Overproduction

Capital in oversupply will continue to drive commodity prices higher. Using the supply does not draw it down but continues to accumulate the capital if it is not used to add supply. The result is the crisis of overproduction (declining demand: deflation, and rising prices: inflation).

Deflation and inflation at the same time has a whipsaw effect. Rising prices reduce available income to form "the capital." The loss suffered to form (to invest) the capital is supposed to add supply with a disinflationary effect (low inflation with full employment: falling prices and rising incomes--the opposite of the whipsaw effect).

A whipsaw effect rather than disinflation indicates that the capital is no longer owned by its investors (those who have suffered the loss). Instead, it has been usurped to derive more value than returned to the investors. Taxpayers, for example, that bailed out big financials are now beset with huge budget deficits (an accumulated tax burden). Unemployment, as well, continues to rise (loss of income per hour worked), and foreclosed homeowners need homes to live in (loss of net worth) while Wall Street continues to distribute record pay.

The value accumulated (the return on investment), directed by the common utility of self-interest, is supposed to trickle down and add supply, causing disinflation rather than deflation. Instead, however, we have rising prices (commodity inflation) causing falling demand which the Fed is expected to ease by adding to the money supply (more money to pay Wall Street bonuses and support corporate profits without growth, which supports the deflationary trend). The missing (accumulated) value is the missing demand that causes overproduction.

It is important to notice that Wall Street analysts describe and explain quantitative easing (QE) as a causal factor in order to ignore the causal relationship between corporate profits and unemployment. Supposedly, QE is supporting equity prices, not unemployment. Expostulated, however, QE is the result of unemployment which produces the value of overproduction the Fed monetizes.

It is also important to recognize that the Fed, in the current case, for example, is acting to support commodity prices. That not only checks growth and general inflation, but sets up a clearly detectable signal for recovery--declining commodity prices indicating recovery and rising interest rates with the fewest possible spurious and confounding variables. Limiting risk that is spurious and confounding (the black box of derivative finance) limits the probability that monetizing the debt supports a debtor-financed recovery which predicts a severe economic crisis (an extreme double dip).

By monetizing the missing value (the loss of income) into debt, the Fed knows the added funds will be used to inflate commodity prices, producing capital gains. This will control inflation not by adding supply (disinflation, which supports incomes while resisting inflation), but by reducing available income per unit of labor (unemployment, or the capital gained), causing "productivity gains."

Keynes and other economists noticed that instead of adding supply, we dumped soft commodities like wheat in the ocean in a time of deflationary crises, not because we did not need it, but to support the price. People were hungry not because they didn't want to work or did not work hard enough, but because they did not have the money to buy the production (the missing value). Thus, the crisis of overproduction in which demand (money) is insufficient to reduce the supply (what classical economists called "surplus value" and the value we today monetize into public debt).

The easy solution is to print the money to fill the gap created by an overaccumulation of wealth into the hands of a small proportion of people. Capital, then, is in oversupply--it has been overproduced, reinforcing the element of overproduction (a surplus) in a crisis proportion. To counter the added value, the economic rent is extended to absorb it. Although it may not be readily apparent, buying gold, or any other commodity, for example, to impulsively hedge the risk of currency devaluation is a way to extend the rent. Extra value can then be derived with a subsequent corrective wave in which distributions are arbitraged against the accumulations. Accumulation of gold, for example, will eventually be arbitraged into a short interest that inflates the value of the extended risk (the rent). The risk has then been successfully hedged and the value (the economic rent) accumulated.

As we all know, too much money is inflationary. So, we go from having too little to too much money.

While it is irrational to dump wheat in the ocean when people are hungry, or leave homes empty when homeless shelters turn people away, it is perfectly rational on the beneficiary side--on the side that owns the surplus and intends to derive value from it, but with increased gamma risk.

Today, while a dollar buys less in a post-Keynesian environment, the gamma risk to the accumulation of the capital (the irrational benefit) has been proportionately reduced. The surplus value is technically programmed into short impulsive and corrective waves; but because that value is monetized, it reappears in the form of debt, transforming the value into an ever-larger risk proportion. It is what we now call a "bubble" that under enough pressure is sure to bust.

Yes, this is all very confusing. As long as the value of the risk is derivatively compounded from the fundament, its technical value is constantly projected into a future value that is evermore complex and uncertain. Ten years ago, for example, the Bush tax cuts were projected to be currently affordable. Supposedly, without making those tax cuts permanent, the capital will not be applied to reverse the deflationary trend.

What, then, are the expectations?

For Republicans, continuing a post-Keynesian path extends the debt into continuous crises. According to Democrats, we can expect to experience crises with or without monetizing the debt, but crises are expected to be less severe if continuously monetized.

What, then, is the alternative to maintaining a continuous crisis proportion?

Since the crisis of overproduction is not a function of producing too much, but paying too little (which over-accumulates the capital, causing an insufficient demand), the alternative is to deconsolidate the capital rather than monetize the demand with debt (avoiding a debtor-financed recovery).

Consider, for example, the mortgage crisis. Mortgages (debt) increased while incomes (real credit scores) were declining. The capital to make the mortgages was formed from the income needed to pay the mortgages, not from the accumulated capital. Crises is not just probable, it is inevitable (a fully expected value).

While real credit scores were declining, mortgagees leveraged the value of homes to supplement their incomes. If lenders were not willing to loan the money missing from the incomes of average homeowners, what was slow growth throughout the Bush era would have been an era of negative growth. (Keep in mind that homeowners were solicited to leverage their assets. Bankers falsely assured the accumulative value of those assets which was solely dependant on the leverage ratio--the higher the leverage, or price, the higher the risk of loss. Instead of appreciating, the future value of the assets were really depreciating by increasing the income of homeowners through debtor financing. The result was not only loss of potential value, but the loss of principal. In the same way, it is important that the Fed avoid a debtor-financed recovery.) Of course, the accumulation finally reached a crisis proportion (6 percent negative growth by 2009) and we are now experiencing the latitude of that proportion projected to be years of slow growth and high unemployment. Whether Democratic or Republican, it is a fully expected value.

The default on all this bad debt that was deliberately made bad by declining incomes is referred to as "deleveraging." We can expect to be deleveraging for quite some time, allowing for the wealth to consolidate which will then be releveraged into debt that lacks sufficient income to be paid, resulting in the crisis of overproduction.

Overproduction, it would seem, is something we should expect. We should expect for average incomes to decline, but not the prices we pay. This is not deleveraging. It is a misrepresentation--a deceit perpetrated to consolidate value in zero-sum with the false legitimacy of forming the capital for investment.

Derivative accounts at major banks, according to Haver Analytics, is at a record $214 trillion, and the CFTC says that derivatives are the primary source of risk that unwinds (deleverages) into crises. Rather than in-vesting for the commonwealth, the capital is being used to derive value and accumulate it by positioning in-vestment (average incomes) on the detriment side of the market.

How do average incomes compete with hundreds of trillions of dollars aligned against them? Where is the benefit to average incomes of keeping financials in a too-big-to-fail, economy-of-scale proportion?

Average incomes are being swindled with exclusively inscrutable, inaccessible and unaccountable financial instruments. While giving the appearance of scientific objectivity (and an exculpatory aspect to the risk), these instruments are mere props in a con game.

Technically objective "aspects" are employed (mathematically triangulated, or leveraged) not to benefit, but to beleaguer The People into the huddled masses waiting for their malefactors to save them from the fate of their natural (triangulated) existence.

Leveraging risk is not some dictate of nature. So, how does a person break out of an over-triangulated existence into a natural existence of self-determination anyway?

We have to recognize that leveraging risk is a function of organizational size: the bigger the size the bigger the risk and the probability of a deliberately exacted detriment. Thomas Jefferson had a very succinct description of this phenomenon--tyranny!

Securitizing (bundling) mortgages and consolidating banks, for example, resulted in an attempt to foreclose on everybody in an economy-of-scale proportion. Is that just a mistake like Bank of America's CEO claims, saying maintaining an economy of scale is in their customer's self-interest, or a deliberate detriment perpetrated by a company you just can't trust, but have to, with the force and legitimacy of a government-mandated, too-big-to-fail authority?

If we ensure a free and unconsolidated marketplace in priority, instead of bailing out what is too big to fail, we would have less capital consolidated and triangulated into a systemic-risk, economy-of-scale proportion and more in a small, fundamental, directly accountable, small-enough-to-fail proportion.

The risk can, and sould, be reduced to an alpha-risk proportion. There's no need to panic, it's perfectly natural...it's something we do every day without horizontal and vertical integration to network the externalities and triangulate the risk into a zero-sum detriment. Quite the contrary, causing a zero-sum detriment alienates your family, your friends, your customers.

We are being programmed to believe that organizing to produce a detriment is the nature of our humanity. Should we be locked in perpetual conflict armed with only an economy-of-scale formula for success?

The way it is now, we are condemned to an organizational model to hedge risk that is caused by the model. It is a nightmare of tautological proportion.

As a moral species, we should reasonably question the value of causing failure to produce success. If being able to impose your will on others and get what you want at someone else's expense is the measure of success, we have achieved the ultimate failure--hell on earth!

Believing that we must make others suffer the value of our success, and acting on it, confirms a hypothesis that if expostulated, and actively resisted, renders quite another natural existence.

We are not condemned to detriment unless we capitulate our natural rights to a ruling elite organized to self-fulfill their importance in an economy-of-scale proportion. The large, oversized scale is the detriment.

We should not resist the tendency to deconsolidate and relieve ourselves the angst of risk imposed by want-to-be masters and minions of mathematical manipulations. The signal that measures the extent of the risk is overwhelming--overproduction--and it must be perceived as a general benefit in order to be conserved. When the Democratic Party is described as the party of the food stamp and the Republican Party the party of the paycheck (the good only measured against the extent of the bad), we have an accurate description of overproduction as a general detriment.

Party politics results in policy that delivers insufficient paychecks and re-active measures that do not in-vest, but in-debts. Budget deficits signal a demand deficiency in the private sector. Public sector measures do not have to be debtor-financed, but invariably are to conserve the value accumulated to finance the debt. The result is a debtor-financed recovery, like we have now, setting us up for the next deflationary dip.

The Fed is genuinely attempting to avoid a debtor-financed recovery, causing a bit of a stir. With chairman Bernanke trying to create more in-vestment, financial markets are not exactly sure how to process it but are going through the expected consolidation phase of the cycle (robo-signing foreclosures, for example) nevertheless. Bank of America intends to consolidate as much as it can before in-debting in the guise of in-vesting.

"Every great society has failed when its debt gets too high" is the caveat delivered from the newly formed Republican opposition. Knowing that the funding available to pay down a public debt would have to come from the accumulation, Republicans oppose a more progressive tax code and budget deficits. Thus, reducing taxes and spending is the party's platform. Such a policy program, of course, ignores that the deflationary trend (the recession) is the result of the accumulation.

Spending cannot be reduced without cutting taxes for average incomes, quantitatively easing the crisis of overproduction without the Fed monetizing (adding to) the debt. Tax cuts for the rich will not allow a distribution from the accumulation which will reduce the debt that Republicans say is driving us into ruin.

Politically, if Democratic policy increases public debt, and Republican policy increases the need for public debt, the choice for voters (the extent of self-determination) is binomially reduced to indebtedness. Economically, with unemployment reaching to an official 10 percent and QE-2 being most likely, driving equities higher without a real recovery, the horde of corporate cash will be buying debt. Both politically and economically, the risk is being extended to average incomes whose buying power is being reduced. The result is cheap debt to be bought and sold dear with all the cost being extended to average incomes, yielding a benefit to those who have all the buying power (the ability to in-vest)--the top 2 percent of incomes.

The top 2 percent get the paycheck and everybody else gets the food stamps until the rich get the benefit/detriment they want. Everybody else suffers an extended detriment till they are assured a government authority that allows them to extract inflationary-deflationary value through private means without risk of disinflation (a free and unconsolidated marketplace) or liability for benefiting by causing a detriment in a too-big-to-fail proportion. Average incomes are forced to sacrifice their buying power to support the means of their economic distress. The result will be a double dip (rising bond prices).

Trends, meanwhile, are guided by managed futures--financial companies that manage the risk by guiding trends (impulsive and corrective waves) into a position beneficial to their books. The benefit derived from the future is, of course, overproduction (reduction of demand)--the expected value of the extended deflationary trend.

The debt being bought by the horde of cash will be sold at a profit to the unhedged risk of average incomes looking for a return at no risk. At that point, bonds go short, yielding a low return at high risk, and the value of the differential (the unexpected value) will be consolidated into "the capital." Since that capital is privately owned but has the potential for public good, it will, however, be converted into consolidated wealth (commonly owned only by the extension of debt or risk, hence the practical concept of a "debtor-financed recovery"). To turn it back into capital, its owners demand extra value (protection from risk or debt) that is borne by already-beleaguered average incomes. The value of overproduction gets support by extending the risk, the deflationary trend, and a debt that continues to accumulate both public and private.

With the wealth so accumulated, who is going to pay all the debt that supports it?

Something has to "give." A sacrifice has to be made that determines who bears the brunt of the risk. This is the gamma-risk dimension in which economic value accumulates into an unavoidable political proportion.

While overproduction suggests a disinflationary quality, it is a deflationary event. The value of the currency does not increase, but falls, pressuring commodity prices as "the capital" seeks risk protection (avoiding being turned into productive capital).

Investors--those who administer the capital--do not learn that avoiding risk causes it (just like being condemned to an organizational model to hedge risk that is caused by the model). They learn that it forms capital and they get a cut. They do not expect to be a victim of risk they are paid to reduce. They find out that the more capital accumulated, the less the available cut, just like every other working stiff. They find out that a devalued currency does not cause commodity inflation, for example, but the inflation reduces the value of the currency and increases (causes) deflationary risk (demand reduction).

Consolidation of the capital does not reduce risk, like we learn, but avoids it to the point of being unavoidable (into a crisis proportion).

Since commodity prices lack a fundamental quality, value is quantitatively derived that does not add demand (growth), but subtracts it. Growth will only occur by means of debt (a debtor-financed recovery) so that rising incomes cannot become capital, but are in service to the debt.

Growth is only to service the debt so that average incomes are in servitude rather than in-vested. Investment is not for growth, it is to service the debt, resulting in overproduction.

As long as there is a state of overproduction, there is no need to hire (deflation). The value not being paid average incomes is being used to drive up the prices of commodities (inflation). The value being gained and pocketed by the rich (unemployment and reduction of net worth) is literally "derived" from average incomes (the distributed debt). Given the source of "the capital" (the accumulated credit), everyone has a claim to its ownership and the benefit accrued. Retributing the value is not what will ruin us, but continuing to accumulate value without the necessary and proper distribution most certainly will.

It is a mistake for a power elite to equate an accumulation of gamma risk with their power. Quite the contrary, it is antithetical. It depreciates their power by eroding its legitimacy. Holding The People hostage to the threat of detriment is no threat if they are always in the throws of the detriment to be prevented. Eventually, the sacrifice required of The People is beyond the ability to give, and focus on all the hocus-pocus financing to derive the gamma will be depleted of its technical value when the value of the risk is nothing but retributive.

When the value becomes so derivative that overproduction is the value derived, the value derived becomes a function of the state (the sovereign, which is The People). Coercing yourself into a detriment, of course, makes no sense. The result is a bourgeois revolution (people like Rand Paul demanding to see the Feds books for himself, for example).

Without productivity (with overproduction), more and more people are available for the administration of the capital. The value being extracted from a loyal, bourgeois class has now reached a gamma-risk proportion. The affected class is not only familiar with the technical hocus pocus because they are administering it, but politically savvy on a level of participation concomitant with a sub-elite status, making class warfare a war progressively more difficult to win.

Republicans repeatedly remonstrate turning politics into class warfare because overproduction results in repeated and more extensive failure of bourgeoise aspirations. It is a war they cannot win.

The power elite no longer face wage earners watching widgets go by on an assembly line, but an expanding managerial elite that watch over the capital being administered to their detriment (which, again, includes the power elite despite what they may think). The bureaucratic model that has emerged combines elements of elitism and pluralism, reconciling the failed expectation of middle-class loyalty with the progressive confirmation of being members of the masses expected to sacrifice in service to the capital.

Austerity is not only an overtly expected value of the working class, but the middle class as economic growth stagflates. Productivity measures are no longer expected to increase, but decline (inflation supported by deflationary risk). "The workers," more and more, make things less and less. Progressively, a service economy emerges. Instead of making things, we serve it up in the capacity of overproduction (overaccumulated wealth and power, or an oversupply of debt).

Class becomes progressively bifurcated into servers and served (debtors and creditors). Risk is reduced to the deprived and those that have the capacity to deprive by means of overproduction (the overextension of credit risk).

Eventually, overproduction will lose its class-conflict value of zero-sum deprivation. Supply will eventually be technologically pulled into value that is not a quantity of reduced demand. Overproduction will gain the value of disinflationary capacity. It will be a function of oversupply rather than insufficient demand which causes the crises of deflation and inflation.

(Remember that accumulation of capital causes deflation, and the way to prevent a declining rate of profit is inflation--a quantitative measure. Despite unemployment, prices rise against the existing supply to support, and extend into the future, the value of overproduction through an overextension of credit--what we now call "quantitative easing.")

Quantitative measures affect the quality of the risk. When the risk reaches the gamma proportion, both the quantity and the quality are ontologically determined (categorically imperative) in direct proportion. There is no avoiding "the risk" at that point. The risk is fully taken and prepared for self-determination endowed by The Creator (ourselves)--power we have always had but lacked the determination to use.