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.