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.