest rates low, the market is more open than if rates are higher because the economy has liquidity. As long as the market has liquidity, our nation is not bankrupt--that is, despite liabilities exceeding assets, bankruptcy is never declared. This means that we are always sovereignly solvent, but our currency is devalued. The dollar is worth less. It buys fewer goods and services.

Even with a high amount of liquidity, if the money quickly recycles to the top quintile of incomes (if derivative markets continue to drive commodity prices higher on the news of a technical recovery, for example, and healthcare incomes continue to outpace that and are reinvested in derivatives), the market is not as free and therefore "open" as it could, or should be.

If we are to identify the source of common bankruptcy that plagues our nation, consolidation of the capital is where you will find it; and after the Great Recession, the market is even more consolidated, or closed, with new financial regulation and healthcare legislation that continues to consolidate income and bankrupt the nation.

The FOMC is going to tell us that state-sponsored capitalism has sponsored a technical recovery, but the probability for common bankruptcy has not much abated. If we are going to reduce unemployment, public policy that provides liquidity where it is needed is required. The FOMC must endorse a more progressive tax code that relieves the burden of the middle class, making the wealth more common and bankruptcy less common.

We see the tendency to provide, or deprive, for the common wealth. Provision comes in the form of liquidity. The Fed (a private enterprise that heads our private banking system) is the chief arbiter of supply management by controlling demand (the supply of money).

Despite being awash with liquidity, demand is still too deficient to add employment. As long as demand is low (deprivation), capital is cheap. This simply means that the capital is too consolidated which the FOMC will not admit to being a detriment. (and here is where the technical modeling predictably fails).

Despite ample liquidity, credit scores are too low to increase the demand that reduces supply and increases employment. The result is a debtor-financed recovery with liquidity (capital) being used to resist the declining rate of profit (deflation) without employment (inflation). Margins are maintained with budget deficits that essentially bankrupt our nation.

While the benefit is short, the detriment is long (the double dip).

Hedge funds will likely be short on the current trend. Sell now and stay ahead of the hedgers who set the trend but hide a high order of intent in high-frequency noise (volatility) that otherwise closes the market with limited risk of liability.

The Measure of Success

The measure of success is a largely philosophical question.

Classically, the measure of success, as Plato and Aristotle described it, for example, is the approximation to the ideal. So, ideal economic policy is quite different for billionaire hedge-fund managers than it is for restaurant workers. Each party has something to gain and something to lose: each party has a risk differential which probably correlates interactively in zero-sum.

Since hedge funds and service workers apply their time and resources to obtain the ideal in differential, there is conflict. To keep the peace, we have adopted a competitive marketplace to resolve the conflict and give empirical verification (legitimacy) to the outcome.

We immediately see that the theory of organized conflict resolution that we call the free-market system is operationalized with the scientific method. Hypotheses (risk differentials) are tested in the marketplace and the result is, as modern philosophers like Ayn Rand describe it, fundamentally legitimate (verified) and ontologically derived (unavoidable). Even if we try to consolidate the risk into a homogeneous, common self-interest, the elite (the party best able to manage the risk in their self-interest) will always emerge the winner in zero-sum.

According to free-market theory, ideally we should just "let it be," but, of course, we just can't keep our hands off of it; and this is where it gets technically complicated. We arbitrage "the risk" into an instability of valuable proportion that differentiates the risk into a relative value of useful dimension. This is where risk assessment gains its ideological (political) interpretation (dimension), and losing its empirical value of fundamental resolution gains a gamma-risk momentum and proportion.

For example, we hear it said that the government is bankrupting our nation. Does this mean that our fate has reached a high level of gamma-risk momentum with a high order of intention, or a low order of intention? Answering this question determines the extent of the risk in the gamma proportion. The risk is now extended to a liability with a probability coefficient to the reward that is not empirically derived from fundamental free-market means, but arbitraged, or arbitrated, with the force and legitimacy of public authority like it was with the sovereign application of the crown.

Now we have a philosophical problem--a paradox to be resolved, which if not resolved results in cognitive, political dissonance.

To assure hypotheses are not corrupted with ideological bias, it is necessary to devolve the risk to the fundament. The question whether government is bankrupting our nation is reduced to a practical rather than a rhetorical resolution. The question is then a measure of empirical value, legitimately rendered to define the current and future value of the risk. Otherwise, the value is differentiated into the instability of relative values that diminishes the probability of accepting or rejecting the risk that comes with the nation being bankrupt.

Reconciling the way things are now with government by consent is to say we agree and accept all the terms and conditions associated with the government being bankrupt (our liabilities exceeding our assets). The risk, of course, is that you may be assigned the liability. Who decides that?

The liability is assigned with the force and legitimacy of government authority. Without devolution of this power, the empirical consent of the governed is never obtained and the question of whether we are bankrupting ourselves is continuously recycled rather than resolved.

Candidates that argue the government is bankrupting the economy are guilty of the post-hoc fallacy, which gives good indication of what they will do to solve this problem--stick you with the liability. The probability of risk to you goes up with a very high order of intention that is not your own, and because government power has been usurped for an ideological distribution of the risk, your ability to render an accountability and assign a liability to the reward is limited to the election cycle and a two-party binomialism. It is hardly the model of a government by consent. It just does not measure up!

If we are not talking about deconsolidating the risk and ensuring a free-market distribution of income in priority, government by consent is indeed bankrupt.

Limiting the role of government to ensuring a free and unconsolidate marketplace effectively limits the need for it, resolves the paradox, and reconciles the difference (the political dissonance, the existential angst) between the ideal and the practical representation of it.

It is time to turn "what is" into what we all know "should be."

It is time to turn the possible into the probable.

Doing the Double Dip

The top two-percent of income classes are doing the double dip.

Except for a few high-frequency debacles, it is not a deep dip to be seen from the start, but a long, slow scoop of the pie on the chart.

The dip's frequency will be long with short, sharp, impulsive and corrective waves (highly fractile sequences and degrees down to the minute, the second, the millisecond), reflecting the buy-long-go-short hedge fund strategy.

A noisy environment, economic and political, shrouds the double dip with a mysterious din, like so much cosmic noise of the electromagnetic spectrum. Much of the noise is interpreted as technical recovery--so many moves up, so many down, convergence here divergence there...hiss, crinkle, crackle, pop, you better log in to catch your stops; and if you're quick at the switch, you will be the hero, because in a flash it can crash to zero. Technically trapped you could be stuck when you thought for sure the other schmuck.

Don't be tricked and trapped by technical manipulations that can and will move against your position and acquire your book in a flash. Just beneath the din of volatility is a deflationary monster slowly devouring (selling short) the promise of prosperity for more and more people (hedging the risk), leaving nothing but crumbs to nourish the commonwealth.

Conflicting trends indicate the extent of this Keynesian monstrocity. While double dippers made sure there are plenty of houses to live in, for example, they also made sure they would be deprived for the extended value to be derived. They are to be bought and sold--arbitraged--like the people supposed to live in them.

Having a surplus of empty homes and a surplus of people needing housing is not free-market economics; and falling prices, because the buyers do not have the income to buy at any price, is not "disinflation," it is classic "deflation." Understand that this fundamental misattribution, this deliberate error, supports analytical models that too often produce technical projections that are "better" or "worse than expected" (the surprise-premium, or the arbitraged value of failed expectations).

To protect the arbitraged value (the surplus, which is the fundamental attribute of supply-side economics advanced by Republicans), the risk is attributed to the mortgagee (the debtor). Since the debtor is detrimentally dependent on the creditors for the income (economic growth) that was shorted to hedge the risk, the hedger (the creditor entrusted to reinvest the capital accumulated) has determined the fate of the mortgagee. In other words, creditors are responsible for causing and profiting from a detriment that is fully and improperly assigned to the debtor.

The ability to assign, or determine, the fate of The People is an opprobrium of power that our founders very deliberately intended to avoid, not encourage. We The People have the natural right, endowed by God, to self-determination. It is not up to Bank of America and Goldman Sachs to determine your fate or mine and then, with a royal sense of too-big-to-fail proportion, dismiss the detriment as the natural fate of the rabble.

The crude masses, as both Republicans and progressives maintain in both theory and practice, are too unsophisticated to know what their self-interest really is (the thesis of independence--the Aristotelian epistemology that reality exists independent of perception). The People are always happy to accede their natural rights to a ruling class by popular consent so that the republican form of government naturally supercedes the tendency to the democratic form.

It is a cruel amusement--the crudest means of confirming one's status (Democrat or Republican)--to watch The People, stirred about in a panic like an overpopulated pestilence, desperate for their economic security while it is managed to brim the bowls of their bogus benefactors. The Democratic, progressive faction of our national party system, for example, has done as much to support the current recessionary trend as to resist it in the interest of We the People (the general welfare).

Do progressives intend to do as much harms as good, or is it a function of an ontological accumulation of risk? In the case of the mortgage crisis, for example, progressives do little to match the supply of housing with the demand. Foreclosures increased at a record pace while progressives were preoccupied with a healthcare plan that will do as much to consolidate the wealth associated with it as to provide universal healthcare. The result of that priority will keep the critical variable for curing the mortgage crisis--income--the missing variable of self-determination conserved in the hands of The People's so-called benefactors.

Doing the double dip will keep progressives fully employed, but even worse than the so-called unintended malefactions of the progressive faction are those who shamelessly claim that the popular demand for equity and justice is but class envy. We can be reasonably sure The People distrust the good intentions of, but do not envy, their malefactors.

An accumulation of a crisis proportion is not enviously valued, it is retributively valued, and the detriment it causes (the value) despaired.

There is nothing more crude, with so little care, than to victimize The People with their own despair.

A power elite only flatters itself with the belief that the means to exploit the weaknesses of others is something to be envied.

Keep in mind that an economy-of-scale, too-big-to-fail, ruling class distinction can only exist in a gamma-risk proportion. Despair can be re-transformed into the value of non-disparity.

Despite being modeled to eliminate risk, too-big-to-fail organizations accumulate risk into a crisis proportion which our founding fathers deliberately intended to pluralize and diffuse into the peaceful and prosperous proportion of free-market self-determination. In the case of consumer finance protection, for example, it would be Elizabeth Warren's job to diffuse, or deconsolidate the risk into an alpha proportion.

If financial institutions are not too-big-to-fail, they will not be able to rule the marketplace. The marketplace would be controlled by consumer sentiment--the alpha risk an economy-of-scale is intended to avoid.

Ensuring the alpha risk dimension of power in maximum proportion reduces both the beta (the noise--the volatility) and the gamma risk (the need to consolidate the risk into a controlling authority). As the need for a controlling, central authority evolves, the empirical, pluralistic efficiency and legitimacy of popular consent is reduced. It is then necessary to "devolve" that accumulated power (the consolidation of the risk) to the stable and cost-efficient level we are all looking for.

Ensuring the alpha in priority (deconsolidating or "devolving" the risk) will stabilize our economy at both the micro and macro levels without sacrificing the efficiency, the productivity, of free markets.

With a productive incentive in full force, the distributive deficiencies of the free-market system abates. Systemic risk (despair) is transformed into the can-do innovative productivity of positively competitive forces. Instead of privation, there is provision. Instead of big government intruding into every aspect of our lives, we turn our attention to the latest and greatest thing that fuels economic growth--doing everything cleaner, greener, quicker, smarter, faster. Instead of relying on a controlling authority, we are free to innovate and continuously improve the quality of life for everyone through the empirically direct means of popular consent, transforming government into its more ideal, democratic form (government by consent).

Without maximizing alpha risk (deconsolidating economy-of-scale entities) Elizabeth Warren, for example, will just be spinning her wheels. While she recognizes the need to control the value of the risk being derived from the means (the power) to reassign it, which is why hedge funds and Wall Street so strongly object to her, she is, nevertheless, not likely to advance deconsolidating the risk.

Consumer financial protection is likely to be more a function of consolidating the risk into a regulatory authority, effectively treating the problem with the problem. Elizabeth Warren, for example, who will be overseeing development of the new protection agency knows all the "tricks and traps" of the trade, but her oversight and practical effect is likely to be Ivy League despite the resistance to her.

Treating the "tricks and traps" of consumer finance will do little to address the more fundamental mis-assignment of risk that occurs. It may help consumers reduce the cost of credit, but If the people who need to have buying power to prevent deflation are the highest credit risk, and therefore cannot get credit (and are likely then to get trapped, reducing buying power even more), the probability of deflation is nearly perfect.
The need for credit and the incentive for credit companies to find new ways to trick and trap on the existing extent of credit increases, despite the regulatory effort, to avoid the declining rate of profit.

The entire system is put at risk (including the power elite) in a gamma proportion by mis-assignment of the risk.

Mis-assigning and then over-leveraging the value of risk results in the fundamental attribution error that makes for faulty predictive modeling and creates the derivative value of arbitraged risk that Elizabeth Warren has stridently condemned. While the function of the Consumer Finance Protection Agency is to protect consumers, it will do more to protect the providers from themselves (the declining rate of profit which reduces credit scores while increasing the need for credit). The practical model progressively diverges form the ideal model of self-determination (consent of the governed), causing political dissonance.

Reducing the political dissonance (the noise of divergent ideals and practices) to a distributional problem inherent to capitalism may be an accurate assessment, but it is not enough. Keeping distributions (like the extension of credit) from consolidating into economic contraction is a different problem, something that Keynesian economics--substituting for free-market economics--fails to do, along with protecting consumer credit, in priority.

Monetarism is used to keep the capital consolidated (thus the demand for credit and its over-extension). A double dip is possible because the retributive value is continuously monetized into a redistribution. The problem with that, of course, is it accumulates debt (and the pressure to tax AND spend).

Value that needs to be retributed (the deflationary value--the double dip) is transformed into an extended risk--systemic risk redistributed (monetized) into a crisis proportion. In order to extend the proportion (to do the double dip), it is transformed into a high frequency (volatility) to maintain its current value (extending the retributive value into the future).

Value arbitraged with high frequency and mass momentum creates noise at high volume, masking an underlying, well-orchestrated score composed, performed and conducted for the crimson court of too-big-to-fail economy-of-scale. The noise is for common consumption; the music is for the discriminating ear on the inside.

Ponderous platitudes will not prevent the expansion of poverty, and although economic expansion will, it is the artful object of rhetorical ruse.

While preventing poverty is progressively hip, its an interpretive dance with a deep double dip.

The Keynesian Alternative?

With unemployment at 10 percent or more, the number of Americans living in poverty increasing, and corporations sitting on $2 trillion in cash, we should be looking for other alternatives.

Since the Keynesian alternative to consolidated capital has yielded a downward class mobility, the most visible reaction is a conservative popular revolt.

If the probability of class mobility is verifiably down and not up, at least half of American voters are prepared to declare their independence and shape a more favorable alternative that is not exactly Democrat or Republican.

Being treated like so much macro-meat in the marketplace, herded together like cash cows to be parceled into prime and sub-prime, is not exactly flattering, and both parties are going to suffer a stampede of popular sentiment.

Binoms (binomial partisans) are under pressure to resolve the dissonance. This is an overwhelming psychological condition that compels a resolution even on a macro scale (you know the old saying, "there is no resisting an idea whose time has come).

Free-market economics is not dead, its time has come!

It is time for The People to realize, the more free the market, the less political risk in proportion (the less need for government and the probability of being stuck with all the risk, like negative class mobility or negative equity).

The free market measures the proportion of political risk--it may be in your favor today, maybe not tomorrow. Binoms are realizing that ideology does not minimize the risk, it makes it more volatile if anything at this point.

While Keynesian economic policy is supposed to stabilize systemic risk, it makes it more volatile. Toggling between expansion and contraction of the money supply (boom and bust with ever higher frequency and a bias for bust), binoms are prepared to see another alternative that ensures stability--free market economics (deconsolidation of the risk)--with the force and legitimacy of government authority.

Investing in America is a function of ensuring free-market economics in priority (expansion of the commonwealth), not partisan politics.

Investing in America is a function of maximizing the empirical power of popular consent with a bias for boom, not the Keynesian alternative with an empirical bias for bust.

Shaping the Future

The series of articles on risk I have authored and published to this site are not only to identify variables typically ignored or attributed to randomness, but to describe and explain a practical means of shaping the future.

A probabilistic ontology is not a random walk. Closer inspection reveals a probability of risk that is largely determined by indicators (symbols that guide perception) technically designed to shape the perceived risk and, thus, the future. Identifying the incentives associated with the perception of the risk predicts its future value and its probable path, or trend.

High-frequency trading, for example. As I have pointed out in previous articles, value is being determined by a highly consolidated capital. That concentration combined with high frequency increases the velocity of the risk (and the reward). Remember, these are hedge funds--they magnify the margin by hedging the risk. They increase their profits by shifting the risk to you, now at high frequency and velocity which, if you are not in control, appears to be randomness.

Randomness, as I have described and explained in the series, suggests a lack of culpability. If there is a zero-sum detriment, the beneficiary needs to demonstrate a lack of responsibility for the outcome and pin it on the victims as having "taken" (consented to) the risk, and lost.

Americans, having been stuck with overwhelming detriment on a macro-economic scale that suggests a macro-risk ontology (the systemic risk), now seek to mitigate the loss and recover damages (retribute the value). The macro means of mitigating the loss (the risk) in a post-industrial, post-modern world is the Keynesian application of economics.

Suing out the damage is a function of political process at the macro level. Victims consider the damage to be deliberately inflicted--their net worth confiscated and used against them in the pursuit of "the American dream." Keynesian economics is a technical means of managing the risk of liability by consolidating it (reducing it to the force and legitimacy of public authority)--what the series refers to as the gamma-risk proportion.

Having been betrayed by political rhetoric that promises the American dream, Americans are deciding (are determined) to actually "take" the risk, rather than have it extended to them, and reduce the dissonance (the gamma-risk proportion). While it may not be everyone's cup of "tea," taking the risk to shape (determine the probability of) the future transforms rhetorical possibility into the realpolitique of probability, posing a significant risk that is fully gamma.

Risk analysts do not figure a gamma-risk proportion. If the practical model does not assume the risk is a possibility because it ignores it, the probability it will occur is ontologically assumed and is fully extended (nearly 100%). While it may seem to be stupidity error, ignoring the probable risk is a calculated, political measure, ideologically (axiomatically) derived.

Since risk axiomatically derived suggests a model that fixes, or determines, the risk-to-reward coefficient, the value of what you don't want to occur tends to be undervalued and the risk becomes over-extended as discussed in previous articles on the extension of the risk.

Avoiding the over-extension requires abandoning its ideological assumptions which, in the gamma proportion, renders the possible evermore probable. I refer to this as the ontology of the gamma-risk proportion.

Republican rhetoric, postulating a free-market system that provides for the commonwealth, for example, has suffered a significant loss of credibility within the short-term, declarative memory of its constituency. Without abandoning its ideology that subsidizing the rich provides for the common wealth, it is entirely dependent on the two-party system to systematically recycle the risk to "conserve" its current value. I refer to this as recursion of the risk, which very effectively shapes the future, until now.

The system is set up to inspire class mobility but then deny it with a macro ontology. The system, however, at this point of our political-economic history, in the midst of a deepening crisis, has inspired a critique of that ontology instead.

Fundamentally questioning the logic of producing value by denying it to a cohort that the system "selects" to give it the power of consent will, at this point, with a macro ontology, not be denied.

As the middle class gets bigger, there is less distinction between the classes. While each member of a different class puts their pants on the same way, there is a big difference in the value of their pants. While the use value may be the same, the market value is a mark of distinction symbolizing the ability to pay and is expressed by referencing to a political group or party (and perhaps more important, inspiring the over-extension of debt into a crisis proportion).

Tea partiers, for example, are highly motivated to manage the macro-risk without Keynesian attributes. Eventually, class symbols (like reverse pricing) are not enough to demonstrate class identity. It is then reduced to the ability to survive the extension of the risk that results in the zero-sum accumulation of net worth (macro-economic liquidity crisis).

When crisis occurs (remembering that it is supposed to be improbable as long as we axiomatically adhere to the right ideology), class is fully valued, categorically and unsymbolically, in the form of the ability to pay (where you once could not afford the reverse price for a pair of pants, now you can't afford a pair of pants). The risk is then rendered with Keynesian attributes and the debt accumulated (extended) to maintain a middle class status.

The ability to pay (the risk) is monetized and consolidated into state control which, of course, tends to conserve the status-quo. The middle class is returned to the previous extent of the risk in liege (in debt) to its benefactor (the beneficiary of the detriment now buying and selling the monetized middle-class debt with funds expropriated from their net worth, which caused the crisis).

The zero-sum is successfully applied and prepared to be recursively re-applied in an ontological fashion, protecting the reward from the risk of liability--but the Tea partiers are too smart for that.

If we want real freedom, we must break the cycle of consolidated risk. Real freedom requires each person declare independence. The extent of our self-determination (the risk) will then be obtained by shaping the probability of what We The People want will occur.

Shaping the future is like what Michelangelo said about his sculptures--the ideal image has always been there, all we have to do is remove what we don't want.

The commonwealth is a work of art just waiting to be sculpted.

It is perfectly natural (our natural right) to revolt against a system that is constitutionally endowed with the freedom of self-determination but operationalized to deny it. Nature ontologically acts to resolve this paradox that has been extended to an unavoidable, gamma-risk proportion.

It is our natural right to deny systematic means that prevent shaping the possible into the probability of what We The People want, beginning with providing for what we all need.

Probability of Risk

Statistically, the probability of risk is 100%. The risk is fully extended. Discounting the probability of the risk, the extent is "determined."

The risk is always fully valued. Discounting the probability it will not occur (the null hypothesis) is the risk as far as we can determine. So, the only way to be completely certain (the probability of risk fully discounted to zero) is to have complete control (like consolidating markets to determine the extent of the risk, for example, or by controlled experiment and nulled hypotheses as a scientist).

In the world of scientific inquiry, hypotheses are nulled to verify the probability of having acquired truth, or knowledge, as best can be possibly determined. Even after this rigorous, empirical, cognitive regime, theories are tested for predictive utility. Since theories are apt to be thrown out or amended, knowing truth is an approximation of its absolute value (discounted from the fullest extent), much as Socrates and Plato postulated.

Platonically, there is "nothing" really new. Everything reoccurs in different forms over time (and space), becoming a closer approximation of absolute value (what science discounts, or nulls in the form of hypotheses, to absolute zero, or certainty, otherwise known as the unchangeable condition of God, or what is Platonically described as "the world of ideas").

Classical cosmology (the theory of everything) does not postulate random events. It postulates truth can be absolutely known (things appear random if you don't know the truth--or have perfect knowledge like God). Everything can be known by its ideal measure (like the 100% measure of fully extended probability we use today). It is not necessary to null hypotheses because every thing teleologically tends to the ideal form of it (including the risk, which ideally is zero).

It is unnecessary to verifiably know something by knowing what it is not if you already know what it is to the fullest extent (its absolute 100% value).

Political, economic, and religious arguments, for example, tend to the classical, teleological form to avoid the risk of verifiable hypotheses. Arguments are reduced to axiomatic moral principles, or hazards, that run the risk of negative consequence if violated. Since predictive utility tends to self-fulfilling prophecy (like not cutting taxes for the rich causes unemployment), validation of axiomatic principles masquerade as empirical verification of hypotheses (with the proposition of the risk "determining" or prophesying its absolute value).

Classical philosophers tended to describe and explain the dynamic of nature with a teleological attribution. It was not until the scientific revolution that the classical, teleological interpretation was replaced with ontology.

Successful use of the scientific method launched the current probabilistic interpretation of the risk in which we null hypotheses, discounting the possibility that we can ever obtain absolute truth, ontologically anyway.

The Constitution of the United states was also a product of this cognitive, scientific revolution. We recognize the empirical benefit of a verifiable government by consent, discounting the probable extent of the risk to the inalienable right of self-determination.

Delimiting the risk to the direct control of The People allows for a scientific process--a continuing revolution--of continuous improvement (maximum participation) rather than a government of self-adulated kings, criminals, or any of various forms of elite incompetence. An intellectual, moral competence is especially important and inherent to a pluralistic model, recognizing and protecting the stability of keeping risk pluralistic and deconsolidated (exactly the opposite of what we have now).

Rather than economy-of-scale organizations that are too big to fail and create barriers to entry (minimum participation), maintaining a pluralistic model recognizes the moral value and practical effect of deconsolidated risk. A risk ontology that systematically operationalizes self-interest with the public good recognizes that providing for the wealth of nations is not by means of its deprivation.

Accumulating a benefit by causing a detriment (deprivation of others) is not in anyone's self-interest. It accumulates risk and causes general instability.

Ensuring the fullest probability of participation (pluralism) is not only a moral sentiment, it is a practical measure that, as our founders recognized, ensures the general welfare (avoids the accumulation of systemic risk that plagues us now).

Pluralism operates with the working hypothesis that we all know everything together, forming the perfect reduction of risk--self-determination or self-government. That reduction does not occur without the fullest participation, and income is required to participate. Self-determination is dependant on the provision of income, not its deprivation.

Providing for the commonwealth is a moral imperative (it has absolute value). If we want to reduce systemic risk, it means absolutely everything.

While we struggle to come up with a scientific theory of everything, classical philosophers breezed right through epistemic cosmology 101 with absolute, but unverified, knowledge of the truth.

By means of verification we recognize that many things once considered to be empirical truth and declarative knowledge (like the earth is flat) are now declared disconfirmed hypotheses. Indeed, we tend toward an absolute value of knowing what the truth really is, but fully dependant on our perception of it. Truth is a phenomenology. It is not independant of the mind as Aristotle argued (just as the real value of capital is not alienated from labor as Marx conceived it, but fully realized in the detrimental value of the risk).

The risk analyst is presented with a phenomenology of the risk that this series of articles has attempted to demonstrate. Analysts are keenly aware that the perception of risk is both a determining variable and the variable to be determined. It makes for an especially fractile reduction in which acting on the information affects the values being observed (the risk of unintended consequences--randomness that classical philosophers attribute to ignorance of absolute values).

Perception of the risk not only determines the probability, but the relative value risk yields in a current environment. Current, relative value is a coefficient of an absolute value that is knowingly increased or reduced. The risk coefficient (risk-to-reward) indicates the extent of the risk and delimits the risk to be encouraged or avoided. We then discover (perceive) the extent to which we are all knowingly and willingly "determined" to discount the probability of what we don't want will occur.

As we discount the probability of having obtained knowledge, we consistently verify that there is no absolute zero (trying to eliminate economic risk, for example, produces political risk in equal proportion). Wherever we find nothing, something always appears. So, maybe the classics are right--we are just discounting the probability of our ignorance to discover what we knew all along.

While modern physics has stirred a popular critique of scientific inquiry, let's turn the heightened philosophical awareness to the political-economic domain where critical thinking gravitates against what remains of social inertial forces.

Political Extension of the Risk

Politically extending the risk by means of public policy confirms income class and the current value of the risk in a zero-sum proportion.

The current debate is consumed with income-class valuations. Which income class, for example, is more worthy of risk protection--the class more, or less able to "take" the risk? It is a question that is economically motivated (the zero-sum) but politically (ideologically) determined.

Income is not only the measure of success, it is the variable that determines it. The more income (the ability to pay), the more protection from the risk which, by virtue of the accumulation, extends from it. No better way to protect yourself from risk than to determine who takes it when and how, and even more important, politically, why?

Why is a philosophical question, and while it is a speculative endeavor it does not preclude empirical measurement. Quite the contrary, it is empirically verifiable by very clearly defined class distinctions.

Like Skinner said about psychological motivation--you can't see it but you can measure its effects.

The effect of tax cuts for the rich, for example, has yielded an obvious zero-sum benefit. Those representing the rich, of course, argue the effect was neither caused by the benefit (accumulation of income) nor intended to cause harm (consolidation of lower-class assets into upper-class income). While the motive is speculative, the effect is clearly verifiable.

Now that the wealth is so consolidated that the only risk to be taken is the risk nobody wants, the capital accumulated is ready to merge and acquire assets distressed by the accumulation. At this point, the risk is so over-extended, the additional unemployment produced by M&A will push the economy over the edge.

The political risk (the gamma) is so extensive, even the typically complacent, ideologically compliant middle class is radicalized. The recession has made moving into the upper class so verifiably improbable, and being busted down (the risk being extended to anyone of lesser means) probable, the probability of risk is reaching its fullest, ontological extent.

The probability of risk (change) is never zero. It is always 100 percent.

Public Policy and the Current Value of the Risk

We are so far from the commonwealth it is not likely to obtain a presence of value anytime soon. Sure, we talk about conserving the value of self-determination and self-reliance grounded in the fundament of self-interest as if it obtains. Empirically, however, we have become so reliant on externalized, expert management of the risk that self-interest is more an amusing apparition of speculative philosophical inquiry than a practical measure of either the means or ends of its application.

Reducing our self-interest to the application of public policy is to render it so collectively large and complex that it is, paradoxically, out of our hands.

Recognizing the natural tendency to pluralism resolves the paradox peacefully and prosperously. The binomial organizational model employed to obtain the current value of popular consent, however, is a false empiric. The two-party system is a false pluralism designed to impede the natural progression of the commonwealth.

In order for the risk to gain the current value of the commonwealth we must abandon theories and practices that only appear to confirm its presence.

When, for example, the causes of economic crises suffer fundamental attribution error, we suffer a lack of expertise we rely on to effect good public policy; and since the means of achieving popular consent is reduced to a dummy variable, the error recursively accumulates with the semblance (the false inference) of a popular consent. The pluralism of the commonwealth (and the fundamental wisdom of a popular consent that manages the risk to a commonly peaceful prosperity) becomes progressively more distant (and The People more collectively reliant in the name of conserving the value of self-interest). It creates a class of people evermore reliant on the extensive management of the risk. The self-interest of The People (the commonwealth) is evermore alienated (extended) from the fundament.

When the risk is extended to you, you still have the power, the freedom, to not take it in your self-interest. The power elite literally banks on the probability you will take (consent to) the risk, however, and not demand the wealth be more common in your self-interest. The dichotomy is so well extended--the probability you will take the risk so high, the probability of the gamma risk being extended to the power elite is equally low.

When hedge funds, for example, bought long but sold short, the risk was extended to the common interest without the reward--thus the term "hedging the risk." Now that the hedge has converted value into systemic risk (the gamma risk proportion and the object of public policy), the capital gained is prepared to consolidate the risk into current value through venture capital, merging and acquiring distressed assets that resulted from hedging the risk. Venture capitalists now argue, of course, they are providing for the common wealth by providing liquidity (buying distressed assets).

As the gamma continues to accumulate, validating the elite hypothesis that The People do not know what their self-interest really is, the wealth is commonly consolidated and redistributed. The People's wealth is retailed at a profit and the risk extended, with interest, in the form of credit. The profit plus interest equals the inability to pay the economic rent (classically referred to as the extension of the rents). The result is economic crises that extends (is managed and conserved, merged and acquired into an economy-of-scale) in your self-interest as a matter of public policy.

Now that the President has outlined the probable direction of public policy that will determine the extent of the risk, the wealth is being prepared to trickle down. Most of the current value needed to reverse the recessionary trend will be applied to mergers and acquisitions.

While M&A is touted as being a precursor to economic recovery, the capital acquired at low interest rates will be used to consolidate the marketplace rather than pluralize it. Bank of America's M&A division, for example, is poised to pounce on distressed assets, which is what they mean when they advertise "we are investing in our communities."

Democrats have a trickle-down plan for economic recovery. It is a matter of public policy, whether Democrat or Republican, to direct and extend the risk from the top down with the objective of controlling the common element of risk--the systemic risk. Policy is designed to fail-safe the system for continuous conversion and consolidation of value in the form of private property, merged and acquired to extend the current value of the risk at the expense of the commonwealth.

An economy in a state of being merged and acquired is not pro-growth. It produces current value by extending the value (the risk) of unemployment and slow growth (limited supply). Supporting this plan is a matter of public policy--achieving an economy-of-scale efficiency (mergers and acquisitions). It is a false common-wealth efficiency.

The President was not heard saying economy-of-scale consolidation is inimical to the commonwealth. Rather, it is generally accepted that consolidating risk you must take when extended (the certain value of the risk) is good public policy. You are then forced to rely on government authority to relieve the extent of risk (the individual's only "salvation" as the President described it, implying what our self-interest really is applied from the top down); and it will not be a relief, as Republicans argue, to reduce government reliance without first eliminating the need (the extent of the risk).

The current value of the risk is politically rendered but economically motivated. It is gamma risk. Relief (risk) is reduced to a zero-sum with a high order of intention (empirically verified by income-class distinction) that is considered the collective (extended) consent of the governed. It has the force and legitimacy (the current value) of public policy and authority.

Risk, politically extended by means of public policy, confirms income class and the current value of the risk.

Risk of Reliance

Citizens of the commonwealth take up the risk, it is not extended to them. The commonwealth does not rely on the state to dole out the risk, or legislate to prevent it.

Citizens of the commonwealth take the opportunity--organizing production, producing value, solving problems--as they see fit within their own policy space. Freedom is the common element, the causal factor, operationalizing an unlimited number of choices with the freedom to organize an ontology of continuous improvement. It is the goal of the state to maximize the probability of this pluralistic ontology; it is not the role of government to determine the extent of the risk, but to ensure the freedom to take it.

Without reliance on government authority, the risk is fully extended a' priori--it is fundamental, alpha risk. (To hear a politician talk about extending unemployment compensation, extending tax incentives to create jobs, or government-backed security to extend credit is unlikely.) It is not until the risk is allowed to consolidate with the capital that risk becomes an extension of the state. Not only do The People then rely on the extension of the risk, but a wealthy elite who consider themselves to be beyond the power of The Sovereign are also subjected to the ontology of accumulated power. Both classes rely on government authority to manage, and extend, the risk which tends to be over-extended. The risk goes gamma, achieving a crisis proportion.

While it may seem risk averse to consolidate the risk into an economy of scale, it runs the risk of reliance. A lack of common self-reliance diminishes the capacity of pluralism. It diminishes the opportunity (the probability) of continuous improvement (economic growth, for example). At the same time, it enhances the probability of making the same mistake over and over again (cyclical economic crises, for example), making the risk recursively manageable by operation of large governing bodies networked into a too-big-to-fail ontology (the political-economy we have now to network the externalities into a gamma risk proportion).

The people that lost there homes if not their net worth did not take the risk, it was, for the most part, extended to them. The sense of being cheated extends from the risk (the gamma risk), accounting for the populist sentiment a power elite recursively attributes to class envy.

Fundamental mis-attribution of the risk supports analytical models that harbor faulty assumptions. The accumulation of errors always runs the risk of relying on overextended controlling authorities inimical to a free society and the achievement of a commonwealth.

The Capital Requirement

The commonwealth requires a healthy distribution of capital from the accumulation. A distribution is required that does not cause systemic risk.

A capital market that borrows its way out of debt (a debtor-financed recovery) over-extends both the risk and the credit needed to support it. If we monetize the debt without sourcing the value accumulated, we increase the risk of inflation without adding supply. The risk is not abated, it is extended, which for the most part defines the failure of the Obama administration.

Precipitous decline of the administration's popularity, and the Democratic faction generally, directly correlates with the unwillingness to source the accumulative value and invest the marketplace with economic expansion (disinflationary addition of supply). Instead, with ample opportunity to reverse the trend, deflation got support, discouraging expansion.

The failure of both the Democratic and Republican factions is clearly confirmed by the evidence: an economic landscape conflicted with both inflationary and deflationary tendencies, putting the economy into a tailspin of volatility.

Understand that volatility gives useful, current value to the risk. That extension of the risk is arbitraged into certain future value largely commanded by an over-accumulation of the capital (a mal-distribution of the risk). An over-accumulation is required to command the distribution of the risk and, therefore, the reward. The only counter-measure is to invest the marketplace and require a deconsolidation of the capital, but we are doing the opposite.

While consolidation of the risk may plausibly seem to provide a common protection from risk, it really functions to commonly apply it to a negative extent (the probability of negative growth and a zero-sum detrimental accumulation of value that we must protect ourselves from by requiring ever-larger capital reserves).

If big firms are required to reserve more capital to deter systemic risk, then the capital is not available to bail out foreclosed homeowners, for example, and restore the lost value. The lost value, at best, is being used to protect the victims from a detriment that has already perpetrated, and that, of course, is a dismal failure. Meanwhile, the capital is being required to consolidate to cover the future systemic risk rather than prevent it.

The capital is being used to consolidate the value of the risk systemically derived and extended, setting The People up for a fall that is deliberately induced. It is not hard to predict a considerable amount of popular disapproval (a lack of legitimate popular consent).

Consolidating the risk to minimize it for common consumption is a mechanism of economic pathogenesis that plagues the common capacity for wisely applying tools, like the capital. It prevents us form using all the tools derived from the capital to shape the future to a common benefit.

Dispelling from the traces of declarative memory the notion that recession is normal, for example, is inhibited by the derived complexity of the tools used to manage the consolidation of risk and its extension for common consumption. The use of capital is made so complicated--derivatively assumed and consumed--that the value derived appears to be an ontology of undirected, free-market risk.

To reduce the dissonance between "what is" and "what should be," we tend to philosophically re-trace the problem. We may, for example, engage an Ayn Rand type of re-cognition, re-programming what we all know to be a deliberate, elitist objective into an empirical ontology permanently installed into the circuitry of declarative knowledge.

Implied in the disapproval statistics, however, is a common call for investing a free-and-open marketplace that allows for a common, rather than an elitist, management of the risk. A free market requires that capital minimize the risk by seeking the reward of popular consent. In that way, the useful value of capital is delimited to adding supply without reducing demand (economic growth), and thereby limiting the need for government by maximizing the probability for a common self-determination, or The Commonwealth.

Binomial recursion of the risk rigs the market to resist the commonwealth distribution implied by two-party rhetoric. Both factions claim the path to making the wealth more extensive, not more common (verified by the recursion). The President today, for example, disclosed a plan to "extend" the benefit of wealth to everyone. If you have followed these articles on the extension of risk, however, the promise serves as much to indicate an extension of the problem (credit extending from the accumulation) acting as the solution as it is to extend the hope of relief.

Letting the tax cuts expire for the top two percent of income class is as much a $700 billion extension from the accumulation as it is a redistribution of the risk. Not only is it still a low rate anchored to the prior rate, but the capital will be used to support a debtor-financed recovery (financial recovery with extended unemployment). The difference between the upper-class increase and the middle-class reduction is more a debt reduction measure than a pro-growth measure. The capital will still be too consolidated to relieve the extent of the detriment (the extension of the risk).

The administration's plan will not be enough to reverse the deflationary trend any time soon. It is more to alleviate the pain of a detriment that has long perpetrated and extended to a massive consolidation of net worth, deliberately rendering uncommon wealth that is commonly derived by the capital requirement.

The Party of Independence

Declare your independence!

Demand your state be the practical model of the commonwealth.

The commonwealth is not a pie-in-the-sky idealism that promises everything and accomplishes nothing.

A policy process that provides plenty of diagnoses but changes nothing needs the effectiveness of an independent variable. Inertial forces can be countered with a more pluralistic process, vectoring prognoses toward a more optimal distributive value that avoids, if not prevents, crises rather than ensuring its extension.

Binomialism is a pathogenic mechanism. It inhibits optimal organizational health, resulting in political dyskinesis. Cognitive capacity is limited to the binary variation, limiting the capacity for needed change.

Ineffectiveness of a party platform that promises change we really need predictably yields a conservation of the values to be determined when a binomial model is applied. Back testing that model indicates a future value that is limited to the practical extension of the risk--distribution of the values that support the problem to be solved (demand deflation and credit inflation).

Supporting the problem as the solution is pathological.

Testing the current value of policy alternatives against the practical, binomial model in operation yields a second economic stimulus with the same results as the first.

Policy alternatives binomially (ideologically) determined will not cure what ails us. If anything, it extends the problem into the future, which defines the future value of the risk and delimits the value of taking the risk to means that test a high score on the value of creditworthiness (the problem).

Recycling the debt (extending the credit risk) into crisis proportions does not solve the problem. The only way to achieve a distributive probability of the values that infers a commonwealth modeling of the risk is the deliberate intervention of third-party political risk.

If you have not been much affected by the current cycle, do not be deluded. The risk recycles and extends at progressively higher frequencies. It will eventually extend to you in forevever innovative ways to test the means of risk tolerance.

Innovative means of extending the risk far outpaces the means to avoid it. So, we always end up mitigating the value of the risk which, binomially determined in the public policy space, is arbitraged into a beta valuation and re-extended (re-novated) into the current, useful value of the capital required to make the wealth more common.

Theoretically, the commonwealth will eventually converge with the analytics. Instead of perpetually recycled in the form of beta and gamma risk (authoritative management of volatility), capital eventually gains the value of a common requirement. That revaluation would not, however, occur without taking a considerable political risk associated with the fear of change (like losing your freedom) that tends to pathological expression, like a binomial determinism.

Requiring the capital to fully assume the risk of a free-and-unconsolidated marketplace does not present the political risk of lost liberty. Instead, it represents the economic means of attaining it.

By allowing for an economic test of political hypotheses (limiting the role of government to allow for that test), the risk is "freely" innovated by The People to produce the stable and predictably useful value of the capital for the commonwealth.

Representing the Commonwealth

The concept of the commonwealth is not new, but it is revolutionary. The concept of the commonwealth was a deliberate novation of the risk (see the article, "Novation of the Risk") that pluralistically diffused the risk to facilitate the greatest expansion of economic wealth (and power) the world has ever known.

The Revolution continues, testing the practical concept of the commonwealth (deconsolidating the risk). Currently, the risk is so consolidated there is virtually none available unless extended from large, consolidated, too-big-to-fail, economy-of-scale, organizational entities, including government. Taking the risk (economic growth) is virtually not available except by extension of consolidated authority both public and private. Our current status fails the test of deconsolidating the risk that represents (confirms) the commonwealth.

The Obama administration, for example, is looking to pass a "jobs bill." Since the risk is being extended from the top down (hence the lack of credit extended to support it and thus the recurrent need for a bill), it does not represent the commonwealth (although it is being sold as making the wealth more common).

Nor do Republicans represent the commonwealth.
Republicans represent common expansion of the wealth as a zero-sum redistribution (a moral hazard). Making the wealth more common is identified (just like the king did) with a punitive retribution of the value accumulated that results in disfunctional, non-productive, class warfare. The etiology of what ails us is then reduced to an endless, ideological debate--a game, a polemic--to be won or lost in the political arena without risk the reward will be identified as a zero-sum detriment that prevents the commonwealth.

So, who represents the commonwealth?

After the American Revolution to deconsolidate the authoritative extension of the risk from the crown (from the top class down), the risk was to be "authored" (taken) from the bottom up, producing the state of the commonwealth.

Many states defined themselves as being a "commonwealth" following The Revolution. The Commonwealth of Kentucky, for example, represents freedom from tyranny and the risk it imposes (extends)--or does it?

Governor Beshear's administration has done nothing but extend the risk.

Following a Republican administration that engaged highly regressive tax increases to support the state's bond rating (its credit score), Beshear was elected on a no-tax-increase platform. He then proceeded to administer the biggest regressive tax increase in the history of the Commonwealth. In the private sector, such a sudden reversal is tantamount to a corruption of trust worthy of swift and decisive prosecution with punitive and compensatory damages--and the damage, heading into the Great Recession, was extensive.

Although Beshear, and the Legislative Research Commission, was advised well in advance of the recession that such a massive, regressive tax increase was extremely detrimental to the Commonwealth, they passed the measure anyway, magnifying the detriment extending from the recent financial crisis (which resists a good credit score, by the way).

Beshear has since engaged in massive tax expenditures with a budget that is every bit in dire financial crisis due to a huge regressive tax burden. That burden robbed consumers of much-needed "discretionary spending" and gave it to wealthy businesses to relieve their tax burden (putting pressure on both taxes and the rate of interest). The "discretion" was, rather, "taken" (usurped) and redistributed by a government authority representing anything but the commonwealth.

Massive, tax-incentive expenditures pressure taxes up. The larger return on this so-called investment is higher taxes to satisfy the demand--the expectation of the reward against the extended risk of unemployment. In a commonwealth, however, employment is not supposed to be a function of tax incentives that regresses the tax burden, keeping the wealthy rich at the expense of the common wealth.

No. Taking the risk does not extend from the upper class in a commonwealth. Managing the risk is not a function of a consolidated authority either public or private, but is freely consumed and labored into wealth with a reward (the profit) commensurate with the risk determined by discretionary income that must be commonplace to reward (verify) best practices, best prices, and best behaviors.

The commonwealth delimits the need for an intrusive governing authority. It governs what limits our freedom to an authoritative extension of the risk that always exceeds the reward in a crisis proportion.

Yes. The commonwealth is a place where a person can still get rich, but without having to plunge everyone else into the depths of depression. Raiding the treasury to prevent crises (budget deficits and tax expenditures) is a thing of the past. It would no longer be necessary to tolerate tax and fiscal policy that supports the probability of recurrent crises in the name of resisting it.

Beshear's open-wallet method for economic development, for example, is raiding an already depleted treasury, and shifts the burden to the least able to pay the accumulative debt. It is a classic over-extension of the risk that is completely antithetical to the practical concept of a commonwealth.

Hard to believe that after such a dizzying sudden and detrimental reversal of policy, and hooking-up with an even more notorious open-wallet spendthrift like Jerry Abramson, Beshear is actually going to run for re-election. Incredible!

While common sense can at times be as uncommon as the wealth, let's hope The People of The Commonwealth will have sense enough not to re-elect Beshear and the entire complicit cohort of complete incompetence.

The Commonwealth

As the wealth became more common (the risk becoming more diffused than consolidated), the role of the crown to manage the risk became more uncommon. The commonwealth emerged with the function of government authority limited to keeping the wealth commonly private in the hands of The Sovereign (The People).

Today we look to government agency to manage the risk. The Financial Stability Board (FSB), for example.

While the FSB is a trans-national organization, it specifically describes itself as providing governance.

The result of the 2009 G-20 summit, the FSB is to provide international risk management of capital markets along with the IMF, World Bank, and WTO.

Since the risk is globally extensive, and with fewer firms remaining to broker international finance after the Great Recession (making them too big to fail), the need to consolidate the management of the risk into a form of authoritative governance (collusion) is critical for maintaining the distribution of the reward in a crisis proportion.

It should be clear that all the measures being taken to address the tendency to economic crisis are not to prevent it, but to tolerate it. The goal is risk tolerance and a stable means of discovering the future value of the risk in order to price the options that derive its current value, arbitraged from the volatility of probable crisis derived from commanding the timing. In other words--to rig the market; and in a free market economy, rigging the market is not only opprobrious, it is criminal.

Rigging the market is offensive to the commonwealth of nations and its sovereign people. Standing its offenders before commissions of inquiry and subjecting them to the standards of a risk-tolerant authority does not deter the criminal element, but cultivates it.

Prosecute the criminals, deconsolidate their criminal means and we will secure the stability we all want without sacrificing the freedom we all deserve. What The Sovereign wants is well at hand with the commonwealth of nations well established and conserved.

Novation of the Risk

Back before the Writ of Extent became obsolete, and a republican form of government was creeping to the fore, it provided for a re-assumption of the risk.

While the Writ was chiefly for collecting debts owed directly to the crown, the risk of default--since the risk was consolidated into the extensive means of the crown--extended to the entire kingdom. The practice emerged of retributing the risk of debts not contracted directly with the crown to the crown, but was abandoned due to extensive abuse.

What was then called a Writ of Extent in Aid is now what we call novation.

It was in the crown's best interest to assure that all debts could be paid to avoid a cascade of defaults which, essentially, would negatively affect the crown's credit score--what we today call a sovereign-debt crisis. It is in the sovereigns self-interest to keep everybody solvent--thus, the practice of novation or what we call today, monetizing the debt (borrowing money to pay the debt).

It is probably safe to say that the process of risk novation has become, as in the past, abusive, but it is not likely to be abandoned anytime soon because it extends the risk disproportionate to the reward which, of course, over-extends the risk.

Novation was a prominent feature of the Great Recession. Derivative transactions were novated on a daily basis to avoid being stuck with the risk. An organizational tool called "the tri-party repo mechanism" was used (or more aptly abused) to essentially novate and extend the risk into a crisis proportion.

Ultimately, the risk was re-novated by government authority. It is now being redistributed in the form of public debt--a process that neo-classically consolidates and re-extends the risk with the force and legitimacy of public authority, keeping the reward accumulated in a crisis proportion, over-extending the risk.

In both the archaic and modern form, novation of the risk is intended to prevent killing the host that provides the current value of the risk--the reward (class distinction).

The ruling class is compelled to novate (renew or innovate) the risk, or be stuck with it.

It's time for the ruling class to be stuck with the risk and keep the Sovereign (The People) solvent.

It's time to re-novate the risk and retribute the value accumulated.