Accumulated capital is expected to distribute. That failed expectation accumulates a diplomatic risk that, if allowed to persist, will require the legitimate force of public authority (it could be an FBI raid on hedge funds, or the invasion of Normandy). For the people who demonstrate that capital only distributes at the liberty of its holders, hording capital to the point of failed expectation presents the testable limitation of the risk.
A sovereign debt crisis does not present the same level of risk it did in the first half of the 20th Century because of monetary and fiscal tools designed to diffuse the risk in posteriori. The limit has been tested to yield a result that is not expected to be a popular consent for fascism or containment of a global communist threat.
The technology for managing risk in the gamma proportion is sophisticated enough to prevent falling into extreme elitist models that promise The People stability at the expense of freedom and prosperity. However, because the tools are intended to operate in posteriori, after the general detriment has been applied (distributing the risk, not the capital, as a public good), the general benefit is limited to stabilizing the means of deriving the accumulated value of the detriment (application of the risk value) in the future (its present value).
The effect is clearly dialectical: we went from general economic crises (classic liquidity crisis like we have now) resulting in general war, to classic crises resulting in post-hoc stability of the accumulated value and the risk it presents monetized into recessionary, rather than depressionary, trends. The proportion of risk value is synthetically conserved, but not without the thesis of diplomatic force and the failure of legitimate expectation having been technically transformed into a new means of evaluating the risk.
By careful and visible examination of what is a legitimate financial risk (antithetically limiting the liberty of the bourgeois elite since the American Revolution), we are now more concerned with detecting signals that indicate the extent of the risk. Where the crown would just send in the royal troops to contain the risk out of proportion (to protect and conserve the property of the crown in extension), we now discover and prosecute "channel" and "network" risks, for example, that intend to use the signals needed to assess and apply the risk as a function of private property (the extended value the crown lost to the revolutionaries).
The military, for example, wants to know what the risk, hidden in the proprietary black boxes of hedge funds, for example, really is. They want to know what kind of tools hedgers have hidden in their boxes and how they work, and since these tools are intended to craft the element of surprise to arbitrage the value of the risk, it is job one of military analysts to not be surprised. If there is one thing intelligence officers know very well is that the technicals are easily manipulated so that it is virtually impossible to detect what is a true or false signal. It is absolutely essential to detect any and all means of manipulation to manage the extent of diplomatic risk (to either prevent or prosecute warfare) with any predictive utility.
The means of diplomatic force are much more sophisticated now than general or even limited warfare. Fighting limited wars to prevent the threat of communism, for example, is a hard demonstration of power abandoned for softer diplomacy backed by assets prepared for the worst-case scenario. It is critical, then, for the players to have an accurate assessment of the risk.
Warfare distributes capital, it is no secret, and can be operationalized with domestic policy agendas. The war on terror, for example, operationalizes with global economic growth to increase the supply of labor available to the capital. This increases the level of risk on two fronts, both foreign and domestic which is, as federalists describe it, the exclusive, diplomatic domain of elite control. Any tendency to pluralism is countered by the need for authoritative control of potential conflict, keeping a practical and analytical elitist model in both a familiar and apparent (but devised) necessary condition.
An elite model is necessary to maintain civil order (and so doing causes incentive for civil disorder). It is an organizational tautology of conflict--a feedback loop that algorithmically predicts the stimulus and the frequency of the response. The feedback achieves a stable (predictable) instability that tests the extent of the risk by demonstration of power (like the crown did, which is why Jefferson called the Federalists "monocrats").
We see, then, how the elitist model utilizes both validation and verification for the application of power. The need for elite control is built into the model and the extent of the risk is verified by its demonstration.
The elite have learned not to allow the demonstration (the accumulation of capital) to occur (distribute) with world-wide conflict because the risk becomes extensively out of control and ontological; and the more ontological, the more likely risk will pluralize from consolidation into a more verifiably legitimate state.
The power elite of consolidated capital know very well that the cheap labor sustaining the current accumulative trend into the top 2 percent of incomes has bourgeois aspirations. Until those green-shoots mature, the risk accumulating in more mature labor markets is a threat to that accumulation of wealth. The threat accounts for the urgency to fix social security rather than distribute the accumulation to reverse demand deflation. This is a very significant miscalculation of the risk. The jobless, for example, are being told that they will have to work longer to retire, provided you have a job, which requires you work longer if you get one that does not competitively export to a cheaper labor market that consolidates the capital in the form of undistributed wealth.
Without the expected distribution of the capital, The People (the sovereign) are faced with a no-win scenario, and telling them that they will need to pay a consumption tax with the longer working time is an overextension of the risk that has very questionable intellectual value. Thus the need for the force and legitimacy of public authority fully prepared for the worst-case scenario.
The reason Wal-Mart is not allowed in New York City is because it is a threat to civil order. The risk is too high. With that high risk would be a high reward for Wal-Mart, but that reward would not sufficiently distribute to support the rents. Sure, there would be plenty of inexpensive, cheap-labor goods, but massive unemployment and deflation. The risk to the community is calculated to exceed the reward, averting the accumulation of risk (the consolidation of value) into a crisis proportion.
The risk is subordinate to the general welfare.
In either case, whether order or disorder in priority, whether pluralism or consolidation, the constant value is the general welfare. Hamiltonians argue, for example, that equitable distribution of wealth is a risk to the general welfare because we then lose the capacity for identifying those who are most capable of managing the risk. Consolidation of industry and markets (reducing the free market to an economy-of-scale efficiency), then, indicates the proper and efficient management of the risk by those who are most capable of reducing, or leveraging it, to their advantage.
Pluralists, on the other hand, argue that elites are the risk to be managed. Whether it is fascism, socialism, communism or whatever "ism," it is the power elite that presents the risk to be managed.
Without elite management of the risk, it is otherwise managed by The People toward a peaceful and prosperous end (the empirical, popular legitimacy of a free-market ontology, continuously tested and re-tested so that trust is a function of verification). Rather than The People being subordinated to the elite, the elite are subordinate to The People...to the Sovereign (the risk that the elite consider counter-revolutionary).
Natural subordination of the risk to the general welfare is subjected to all manner of philosophical interpretation, but they are all objectively concerned with its accumulation and distribution toward an expected, measurable value (or the possibility of its modification). Failure of that expectation, whether dominant or subordinate, requires the force and legitimacy of public authority to manage the risk the failure represents.
Accumulated capital is expected to distribute, and if it does not, the legitimate force of public authority is a fully expected value of the risk assumed. For a power elite, the assumption of loss is modeled into systemic risk, like the systemic risk that has recently led to bailing out entities deliberately designed to be too big to fail. Deconsolidation--distribution--of the value will successfully manage this risk to the fullest satisfaction of the Sovereign...The People.
With the risk of failed expectation fully discounted in priority, we can be well on our way to the peaceful and prosperous pluralism we all know we should have but are denied with the overvalued expectation of elite authority.
That failed expectation accumulates a diplomatic risk. The force of public authority gains expected value against that risk, and since the risk supports the expected value, the elite naturally conserve the value without fail. The practical, organizational model of "too big to fail," for example, that technically supports consolidated capitalism causes crises that demands elite command and control. Thus, it is an expectation that is assured not to fail, giving it the appearance of repeatedly demonstrating a confirmable success when it is really a systematic means of ensuring failure and the cyclical, zero-sum value of the risk.
The assumption of risk is modeled to value at 100 percent of probable loss. Risk is then expected to be managed, discounted, to the fullest extent of that value--the risk of loss, that is, is fully assumed with the force and legitimacy of public authority. The effect is a practical demonstration of power that recursively confirms (conserves) the value of the risk without failure of expectation, which systematically limits the accumulation of diplomatic risk by popular demand.
Capital that only distributes at the liberty of its holders as a demonstration of power (only after having gained favorable tax policy along with spending cuts that do detriment to the lower classes, for example), presents a reoccurring detriment (an accumulative risk) that falsely confirms the need for elite authority. Hording capital to the point of failed expectation presents the testable limitation of the risk that indeed, by its expected reoccurrence, gains the presence of probable loss.
Tuesday, November 23, 2010
Saturday, November 20, 2010
What Does It Measure?
Isaac Newton said science measures causes unknown. He could measure the effects of gravity, but could not identify exactly what it is.
Today we identify gravity as an electromagnetic force, but we still speculate as to what causes it. We can create an electromagnetic field with dynamic, physical processes, but that does not mean that gravity is being caused, just accumulated and re-presented.
Risk, like gravity, is a weak force that accumulates, and distributes, with capital. Like gravity, when risk is critically overaccumulated, the capital collapses under its own weight. It is the charge of political-economic analysts to know when that critical mass (the gamma-risk proportion) has been achieved, and how to avert crises if not prevent them. Of course, that means having the tools to measure the extent of the risk.
Newton and Leibniz invented the calculus to measure causes unknown, and today it is also used to quantify and manage the extent of the risk. If you are a military analyst, for example, looking to predict the probability of political-economic crises that results in civil disorder, you need to know how financial engineers "make the market."
How the market is made (the modeling used) determines the probable extent and timing of the risk, as well as the probable indicators and timing of stability. This is all a fuction of signals intelligence that the military is currently engaged and that our modern-day federalists are looking to operationalize with the threat of international terrorism. Beware of this trend!
What is being politically measured with the signals being detected is timing correlated with rhetorical pitch and policy action, mobilizing the use of military assets in support of domestic policy that increases the gamma risk. Understand that this does not mean direct use of military assets to enforce a policy agenda, like the bonus march during the recession that followed WWI, but indirectly.
While analysts were warning of the elements put in process to accumulate the risk into the Great Recession, for example, we were distracted with the war on terror. That legacy lives and can easily result in the Great-Great Recession without the attention of The People focused on public policy that deconsolidates the risk.
Terrorism that exports from Eastern monarchies forces The People's attention into achieving military security. Economic policy then gravitates to a high level of instability. It becomes a high-risk/reward environment that will, for example, support the risk premium for a barrel of oil (which includes a weak dollar) which, in turn, supports the crisis proportion and the need for elite authority to politically manage the risk over The People.
The Tea Party caucus will ally with the federalists to support what Jefferson called counter-revolutionary, "monocratic" tendencies. It will be hard for the caucus not to be captured by the gravitas of accumulated political power. It will be much more difficult for The People to keep the caucus on course to alleviate the immediate source of our insecurity by realizing what the budget deficit really measures is the detriment caused by the Republican economic agenda, forcing us into the Great Recession.
Republicans would like to convince us that risk analysis measures causes unknown. We can measure the effects of risk, but cannot, without speculating, identify exactly what the source of it is despite their agenda having clearly accumulated risk into the crisis proportion that we now suffer.
We've gone from tragedy to farce which, if you are a federalist, means it is time to ensure the civil order from the top down in priority. Federalists will be reminding us, meanwhile, that our founders ensured a heritage of civilian authority over military assets to protect the sovereign (The People) from abuse of power and from threats to liberty both foreign and domestic.
When military assets are employed to manage the risk directly or indirectly, what is the extent of the risk being measured?
Today we identify gravity as an electromagnetic force, but we still speculate as to what causes it. We can create an electromagnetic field with dynamic, physical processes, but that does not mean that gravity is being caused, just accumulated and re-presented.
Risk, like gravity, is a weak force that accumulates, and distributes, with capital. Like gravity, when risk is critically overaccumulated, the capital collapses under its own weight. It is the charge of political-economic analysts to know when that critical mass (the gamma-risk proportion) has been achieved, and how to avert crises if not prevent them. Of course, that means having the tools to measure the extent of the risk.
Newton and Leibniz invented the calculus to measure causes unknown, and today it is also used to quantify and manage the extent of the risk. If you are a military analyst, for example, looking to predict the probability of political-economic crises that results in civil disorder, you need to know how financial engineers "make the market."
How the market is made (the modeling used) determines the probable extent and timing of the risk, as well as the probable indicators and timing of stability. This is all a fuction of signals intelligence that the military is currently engaged and that our modern-day federalists are looking to operationalize with the threat of international terrorism. Beware of this trend!
What is being politically measured with the signals being detected is timing correlated with rhetorical pitch and policy action, mobilizing the use of military assets in support of domestic policy that increases the gamma risk. Understand that this does not mean direct use of military assets to enforce a policy agenda, like the bonus march during the recession that followed WWI, but indirectly.
While analysts were warning of the elements put in process to accumulate the risk into the Great Recession, for example, we were distracted with the war on terror. That legacy lives and can easily result in the Great-Great Recession without the attention of The People focused on public policy that deconsolidates the risk.
Terrorism that exports from Eastern monarchies forces The People's attention into achieving military security. Economic policy then gravitates to a high level of instability. It becomes a high-risk/reward environment that will, for example, support the risk premium for a barrel of oil (which includes a weak dollar) which, in turn, supports the crisis proportion and the need for elite authority to politically manage the risk over The People.
The Tea Party caucus will ally with the federalists to support what Jefferson called counter-revolutionary, "monocratic" tendencies. It will be hard for the caucus not to be captured by the gravitas of accumulated political power. It will be much more difficult for The People to keep the caucus on course to alleviate the immediate source of our insecurity by realizing what the budget deficit really measures is the detriment caused by the Republican economic agenda, forcing us into the Great Recession.
Republicans would like to convince us that risk analysis measures causes unknown. We can measure the effects of risk, but cannot, without speculating, identify exactly what the source of it is despite their agenda having clearly accumulated risk into the crisis proportion that we now suffer.
We've gone from tragedy to farce which, if you are a federalist, means it is time to ensure the civil order from the top down in priority. Federalists will be reminding us, meanwhile, that our founders ensured a heritage of civilian authority over military assets to protect the sovereign (The People) from abuse of power and from threats to liberty both foreign and domestic.
When military assets are employed to manage the risk directly or indirectly, what is the extent of the risk being measured?
Friday, November 19, 2010
Disabusing the Hamiltonian Model
The Hamiltonian model operationalizes with the risk of loss fully assumed. With economic indicators in a confusing, conflicted array of sudden reversals and unexpected correlations (signaling the risk is going gamma), analysts that are concerned with tracking the extent of risk are compelled to consider worst-case scenarios.
Considering the extent of the risk is going gamma (a combination of a strong deflationary trend, a binomial political system, and strengthening global economic tension), and considering gamma risk is ontologically unavoidable without throwing out the model that assumes the risk, the military, for example, is predictably preparing plans to react to risk accumulating into a political proportion of general crisis.
While this is not a military problem, it is an economic organization problem, operationalizing military assets with conserving the risk assumed by the working model is a necessary condition for securing the general welfare. The model unavoidably relies on the force and legitimacy of public authority (with the risk of loss fully assumed).
The current working model needs to be disabused: the general welfare ontologically expected and verifiably legitimate with the risk assumed to the fullest extent (with the risk of gain fully assumed).
If the risk is fully extended in priority (deconsolidated), the crisis proportion abates. If the risk, however, remains consolidated with an ever-extended proportion of debt, the crisis proportion continues to accumulate for everyone. Controlling the extent of the risk is then a function of the general welfare. Risk is not a privately owned commodity to be privately managed by We the People if the risk is assumed consolidated in priority.
While the Tea Party is expected to vector debt reduction toward middle-class gain, if military analysts were to ask a political-economic risk analyst if the gamma will reduce, the answer is: Without accepting a new model that does not rely on an accumulating debt burden in the middle, the gamma risk is more likely to increase.
Considering the extent of the risk is going gamma (a combination of a strong deflationary trend, a binomial political system, and strengthening global economic tension), and considering gamma risk is ontologically unavoidable without throwing out the model that assumes the risk, the military, for example, is predictably preparing plans to react to risk accumulating into a political proportion of general crisis.
While this is not a military problem, it is an economic organization problem, operationalizing military assets with conserving the risk assumed by the working model is a necessary condition for securing the general welfare. The model unavoidably relies on the force and legitimacy of public authority (with the risk of loss fully assumed).
The current working model needs to be disabused: the general welfare ontologically expected and verifiably legitimate with the risk assumed to the fullest extent (with the risk of gain fully assumed).
If the risk is fully extended in priority (deconsolidated), the crisis proportion abates. If the risk, however, remains consolidated with an ever-extended proportion of debt, the crisis proportion continues to accumulate for everyone. Controlling the extent of the risk is then a function of the general welfare. Risk is not a privately owned commodity to be privately managed by We the People if the risk is assumed consolidated in priority.
While the Tea Party is expected to vector debt reduction toward middle-class gain, if military analysts were to ask a political-economic risk analyst if the gamma will reduce, the answer is: Without accepting a new model that does not rely on an accumulating debt burden in the middle, the gamma risk is more likely to increase.
Thursday, November 18, 2010
Quantitative Leveraging
To turn "the risk" into a discrete, manageable quantity, it is the Fed's job to conserve the value of the accumulated risk in addition to keeping inflation low at full employment, (i.e., manage the extent of the risk).
Since managing the risk is modeled with the Phillips Curve, which assumes full employment only at the risk of high inflation, it reasonably follows that increasing inflation will cause employment. Thus, inflation distributes the risk through the Fed's open-market accounts, keeping close account of its distribution to effect economic activity.
Supposedly, monetarism is a tool for economic expansion--to monetize (leverage) growth, not to cover the debt. One unit of monetary expansion is supposed to yield one or more units of growth to cover the debt. However, what we have is money leveraged ex nihilo to pay the debt in the absence of sufficient growth (employment) to pay the debt.
What is being monetized is the ability to make a profit without domestic employment or growth. Unemployment is projected to be high long term while we prepare to reduce government spending and increase the age of retirement. This presents a tremendous risk to the resulting accumulation of the capital. If it belongs to the wealthy, then they have the liberty to distribute it any way they want. Their property cannot be deprived without due process--the tax code, for example; and if the distribution is determined by one-person-one-vote, the top two percent of income distribution don't have a chance. The top will assume the risk by force and legitimacy of public authority, so there has to be a way to leverage this quantity of accumulated risk into the lower classes.
Conservatives argue, of course, "we can't keep spending money we don't have" which, of course, means we are going to have to spend the money we do have (at the top), or monetize the debt. It is the Fed's job to do the latter and redistribute the risk with a leveraging scheme (with the risk of loss fully assumed) called quantitative easing.
QE maintains the debt without the risk of equity distribution, that is: it pays the debt by extending the risk. The risk of loss is extended to treasury debt and average incomes that are fixed into low-risk returns.
Keep in mind that the very means of QE as a macro-leveraging scheme is via treasury bonds. That means that the low-risk return is transformed into a higher risk of depreciation, making them assets with a high risk of low return (which is accomplished by "making the market"). The bank is using the depositors funds against them, setting them up as the counterparty to take the risk hedged into a counterparty detriment. This is the leveraging scheme that caused the Great Recession; and if we keep it up, without paying the debt from money that has been accumulated in the private accounts of the rich, it only gets Greater.
Since a Great-Great Recession accumulates more risk, the leveraging scheme has to be equally Great. So, some conservatives suggest the Fed drop its dual mandate and concentrate on economic stability. If we don't, our nation will go bankrupt.
Alexander Hamilton, America's first treasury secretary, devised a leveraging scheme that would perpetually keep our nation from default. Cleverly, the trick is to never be solvent. It does not matter if there is not enough revenue to pay the national debt as long as the debt is paid when it comes due. While, technically, the nation is bankrupt, it never defaults.
Of course, there is a significant amount of austerity (inherent risk) built into Hamilton's leveraging scheme. There has to be a scheme (a model) for determining who takes the risk of loss, fully assumed.
Since the lower classes benefit disproportionate to the amount of capital they invest, and risk, with a wage earned and paid in full, it is more important to conserve the means of their employment (the capital) and tax the lower classes to pay the debt as it comes due. Thus, the more capital accumulated, the more security extended to the lower classes to pay the debt without default.
Hence, paying taxes is lower class; and as it was with the crown, the upper class determines the rate of interest (the extent of the risk), and the lower classes, especially the middle class, pays it.
Thomas Jefferson, strongly opposed to Hamilton's Model, branded Hamilton and the Federalists "monarchists." Jefferson said Hamilton's scheme had a whole lot of room for abuse that the Revolution was intended to prevent, and Hamilton's conservative philosophy survives to this day having accumulated a whole lot of abuse, but without the risk of default.
QE is an extension of Hamiltonian modeling, providing a lever for extracting austerity from the least able to pay. The value is extracted from the masses in their own self-interest which, according to Hamiltonians, The People are not capable of knowing.
Who understands QE, MBS's, SDO's, CDO's, CDS's, or SIV's anyway? Apparently, the rich don't have to know how it all works, just that it works, and then it is on to mitigating the risk... playing the game of politics and figuring prominently on the social registry of popular culture which now includes schemes to get rich quick with all that fast-and-easy money out there. One of those pop schemes flipped housing prices into a catastrophic detriment, leaving homeowners with liabilities that far exceed their assets in true Hamiltonian fashion.
Jefferson was right, the Hamiltonian model provides more than enough incentive for abuse with less than enough ability to check it if we let wealth and power consolidate into the hands of the people driven by the animal spirits of greed and domination.
Politically ensuring a free-market system ensures both economic stability and productive capacity.
Keeping industry and markets from consolidating protects us from the tyrannical, extortionist tendencies of too big to fail and operationalizes animal spirits into an incentive for productive capacity (employment with low inflation) rather than operationalizing customers into a counterparty risk and detriment.
The Fed and the Treasury will serve us ALL well by ensuring pluralism first instead of conserving and protecting the accumulated value of the risk. Conserving a fully assumed risk of loss ensures liquidity crises and a continuous accumulation of debt that fits the Hamiltonian model of political-economy.
It is time to employ a model that does not operationalize with the risk of loss fully assumed, but the general welfare ontologically expected and verifiably legitimate with the risk assumed to the fullest extent.
Since managing the risk is modeled with the Phillips Curve, which assumes full employment only at the risk of high inflation, it reasonably follows that increasing inflation will cause employment. Thus, inflation distributes the risk through the Fed's open-market accounts, keeping close account of its distribution to effect economic activity.
Supposedly, monetarism is a tool for economic expansion--to monetize (leverage) growth, not to cover the debt. One unit of monetary expansion is supposed to yield one or more units of growth to cover the debt. However, what we have is money leveraged ex nihilo to pay the debt in the absence of sufficient growth (employment) to pay the debt.
What is being monetized is the ability to make a profit without domestic employment or growth. Unemployment is projected to be high long term while we prepare to reduce government spending and increase the age of retirement. This presents a tremendous risk to the resulting accumulation of the capital. If it belongs to the wealthy, then they have the liberty to distribute it any way they want. Their property cannot be deprived without due process--the tax code, for example; and if the distribution is determined by one-person-one-vote, the top two percent of income distribution don't have a chance. The top will assume the risk by force and legitimacy of public authority, so there has to be a way to leverage this quantity of accumulated risk into the lower classes.
Conservatives argue, of course, "we can't keep spending money we don't have" which, of course, means we are going to have to spend the money we do have (at the top), or monetize the debt. It is the Fed's job to do the latter and redistribute the risk with a leveraging scheme (with the risk of loss fully assumed) called quantitative easing.
QE maintains the debt without the risk of equity distribution, that is: it pays the debt by extending the risk. The risk of loss is extended to treasury debt and average incomes that are fixed into low-risk returns.
Keep in mind that the very means of QE as a macro-leveraging scheme is via treasury bonds. That means that the low-risk return is transformed into a higher risk of depreciation, making them assets with a high risk of low return (which is accomplished by "making the market"). The bank is using the depositors funds against them, setting them up as the counterparty to take the risk hedged into a counterparty detriment. This is the leveraging scheme that caused the Great Recession; and if we keep it up, without paying the debt from money that has been accumulated in the private accounts of the rich, it only gets Greater.
Since a Great-Great Recession accumulates more risk, the leveraging scheme has to be equally Great. So, some conservatives suggest the Fed drop its dual mandate and concentrate on economic stability. If we don't, our nation will go bankrupt.
Alexander Hamilton, America's first treasury secretary, devised a leveraging scheme that would perpetually keep our nation from default. Cleverly, the trick is to never be solvent. It does not matter if there is not enough revenue to pay the national debt as long as the debt is paid when it comes due. While, technically, the nation is bankrupt, it never defaults.
Of course, there is a significant amount of austerity (inherent risk) built into Hamilton's leveraging scheme. There has to be a scheme (a model) for determining who takes the risk of loss, fully assumed.
Since the lower classes benefit disproportionate to the amount of capital they invest, and risk, with a wage earned and paid in full, it is more important to conserve the means of their employment (the capital) and tax the lower classes to pay the debt as it comes due. Thus, the more capital accumulated, the more security extended to the lower classes to pay the debt without default.
Hence, paying taxes is lower class; and as it was with the crown, the upper class determines the rate of interest (the extent of the risk), and the lower classes, especially the middle class, pays it.
Thomas Jefferson, strongly opposed to Hamilton's Model, branded Hamilton and the Federalists "monarchists." Jefferson said Hamilton's scheme had a whole lot of room for abuse that the Revolution was intended to prevent, and Hamilton's conservative philosophy survives to this day having accumulated a whole lot of abuse, but without the risk of default.
QE is an extension of Hamiltonian modeling, providing a lever for extracting austerity from the least able to pay. The value is extracted from the masses in their own self-interest which, according to Hamiltonians, The People are not capable of knowing.
Who understands QE, MBS's, SDO's, CDO's, CDS's, or SIV's anyway? Apparently, the rich don't have to know how it all works, just that it works, and then it is on to mitigating the risk... playing the game of politics and figuring prominently on the social registry of popular culture which now includes schemes to get rich quick with all that fast-and-easy money out there. One of those pop schemes flipped housing prices into a catastrophic detriment, leaving homeowners with liabilities that far exceed their assets in true Hamiltonian fashion.
Jefferson was right, the Hamiltonian model provides more than enough incentive for abuse with less than enough ability to check it if we let wealth and power consolidate into the hands of the people driven by the animal spirits of greed and domination.
Politically ensuring a free-market system ensures both economic stability and productive capacity.
Keeping industry and markets from consolidating protects us from the tyrannical, extortionist tendencies of too big to fail and operationalizes animal spirits into an incentive for productive capacity (employment with low inflation) rather than operationalizing customers into a counterparty risk and detriment.
The Fed and the Treasury will serve us ALL well by ensuring pluralism first instead of conserving and protecting the accumulated value of the risk. Conserving a fully assumed risk of loss ensures liquidity crises and a continuous accumulation of debt that fits the Hamiltonian model of political-economy.
It is time to employ a model that does not operationalize with the risk of loss fully assumed, but the general welfare ontologically expected and verifiably legitimate with the risk assumed to the fullest extent.
Wednesday, November 17, 2010
Nothing's Easy
As we come to realize that QE is one huge leveraging scheme, we have to question the rationality of such a huge accumulation of risk in addition to the 30-1 ratios that privately enterprised our economy into an abysmal crisis proportion.
Money from nothing is easy, right? Just create an account and start trading. It's pretty easy till we get to the austerity part of it. Nothing's easy then.
Enterprising at 30-1 effectively increases the money supply 30-1. Thirty times the risk proportionally accumulates somewhere. The trick is not to let it reside in your account. The best place to dump it is at the Fed who will print the money to accommodate the wealth over-accumulated from the over-leveraged risk and quantitatively ease the liquidity crisis you have caused.
Since the economy will grind to a halt without easy money for everybody else, the risk will eventually accrue to your account. It is necessary to extend the risk (debt) to keep the economy from a depressionary level. If that happens, there is no one left to pay the debt but you. The risk to your low tax rate that was supposed to ensure growth accumulates exponentially. If you are stuck with a higher tax rate (a strict liability of causing the accumulation), you are prepared to punish voters with even less liquidity, claiming it was stolen by the government and liberally spent on bridges to nowhere.
Although the goal is to exact austerity from the lower classes (your margin of profit without growth), the data indicates you have reached the limit. You can no longer exact the detriment with any measure of stealth, risking the margin by exposing its accumulation as a deliberate zero-sum (representing a causal relationship between the detriment and the benefit rather than a correlation that can be plausibly explained by spurious and confounding variables like government spending and regulatory interventions). The risk would then re-present as a detriment to you (increased probability that you will have to pay the debt--the liability).
A government commission to study reduction of debt is in order. That reduction, of course, is to reduce your risk in the public interest, shifting the risk to the lower classes with spending cut three times the rate of taxation.
The disparity will keep us solvent, you contend, with the force and legitimacy of government authority. We will be able to continue borrowing from exporters to buy their cheap-labor imports, supporting the price of commodities (our exports, providing a hedge against inflation--QE, for example--and the declining rate of profit) while resisting a strong dollar.
Now you can claim, with stealth, that the weak dollar causes headline inflation which strengthens the deflationary trend. This creates a whipsaw effect (a stealthy profit margin exacted from austerity), increasing the demand for debt (income reduction) while debt is being cut to reduce it. Now, however, the contradiction (the so-called paradox of thrift) is so overwhelming, stealth is not easily accomplished with everyone looking for the cause of the problem (what is reducing lower and middle-class incomes, and why, which increases the demand for debt, now being stealthily disguised as QE).
There needs to be a technical distraction--a stealthy means of indirectly exacting austerity from the lower classes, allowing you to alienate yourself from any risk of liability (the risk of being the technical cause of the detriment exacted).
QE fits the bill.
Nothing is easy, right? The quantity zero is just whatever you make it. It's easy to create your own reality, just start from zero and fill it up with whatever you want. It's the hallmark of freedom--liberty--to do whatever you want without risk of liability but, of course, you are just kidding yourself. Nothing's easy, right? You have to work for it.
Exacting austerity is hard work, and I hear it pays well.
Money from nothing is easy, right? Just create an account and start trading. It's pretty easy till we get to the austerity part of it. Nothing's easy then.
Enterprising at 30-1 effectively increases the money supply 30-1. Thirty times the risk proportionally accumulates somewhere. The trick is not to let it reside in your account. The best place to dump it is at the Fed who will print the money to accommodate the wealth over-accumulated from the over-leveraged risk and quantitatively ease the liquidity crisis you have caused.
Since the economy will grind to a halt without easy money for everybody else, the risk will eventually accrue to your account. It is necessary to extend the risk (debt) to keep the economy from a depressionary level. If that happens, there is no one left to pay the debt but you. The risk to your low tax rate that was supposed to ensure growth accumulates exponentially. If you are stuck with a higher tax rate (a strict liability of causing the accumulation), you are prepared to punish voters with even less liquidity, claiming it was stolen by the government and liberally spent on bridges to nowhere.
Although the goal is to exact austerity from the lower classes (your margin of profit without growth), the data indicates you have reached the limit. You can no longer exact the detriment with any measure of stealth, risking the margin by exposing its accumulation as a deliberate zero-sum (representing a causal relationship between the detriment and the benefit rather than a correlation that can be plausibly explained by spurious and confounding variables like government spending and regulatory interventions). The risk would then re-present as a detriment to you (increased probability that you will have to pay the debt--the liability).
A government commission to study reduction of debt is in order. That reduction, of course, is to reduce your risk in the public interest, shifting the risk to the lower classes with spending cut three times the rate of taxation.
The disparity will keep us solvent, you contend, with the force and legitimacy of government authority. We will be able to continue borrowing from exporters to buy their cheap-labor imports, supporting the price of commodities (our exports, providing a hedge against inflation--QE, for example--and the declining rate of profit) while resisting a strong dollar.
Now you can claim, with stealth, that the weak dollar causes headline inflation which strengthens the deflationary trend. This creates a whipsaw effect (a stealthy profit margin exacted from austerity), increasing the demand for debt (income reduction) while debt is being cut to reduce it. Now, however, the contradiction (the so-called paradox of thrift) is so overwhelming, stealth is not easily accomplished with everyone looking for the cause of the problem (what is reducing lower and middle-class incomes, and why, which increases the demand for debt, now being stealthily disguised as QE).
There needs to be a technical distraction--a stealthy means of indirectly exacting austerity from the lower classes, allowing you to alienate yourself from any risk of liability (the risk of being the technical cause of the detriment exacted).
QE fits the bill.
Nothing is easy, right? The quantity zero is just whatever you make it. It's easy to create your own reality, just start from zero and fill it up with whatever you want. It's the hallmark of freedom--liberty--to do whatever you want without risk of liability but, of course, you are just kidding yourself. Nothing's easy, right? You have to work for it.
Exacting austerity is hard work, and I hear it pays well.
Tuesday, November 16, 2010
Finding the Limit
Critical to any analysis is to recognize the limitations of the data. Identifying, describing, and explaining the limitations is where interpretation of the data takes a speculative dimension and tends to reduce to the assumptions inherent to a theoretical and practical model.
Political-economy is replete with an inability, if not an unwillingness, to technically identify the limitations of the data. This is mostly to avoid the risk of throwing out a model which may mean throwing out the principles, or assumptions, inherent to a model; and since political-economic arguments are usually based on immutable, absolute truths, these principles cannot be modified without reforming the model. Arguments tend, then, to be rhetorical and not scientific, refusing to recognize the limitations of the data where the truth is waiting to be discovered.
Philosophically, this discovery of latent truth is called "the thesis of independence" in which reality, Aristotle argued, is independent of perception. The implication to be avoided is that truth is not whatever we want to make it. (When hedge funds "make the market," for example, the risk is not reduced, it is transformed and will re-present in another form.) Our perception of things is immutably either true or false, right or wrong. The scientific method, however, is more phenomenological (dependant) because reality is based on perception (the ability to detect signals that indicate knowledge--the phenomenon--of the truth). That is: reality is only as good as our perception of it, which could very well be limited by the interpretation of the data (the signals that are, or are allowed to be, detected). In other words, without the scientific method, we may, or may not, have the truth, but we would never know it.
Kantians argue it both ways, much like Plato did, postulating that truth can be known by a critique of pure reason, with science (practical reason) verifying what we already know. For Kantians, moral truth, for example, can be logically reduced to "categorical imperatives" that are verified by practical application (verifying what we already knew).
According to Emanuel Kant, there is no limit to knowledge. It is as unlimited as our imagination, which was verified by Einstein's conceptual modeling in the 20th Century, and suggests today's M-theory in which probability is infinitely extensive but quantifiably limited (like the example of the hedge fund's perception of the risk being quantifiably limited and local but extensively unavoidable).
Despite Kant's epistemology, we may have truth but never know it without verification, which is the built-in rhetoric--the universal ethic of thinking, the immutable rule of reason--that governs the scientific method.
Models conceptualize what is believed to be the truth. When applied, however, the results (the signals detected) are likely to modify the perception. If the model is not changed to represent the knowledge of it (the phenomenon), then the "reality" becomes a function of intentional error (teleology). The phenomenon is the reality that philosophers like Hegel and Marx described as "alienation." Even though we may "know" the reality is "not" true (the null hypothesis) in a Kantian way, nature dialectically reconciles the discrepancy (the error), reducing the cognitive dissonance by our choosing the new model, nulling the hypothesis in posteriori (ontology).
Truth just ontologically is. It does not care what our perception of it is and so we are determined to a natural existence despite as we may to teleologically make our own reality in spite of the ontological truth.
The model of capitalism, for example, assumes a free market. The model assumes that capitalism accurately represents our natural existence and is empirically measured by free exchange in the marketplace in which our dollar votes democratically choose the difference between right and wrong, extending down to each and every individual. Winners and losers are ontologically selected (determined) by collective action extended from individual tastes and preferences.
If government chooses winners and losers with tax and subsidy, the system is teleologically corrupted. The model is no longer ontologically true (a free market). Winners and losers are no longer objectively determined by the legitimate logic of collective action and the model has reached the limit of the available data that determines the legitimacy of the risk/reward. The data is now interpretatively limited to validate, rather than verify, the model, which essentially disconfirms it.
The extent of government measures the extent of a free market and the extent of the risk (the alienation that Hegel and Marx describe). The Tea Party caucus detects the extent of the risk, for example, demanding we go back to a free-market legitimacy. They detect signals (budget deficits, for example) that indicate crises that they know by experience reduces the income required to have equitable dollar votes in a free market.
Marxists argue that there is no going back. The evidence, however, does not support that hypothesis.
Despite an observable dialectic, history is not perfectly linear, and a linear projection indicates a marketplace that is so consolidated (the banking system, for example) that individuals have progressively less choice for collective action. It can hardly be considered an improvement despite what progressives may argue in the name of the public good, rendering a public policy environment that is anything but liberal as "liberals" are apt to allow for continuous consolidation of power to control risk (bailouts, mergers, and expansion of debt to provide for our social security) in a characteristically conservative manner (what Marx called "anti-socialist socialism").
We have reached the limit and the Tea Party caucus is an indicator of that arrival. The freedom to choose is not ensured if we have to do business with firms that are progressively more consolidated. Sure, that accumulation of power is destined for a distribution, but that correction does not have to be catastrophic. We can accept the limitations of capitalism and deconsolidate the risk as the primary function of government authority, much as Adam Smith described it economically, and Thomas Jefferson politically. These are not ideas limited to a historical time and space.
The model of democratic pluralism is a model that is still unfolding to reveal the reality of a natural existence that is not limited to the better judgment of elite authority. It is not necessary to sacrifice liberty in order to attain it.
Thomas Jefferson said revolution is a continuous process of improvement as long as power is not allowed to consolidate, much like Adam Smith described it.
Dialectically, the antithesis of directing risk into continuous consolidation is to reverse the trend and deconsolidate. According to Hegel, for example, it is the rational action to take, and what is rational is what is verifiably real (universal, immutable truth); and Kant adds that it is therefore a moral imperative. Hegel argues we are determined to make the right choice because what is rational (dialectically determined) is really not a choice at all. What is rational is immutably real--either true or false like one-plus-one always verifiably equals two. Kant agrees, but contends that choice is not limited to the dialectic--we can choose to be irrational and accept what is not morally imperative, or conversely interrupt the dialectic and project rationality into the future to give truth (reality) the currency of present value (what is and always will be, like our "inalienable" rights, formulated into an ontologically confirmable hypothesis).
Jefferson and Smith tend to agree with Kant while Marx tends to a dialectical determinism. Marx, though, admitted that it appears to be a "soft" determinism, recognizing that we don't have to wait for catastrophe to do the right thing (confirmed by avoiding potential disaster).
Pluralism, according to Smith and Jefferson, is a way to have freedom (the reality of choice) without sacrificing ontology. A free market, for example, puts ontology to work for The People. The dialectic occurs in small packages. Risk is not allowed to accumulate into a crisis (gamma) proportion because it is micro managed by each and every individual according to his or her moral imperative, forming a collective ontology We call a free and open society (the classic concept of liberalism).
Philosophy has everything to do with technical analyses. The assumptions that go into analytical models determine the limits of the data toward a predictive utility. Assessing risk, for example, is a highly philosophical endeavor.
The hedge fund example illustrates the need for philosophical insight to determine the extent of the risk. If analysts consider dialectics to be a lot of Marxist bunk, then they are unlikely to see that risk is not being created with financial leveraging tools, but is being reshaped. Risk is not being created ex nihilo, but accumulated. Then, of course, the complaint is that risk is too accumulated, but because it is not considered to be dialectic, but an expected risk-ontology of the business cycle nevertheless, they do not consider themselves responsible for the full value of the risk that comes back to haunt them to exact austerity in the same measure.
Ensuring the pluralism of a free-market system in priority exacts this austerity (the full value of the risk of loss fully assumed) in small (non-economy-of-scale) units. Factoring in the trillions and trillions of dollars spent over the past two years to manage the accumulated risk, with more to come, the economy-of-scale efficiency is decidedly inefficient on a colossal scale. Nevertheless, we will ideologically (philosophically) ignore the technicals and limit the data, as well as its interpretation, to conserve the accumulated value of the risk in a crisis proportion. That proportion, however, as I have endeavored to describe and explain on this web site, is ontologically gamma--it will unavoidably emerge with a power and determination that needlessly condemns us all to the fate (the inevitable austerity and insecurity) of ignorance and irrationality.
Political-economy is replete with an inability, if not an unwillingness, to technically identify the limitations of the data. This is mostly to avoid the risk of throwing out a model which may mean throwing out the principles, or assumptions, inherent to a model; and since political-economic arguments are usually based on immutable, absolute truths, these principles cannot be modified without reforming the model. Arguments tend, then, to be rhetorical and not scientific, refusing to recognize the limitations of the data where the truth is waiting to be discovered.
Philosophically, this discovery of latent truth is called "the thesis of independence" in which reality, Aristotle argued, is independent of perception. The implication to be avoided is that truth is not whatever we want to make it. (When hedge funds "make the market," for example, the risk is not reduced, it is transformed and will re-present in another form.) Our perception of things is immutably either true or false, right or wrong. The scientific method, however, is more phenomenological (dependant) because reality is based on perception (the ability to detect signals that indicate knowledge--the phenomenon--of the truth). That is: reality is only as good as our perception of it, which could very well be limited by the interpretation of the data (the signals that are, or are allowed to be, detected). In other words, without the scientific method, we may, or may not, have the truth, but we would never know it.
Kantians argue it both ways, much like Plato did, postulating that truth can be known by a critique of pure reason, with science (practical reason) verifying what we already know. For Kantians, moral truth, for example, can be logically reduced to "categorical imperatives" that are verified by practical application (verifying what we already knew).
According to Emanuel Kant, there is no limit to knowledge. It is as unlimited as our imagination, which was verified by Einstein's conceptual modeling in the 20th Century, and suggests today's M-theory in which probability is infinitely extensive but quantifiably limited (like the example of the hedge fund's perception of the risk being quantifiably limited and local but extensively unavoidable).
Despite Kant's epistemology, we may have truth but never know it without verification, which is the built-in rhetoric--the universal ethic of thinking, the immutable rule of reason--that governs the scientific method.
Models conceptualize what is believed to be the truth. When applied, however, the results (the signals detected) are likely to modify the perception. If the model is not changed to represent the knowledge of it (the phenomenon), then the "reality" becomes a function of intentional error (teleology). The phenomenon is the reality that philosophers like Hegel and Marx described as "alienation." Even though we may "know" the reality is "not" true (the null hypothesis) in a Kantian way, nature dialectically reconciles the discrepancy (the error), reducing the cognitive dissonance by our choosing the new model, nulling the hypothesis in posteriori (ontology).
Truth just ontologically is. It does not care what our perception of it is and so we are determined to a natural existence despite as we may to teleologically make our own reality in spite of the ontological truth.
The model of capitalism, for example, assumes a free market. The model assumes that capitalism accurately represents our natural existence and is empirically measured by free exchange in the marketplace in which our dollar votes democratically choose the difference between right and wrong, extending down to each and every individual. Winners and losers are ontologically selected (determined) by collective action extended from individual tastes and preferences.
If government chooses winners and losers with tax and subsidy, the system is teleologically corrupted. The model is no longer ontologically true (a free market). Winners and losers are no longer objectively determined by the legitimate logic of collective action and the model has reached the limit of the available data that determines the legitimacy of the risk/reward. The data is now interpretatively limited to validate, rather than verify, the model, which essentially disconfirms it.
The extent of government measures the extent of a free market and the extent of the risk (the alienation that Hegel and Marx describe). The Tea Party caucus detects the extent of the risk, for example, demanding we go back to a free-market legitimacy. They detect signals (budget deficits, for example) that indicate crises that they know by experience reduces the income required to have equitable dollar votes in a free market.
Marxists argue that there is no going back. The evidence, however, does not support that hypothesis.
Despite an observable dialectic, history is not perfectly linear, and a linear projection indicates a marketplace that is so consolidated (the banking system, for example) that individuals have progressively less choice for collective action. It can hardly be considered an improvement despite what progressives may argue in the name of the public good, rendering a public policy environment that is anything but liberal as "liberals" are apt to allow for continuous consolidation of power to control risk (bailouts, mergers, and expansion of debt to provide for our social security) in a characteristically conservative manner (what Marx called "anti-socialist socialism").
We have reached the limit and the Tea Party caucus is an indicator of that arrival. The freedom to choose is not ensured if we have to do business with firms that are progressively more consolidated. Sure, that accumulation of power is destined for a distribution, but that correction does not have to be catastrophic. We can accept the limitations of capitalism and deconsolidate the risk as the primary function of government authority, much as Adam Smith described it economically, and Thomas Jefferson politically. These are not ideas limited to a historical time and space.
The model of democratic pluralism is a model that is still unfolding to reveal the reality of a natural existence that is not limited to the better judgment of elite authority. It is not necessary to sacrifice liberty in order to attain it.
Thomas Jefferson said revolution is a continuous process of improvement as long as power is not allowed to consolidate, much like Adam Smith described it.
Dialectically, the antithesis of directing risk into continuous consolidation is to reverse the trend and deconsolidate. According to Hegel, for example, it is the rational action to take, and what is rational is what is verifiably real (universal, immutable truth); and Kant adds that it is therefore a moral imperative. Hegel argues we are determined to make the right choice because what is rational (dialectically determined) is really not a choice at all. What is rational is immutably real--either true or false like one-plus-one always verifiably equals two. Kant agrees, but contends that choice is not limited to the dialectic--we can choose to be irrational and accept what is not morally imperative, or conversely interrupt the dialectic and project rationality into the future to give truth (reality) the currency of present value (what is and always will be, like our "inalienable" rights, formulated into an ontologically confirmable hypothesis).
Jefferson and Smith tend to agree with Kant while Marx tends to a dialectical determinism. Marx, though, admitted that it appears to be a "soft" determinism, recognizing that we don't have to wait for catastrophe to do the right thing (confirmed by avoiding potential disaster).
Pluralism, according to Smith and Jefferson, is a way to have freedom (the reality of choice) without sacrificing ontology. A free market, for example, puts ontology to work for The People. The dialectic occurs in small packages. Risk is not allowed to accumulate into a crisis (gamma) proportion because it is micro managed by each and every individual according to his or her moral imperative, forming a collective ontology We call a free and open society (the classic concept of liberalism).
Philosophy has everything to do with technical analyses. The assumptions that go into analytical models determine the limits of the data toward a predictive utility. Assessing risk, for example, is a highly philosophical endeavor.
The hedge fund example illustrates the need for philosophical insight to determine the extent of the risk. If analysts consider dialectics to be a lot of Marxist bunk, then they are unlikely to see that risk is not being created with financial leveraging tools, but is being reshaped. Risk is not being created ex nihilo, but accumulated. Then, of course, the complaint is that risk is too accumulated, but because it is not considered to be dialectic, but an expected risk-ontology of the business cycle nevertheless, they do not consider themselves responsible for the full value of the risk that comes back to haunt them to exact austerity in the same measure.
Ensuring the pluralism of a free-market system in priority exacts this austerity (the full value of the risk of loss fully assumed) in small (non-economy-of-scale) units. Factoring in the trillions and trillions of dollars spent over the past two years to manage the accumulated risk, with more to come, the economy-of-scale efficiency is decidedly inefficient on a colossal scale. Nevertheless, we will ideologically (philosophically) ignore the technicals and limit the data, as well as its interpretation, to conserve the accumulated value of the risk in a crisis proportion. That proportion, however, as I have endeavored to describe and explain on this web site, is ontologically gamma--it will unavoidably emerge with a power and determination that needlessly condemns us all to the fate (the inevitable austerity and insecurity) of ignorance and irrationality.
Sunday, November 14, 2010
Income Pays the Debt
Austerity will not pay the debt. Income pays debt.
If capital is not invested to produce income for those whom the debt is assigned for payment, the debt grows and income declines.
Wealthy policymakers should not complain about an overextended debt-to-GDP ratio if they are only asking everyone else to sacrifice. Not only is it bad politics, it is bad economics.
If reversing the deflationary trend is the objective, reducing the budget deficit without providing the income to pay it supports the deflationary trend. Postulating that deficit reduction in priority frees capital for growth is not only a disconfirmed hypothesis (because slow growth causes deficits), it is an intellectual embarrassment. If America wants to assure its creditors, this is not the way to do it.
The income available to pay the public debt and reduce deficit spending has been consolidated (because slow growth causes high prices, declining middle-class incomes and a higher debt burden). Upper-class incomes have the funds immediately available to give world markets the confidence that the dollar is a stronger expected store of value than commodities. As long as the dollar is weak because the available income will not support its debt, rising commodity prices will support the need for more debt (the Fed adding trillions of dollars of treasury bonds to its open market account, for example).
Exacting payment of the debt from the middle class will weaken the dollar even further. Consumer spending will be reduced from already deflationary levels. Supposedly, QE will add the missing money, but QE immediately adds debt, weakening the dollar. Since QE is bonded debt, it relies on the conviction to cut the deficit. If cut without sourcing the available income (the accumulation that is the source of the deflationary trend--falling middle incomes against rising prices), however, recessionary trending (deficits) get support, not resistance.
It is critical to pay the debt with current income without supporting the deflationary trend. This requires progressing the tax code: increasing the rate at the upper margin and lowering it at the middle. Global markets will be more secure with a dollar strengthened to pay its debt toward extended prosperity rather than extended austerity.
Austerity measures are intended to make the rich richer and everybody else poorer. If the accumulation would not have been so huge with bailouts, deficit spending and QE at nearly $4 trillion, and the Fed still describes recovery as doubtful, austerity would have a more equitable, distributive aspect. Tax cuts for everybody would not be such a hard sell to invest economic growth and provide the income to pay the debt.
The middle class has already suffered a detriment--the Great Recession. The austerity being suggested for the middle and lower classes knowingly and willingly doubles the detriment, yielding a benefit to the upper class.
The lower and middle classes are not being adequately represented. The only catalyst available is a Tea Party caucus that is looking more and more co-optative.
With an 18th Century revolutionary spirit, the Tea Party caucus is concerned with conservative values that were at that time radical. Middle-class incomes today stand to lose to an upper class fully armed with the fullest extent of the risk won by the bourgeoise from the crown. Conservation of that risk is hard to resist by a middle class with upper-class aspirations. At the same time, the middle class knows full well that the best bet for upward mobility is to win the lottery, but the chances are still, according to bourgeois values, entrepreneurially better than overthrowing the crown. Conservation of the risk, and the reward, makes bourgeois aspirations easy to co-opt.
There is a point of inflexion where the middle class is so overwhelmed with debt that it can hardly consider itself middle class, but lower class. That is when the value of the risk reaches its fullest extent of probable loss. The risk goes fully gamma (political) when it is no longer co-optative.
QE, for example, is a way to co-opt the risk. As middle-class pressure for tax relief increases along with deficit reduction, demand for a distribution from the accumulation becomes critically political. QE funds have been added to mitigate the political extent of the risk. The risk can then be economically extended with the illusion of prosperity like the housing bubble.
It will look like tax relief for everyone causes prosperity when the debt has actually been extended over the value of the assets. The effect of overvalued assets with undervalued risk is the crisis that Dodd and Frank warned Americans would surely happen. At that point, a realignment occurs that novates the risk with the value of the Revolution fully conserved, keeping the Hamiltonian model fully operational in the name of liberty.
Debt paid ex nihilo is debt added and distributed to the middle class in the form of systemic risk. Since what is "too big to fail" is required by Dodd-Frank to have plenty of reserves (income that does not distribute to the middle class), who is left to take on all the risk of detriment, with all that popular demand for a flatter tax and deficit reduction, should be no surprise.
The least able to pay, in true Hamiltonian form, will be stuck with the liability, confirming a detrimental reliance on the liberty of a wealthy aristocracy. It is a liberty to be aspired to, like the middle-class revolutionaries that aspired to live like kings with the risk of loss fully assumed.
The debt is paid when crises occur and that includes full assumption of gamma risk when distributions are not allowed to fully occur from accumulations. Co-opting the risk actually accumulates it in the future, depreciating the probable value of the risk to be aspired. That co-optative value of the risk can be fully discounted now, today, to a current value that demands debt reduction from the income accumulated into a crisis proportion. The debt will be paid with the least amount of austerity. The lower debt burden will provide the demand needed to support a recovery that is not debtor (austerity) financed, but financed from the income (the savings) generated from economic expansion (GDP), reducing debt to equity.
Austerity will not pay the debt. Income pays debt. Deprivation of needed income (demand)--cutting Social Security benefits, for example--does not pay the debt. That funding produces the demand necessary for economic activity (GDP), providing income that both produces profits and pays the debt while, at the same time, preventing the value of the debt exceeding the value of our assets into a crisis proportion.
The rhetoric we have now that postulates the need for exacting austerity from the needy is good ideology, but exceedingly bad technical analysis. Technically, and morally, it is just flat-out wrong.
The Great Recession (liquidity crises and slow growth) is not caused by "entitlements." They are an asset, not a liability that is stealing value (demand/income) from the middle class. It is the Goldman Sachs and Bank of Americas of the world who think they are entitled to enslave everyone to the bogus objectivity of credit that is deliberately scored by manipulating the business cycle into a means of deprivation. They provide the detrimental sense of entitlement that needs to be deprived. That deprivation will provide the income to pay the debt instead of extending it into a perpetual risk of loss always scored to their advantage.
When The People are told that equity is technically impossible to the fullest extent of the risk (the paradox of thrift in which the wealth accumulates to those who are willing to sacrifice the most), don't believe it! No one is entitled to bilk The People into economic insecurity. There are plenty of small banks to put Bank of America and Goldman Sachs out of business. It is still a free market despite too big to fail.
It's time to start pluralizing the systemic risk (the paradox) with dollar (empirically popular) votes. The income circulated provides the risk reduction--the empirical margin of profit AND the social security--we are ALL technically looking for.
If capital is not invested to produce income for those whom the debt is assigned for payment, the debt grows and income declines.
Wealthy policymakers should not complain about an overextended debt-to-GDP ratio if they are only asking everyone else to sacrifice. Not only is it bad politics, it is bad economics.
If reversing the deflationary trend is the objective, reducing the budget deficit without providing the income to pay it supports the deflationary trend. Postulating that deficit reduction in priority frees capital for growth is not only a disconfirmed hypothesis (because slow growth causes deficits), it is an intellectual embarrassment. If America wants to assure its creditors, this is not the way to do it.
The income available to pay the public debt and reduce deficit spending has been consolidated (because slow growth causes high prices, declining middle-class incomes and a higher debt burden). Upper-class incomes have the funds immediately available to give world markets the confidence that the dollar is a stronger expected store of value than commodities. As long as the dollar is weak because the available income will not support its debt, rising commodity prices will support the need for more debt (the Fed adding trillions of dollars of treasury bonds to its open market account, for example).
Exacting payment of the debt from the middle class will weaken the dollar even further. Consumer spending will be reduced from already deflationary levels. Supposedly, QE will add the missing money, but QE immediately adds debt, weakening the dollar. Since QE is bonded debt, it relies on the conviction to cut the deficit. If cut without sourcing the available income (the accumulation that is the source of the deflationary trend--falling middle incomes against rising prices), however, recessionary trending (deficits) get support, not resistance.
It is critical to pay the debt with current income without supporting the deflationary trend. This requires progressing the tax code: increasing the rate at the upper margin and lowering it at the middle. Global markets will be more secure with a dollar strengthened to pay its debt toward extended prosperity rather than extended austerity.
Austerity measures are intended to make the rich richer and everybody else poorer. If the accumulation would not have been so huge with bailouts, deficit spending and QE at nearly $4 trillion, and the Fed still describes recovery as doubtful, austerity would have a more equitable, distributive aspect. Tax cuts for everybody would not be such a hard sell to invest economic growth and provide the income to pay the debt.
The middle class has already suffered a detriment--the Great Recession. The austerity being suggested for the middle and lower classes knowingly and willingly doubles the detriment, yielding a benefit to the upper class.
The lower and middle classes are not being adequately represented. The only catalyst available is a Tea Party caucus that is looking more and more co-optative.
With an 18th Century revolutionary spirit, the Tea Party caucus is concerned with conservative values that were at that time radical. Middle-class incomes today stand to lose to an upper class fully armed with the fullest extent of the risk won by the bourgeoise from the crown. Conservation of that risk is hard to resist by a middle class with upper-class aspirations. At the same time, the middle class knows full well that the best bet for upward mobility is to win the lottery, but the chances are still, according to bourgeois values, entrepreneurially better than overthrowing the crown. Conservation of the risk, and the reward, makes bourgeois aspirations easy to co-opt.
There is a point of inflexion where the middle class is so overwhelmed with debt that it can hardly consider itself middle class, but lower class. That is when the value of the risk reaches its fullest extent of probable loss. The risk goes fully gamma (political) when it is no longer co-optative.
QE, for example, is a way to co-opt the risk. As middle-class pressure for tax relief increases along with deficit reduction, demand for a distribution from the accumulation becomes critically political. QE funds have been added to mitigate the political extent of the risk. The risk can then be economically extended with the illusion of prosperity like the housing bubble.
It will look like tax relief for everyone causes prosperity when the debt has actually been extended over the value of the assets. The effect of overvalued assets with undervalued risk is the crisis that Dodd and Frank warned Americans would surely happen. At that point, a realignment occurs that novates the risk with the value of the Revolution fully conserved, keeping the Hamiltonian model fully operational in the name of liberty.
Debt paid ex nihilo is debt added and distributed to the middle class in the form of systemic risk. Since what is "too big to fail" is required by Dodd-Frank to have plenty of reserves (income that does not distribute to the middle class), who is left to take on all the risk of detriment, with all that popular demand for a flatter tax and deficit reduction, should be no surprise.
The least able to pay, in true Hamiltonian form, will be stuck with the liability, confirming a detrimental reliance on the liberty of a wealthy aristocracy. It is a liberty to be aspired to, like the middle-class revolutionaries that aspired to live like kings with the risk of loss fully assumed.
The debt is paid when crises occur and that includes full assumption of gamma risk when distributions are not allowed to fully occur from accumulations. Co-opting the risk actually accumulates it in the future, depreciating the probable value of the risk to be aspired. That co-optative value of the risk can be fully discounted now, today, to a current value that demands debt reduction from the income accumulated into a crisis proportion. The debt will be paid with the least amount of austerity. The lower debt burden will provide the demand needed to support a recovery that is not debtor (austerity) financed, but financed from the income (the savings) generated from economic expansion (GDP), reducing debt to equity.
Austerity will not pay the debt. Income pays debt. Deprivation of needed income (demand)--cutting Social Security benefits, for example--does not pay the debt. That funding produces the demand necessary for economic activity (GDP), providing income that both produces profits and pays the debt while, at the same time, preventing the value of the debt exceeding the value of our assets into a crisis proportion.
The rhetoric we have now that postulates the need for exacting austerity from the needy is good ideology, but exceedingly bad technical analysis. Technically, and morally, it is just flat-out wrong.
The Great Recession (liquidity crises and slow growth) is not caused by "entitlements." They are an asset, not a liability that is stealing value (demand/income) from the middle class. It is the Goldman Sachs and Bank of Americas of the world who think they are entitled to enslave everyone to the bogus objectivity of credit that is deliberately scored by manipulating the business cycle into a means of deprivation. They provide the detrimental sense of entitlement that needs to be deprived. That deprivation will provide the income to pay the debt instead of extending it into a perpetual risk of loss always scored to their advantage.
When The People are told that equity is technically impossible to the fullest extent of the risk (the paradox of thrift in which the wealth accumulates to those who are willing to sacrifice the most), don't believe it! No one is entitled to bilk The People into economic insecurity. There are plenty of small banks to put Bank of America and Goldman Sachs out of business. It is still a free market despite too big to fail.
It's time to start pluralizing the systemic risk (the paradox) with dollar (empirically popular) votes. The income circulated provides the risk reduction--the empirical margin of profit AND the social security--we are ALL technically looking for.
Wednesday, November 10, 2010
What is Missing
Now that the expected midterm adjustment has been made, it is time to declare what the voters voted for when they voted against the previous political-economic regimen.
Immediately on the agenda is the fiscal gap. Immediately it is necessary to determine what is missing.
Income!
Income is what is missing.
Without adequate income there is neither adequate funding for social security payments nor the income to not rely on it for income. Anything else is to belabor the obvious.
The gap is easily accounted for by an overconsolidation of wealth (income) and an overextension of risk.
It lacks good moral intelligence for Wall Street executives to retire multi-millionaires on capital gained while the vast majority of the elderly, suffering loss of net worth to the capital gained, are condemned to a life of impoverished servitude and call it "doing God's work."
Yes, it is perfectly clear, the tax code needs to be reformed to provide market stability, and there is no better way to do that than to provide adequate income, obviously missing.
I always find it an interesting argument that if "we" don't lower our standard of living it will lower "our" standard of living.
Immediately on the agenda is the fiscal gap. Immediately it is necessary to determine what is missing.
Income!
Income is what is missing.
Without adequate income there is neither adequate funding for social security payments nor the income to not rely on it for income. Anything else is to belabor the obvious.
The gap is easily accounted for by an overconsolidation of wealth (income) and an overextension of risk.
It lacks good moral intelligence for Wall Street executives to retire multi-millionaires on capital gained while the vast majority of the elderly, suffering loss of net worth to the capital gained, are condemned to a life of impoverished servitude and call it "doing God's work."
Yes, it is perfectly clear, the tax code needs to be reformed to provide market stability, and there is no better way to do that than to provide adequate income, obviously missing.
I always find it an interesting argument that if "we" don't lower our standard of living it will lower "our" standard of living.
Tracking Risk at the Core
The Fed tracks core and headline inflation risks to pick a tool that shapes the trendline. Headline inflation is marginal risk--the kind of risk that has a hedged, or leveraged objective, affecting the core values and the probable direction (the line) of the trend. Monetary policy is used to direct the line (the probability) of the trend, managing the distribution of consolidated risk in the gamma (political) proportion.
One lesson Hamiltonians learned from the American Revolution, and subsequent crises, is that the extent of the risk must be carefully tracked and managed at the core. King George undervalued the extension of the risk, being too alienated to detect the signals at the core. By divine right, he considered the risk to always be of an economically alpha proportion, and at times beta, but the risk went fully gamma (it became politically unavoidable and economically irreversible).
Maximizing the profit margin (tracking costs and limiting liabilities) emerged with market mechanics to provide capitalists with empirical tools to measure risk. The modeling used by liberal, free-marketeers was much more precise than the crown's whose legitimate interest was assumed secure by divine right and tradition.
The interest of the crown was assumed endowed by the creator and enforced by the accumulated power of the sovereign (increasing the rate of its interest by mere extension of the rents). Its naturally endowed interest became the collective power of The People with a model of risk that always assumes the risk of loss (thus, for example, insisting a bill of rights be written into a constitutional from of government--core values that delimit the political extent of the risk).
The post-Revolutionary model is more precisely designed to prevent risk of loss to the sovereign which, after the Revolution, became The People. The power elite is beyond and above the sovereign. It is supra-sovereign. Its power is demonstrated by a consolidated management of the risk so that, for example, when the dollar and the price of oil suddenly tracks directly instead of inversely, value is derived from the signals that serve to indicate the direction of the risk. While The People (the non-elite) are at a loss to explain the seemingly random signals, the extent of the risk has been determined by fiat, like the crown did, through consolidation of wealth and power. That consolidation includes all the risk that comes with the reward, the extent of which eventually demonstrates at the political core with the risk of loss fully assumed.
The risk of loss fully assumed is at the core of social contract theory that is the dominant feature of revolutionary philosophy. Rousseau's fantasy of the "noble savage" is merely an ideal expression that measures the natural extent of the risk (the freedom to choose). Of course, there are perennial attempts to renegotiate the contract (novation of the risk), giving renewed legitimate value to the fully assumed risk of loss in the form of popular consent. We had "The Contract With America" that, when fully applied, gave us the Great Recession, and that agenda has been subsequently renewed in the form of "The Pledge" following "Change We Can Believe In." These elite-negotiated political settlements are a means of extending the value of the risk which can never be reduced, only avoided, accumulated, and inevitably redistributed.
The wealth of the English crown, for example, continues to decline to this day; and instead of economic catastrophe, the Revolution produced wealth of unprecedented proportion without the divine direction of the crown. We have more people now with a royal-size sense of self-proportion than Hamilton himself could have ever imagined or, perhaps, would care for, suggesting that wealth tends to be progressively pluralistic when the risk becomes progressively more extensive (overleveraged) from multiple sources. Thus, in order to conserve the concentration of wealth and protect it from political risk, it is necessary to keep the extent of the risk in close account. It is necessary to keep the risk consolidated and centrally controlled, like with a central banking system.
The tendency to pluralistically avoid accumulated risk is demonstrated, for example, when investors diversify portfolios. Ironically, while the more pluralistic the economy is the less risk accumulated, there is still a tendency to organize for consolidation (too big to fail). To accommodate this contradiction of values, the extent of the risk is closely accounted for at the margin to measure the effect at the core, formulating the working hypothesis that the number of jobs, for example, directly correlates with the marginal profit which if reduced (i.e., taxed or in any way disinflated or deconsolidated) causes unemployment or deflation. This is a false hypothesis that must be maintained with a centralized authority that keeps the risk from naturally deconsolidating.
The Federal Reserve's accounts are now brimming with both qualitative and quantitative easing. Its current account reflects an extent of liability (overleveraging) not seen since the Great Depression. In order to prevent the liability extending into an unmanageable, inevitable distribution that pluralizes (deconsolidates) the system with political authority, the central bank must act to reduce the liability. The bank takes action so the risk is politically manageable, resisting the pluralistic tendency of power over time and political space.
Following the Great Depression it was decided market stability is best accomplished by closely controlling and accounting for the distribution of risk from a centralized authority. Since risk is a conserved quantity, however, having a constant value of coefficiency, a philosophical risk occurs with the distributive value. The legitimacy of the coefficiency must also be interpretatively managed.
Monetizing market stability from a central authority means it is not a free market unless, of course, the authority intends monetizing to pluralize and expand a competitive marketplace with disinflationary tendencies at full employment. Since that would be detrimental to the accumulation and consolidation of wealth, markets are monetized to "ease" the risk of consolidated capital and markets so that when crises occur there is not a punctuated political leap into a more pluralistic marketplace (a more free and unconsolidated marketplace) to add supply, increase employment and avoid crises.
Instead of pluralism, the marketplace is monetized to allow for economy-of-scale efficiencies (maximum margin with minimum employment, like we have now). Monetizing accommodates the crises that result without economic collapse, creating what is "too big to fail." These large-scale firms can horde cash and deflate the economy, and the more the economy deflates, the more valuable their cash reserves become. If the cash is put in commodity futures, for example, prices rise and extends the risk (raises the economic rent). The risk becomes so consolidated that it is unstable. To prevent the beta volatility going gamma, it is monetized to lower the rent (QE), but not without increasing the debt, which overextends the risk. Overextension of consolidated risk re-distributes wealth by credit default, reducing the net worth of average payers as the value of cash reserves increases.
Consolidation of risk is evident in sudden trend reversals (implied uncertainty that tends to panic the marketplace). These trends (impulsive and corrective waves) are postulated to track the extent of the risk. Saying, for example, that a weak dollar causes oil to rise is a hypothesis that, oops, is sometimes expostulated to demonstrate a highly consolidated extension (a demonstration of power) that is of questionable, legitimate value. (Keep in mind that trying to rig the market is, in fact, a criminal activity. It can hardly be considered, as one Goldman Sachs employee put it, "doing God's work" if The People are expected to lose by means of credit defaults swapped in free-and-open exchange by entities with the power to manage its fullest extent with an economy-of-scale efficiency.)
At this point, the free-market legitimacy of accumulated wealth and power is so far gone that expressing the need for a more pluralistic legitimacy is reduced to a perfidious left-wing ideology that endeavors to destroy the productive efficiency (the economy of scale) that is the "natural" course of capitalism (the trendline to be managed).
Rather than being applied to confirm a free-market legitimacy, monetarism is being applied to confirm the efficiency of large, economies of scale (firms that survive the business cycles that consolidation causes). Essentially, monetarism is used to resist the effects of a disconfirmed hypothesis, easing the burden of risk that is cyclically overextended into a crisis (gamma-risk) proportion.
The time, effort, and resources spent easing the effects of accommodating consolidation would be better spent deconsolidating the risk. Instead of monetizing deflationary debt, we should be accommodating disinflationary growth and let free-market economics manage the risk without a centralized authority.
Risk that is deconsolidated and pluralistically managed in priority ensures that no one component is too big to fail the system, or even cause a large spike in unemployment with a deflationary effect.
Ensuring free-market economics ontologically provides in priority (with a naturally occuring empirical, consensual legitimacy) what central banking badly approximates in posteriori--market stability.
Forcing the trendline is more like a vector analysis that tracks the velocity of opposing forces. While the Fed, for example, is being accommodative, it is also trying to encourage (vector) capital into employment, but without disinflation (growth). We see then that the central bank is serving two agendums--to achieve employment without growth.
If, for example, capital seeks employment, less capital is being applied to bid-up commodity futures, signaling a core recovery and the risk of core inflation. With capital consolidated in oversupply (the consolidation of the risk), supply is not being added relative to prices, and commodity prices are again pressured with headline risk. As that risk consolidates, the trendline retraces the deflationary track, resulting in a stall (a double dip). The risk of core inflation is then forestalled with an economy-of-scale-efficiency accommodated by the central bank.
The frequency of expansion and contraction renders QE policy an ex nihilo addition to the public debt. It becomes a component of a perpetual debt machine that perfectly fits the Hamiltonian model. If we want balanced budgets (no budget deficits and less need for government spending), this model must be thrown out.
The copious amounts of added liquidity required to maintain a deflationary, debt model rather than a disinflationary, equity model supports clever invention and use of capital that makes "taking risk" not a function of growth, but creating risk and shifting it to the uninitiated. Options markets, for example, are a mechanism for "making the market."
Making markets means creating and transferring risk. It is a means of controlling risk, but creating something does not mean it is in control (thus the need for the central bank's authority to headline the risk). Pressuring commodity prices without adding supply, for example, arbitrages the risk and sets up trades (call-put options) that indicate, or headline, the extent of the risk.
(Keep in mind that risk is not created from nothing. Risk, like capital, is a coefficient constant with accumulative and distributive value. Leverage schemes "create" the opportunity for capital gain by manipulating the coefficiency. For example, a 30-1 leverage ratio does not increase the amount of risk, it extends it, pushing it into a gamma--political risk--proportion. The extensive ratio induces a philosophical risk of legitimacy--the kind of risk that manifests the accumulation of revolutionary attributes demanding a corrective wave that distributes value. The choice, then, is nature or nurture. We can peacefully nurture the value--continuously monetizing the debt into a pluralistic extent, for example--or let nature take its ontological course and realize the dystopian ideal of the "noble savage." Pluralism is the ontology to be opted for here. A free and unconsolidated marketplace ensured in priority prevents the impulse to savage the meek in the name of nobility.)
Otherwise known as hedging schemes, "making markets" (rather than adding supply and the employment--the demand--it requires) magnifies the margin with an over-extension of the risk (risk without growth resulting in a net loss, or deflation caused by an overaccumulation at the margin). If that margin is not distributed to add supply, the risk tracks an inflationary trend at the core which, according to the Fed, signals a recovery. Unfortunately, if that false signal is used to indicate less need for government spending (deficit reduction), we will be tracking a depressionary trend and a political, gamma-risk proportion that will not be monetized (hedged) into the future with any credibility.
The time will have arrived for the Hamiltonian model to be abandoned, but that is not going to happen. The deficit will never be reduced enough because the demand (the gamma risk accumulated at the core value) will be too high.
The political will to shape the trendline (to shape the probability of the future), and the tools to shape it are well in hand. It is time, however, to switch to a more pluarlistic model that ensures (accommodates) growth rather than arbitraging the risk in priority. It does not mean that arbitrageurs are put out of business. It means the risk is arbitraged into deconsolidation instead of consolidation.
Growth (added supply rather than an inflated rate of interest in a declining supply) is a reward that distributes with the risk rather than consolidated into a crisis proportion.
One lesson Hamiltonians learned from the American Revolution, and subsequent crises, is that the extent of the risk must be carefully tracked and managed at the core. King George undervalued the extension of the risk, being too alienated to detect the signals at the core. By divine right, he considered the risk to always be of an economically alpha proportion, and at times beta, but the risk went fully gamma (it became politically unavoidable and economically irreversible).
Maximizing the profit margin (tracking costs and limiting liabilities) emerged with market mechanics to provide capitalists with empirical tools to measure risk. The modeling used by liberal, free-marketeers was much more precise than the crown's whose legitimate interest was assumed secure by divine right and tradition.
The interest of the crown was assumed endowed by the creator and enforced by the accumulated power of the sovereign (increasing the rate of its interest by mere extension of the rents). Its naturally endowed interest became the collective power of The People with a model of risk that always assumes the risk of loss (thus, for example, insisting a bill of rights be written into a constitutional from of government--core values that delimit the political extent of the risk).
The post-Revolutionary model is more precisely designed to prevent risk of loss to the sovereign which, after the Revolution, became The People. The power elite is beyond and above the sovereign. It is supra-sovereign. Its power is demonstrated by a consolidated management of the risk so that, for example, when the dollar and the price of oil suddenly tracks directly instead of inversely, value is derived from the signals that serve to indicate the direction of the risk. While The People (the non-elite) are at a loss to explain the seemingly random signals, the extent of the risk has been determined by fiat, like the crown did, through consolidation of wealth and power. That consolidation includes all the risk that comes with the reward, the extent of which eventually demonstrates at the political core with the risk of loss fully assumed.
The risk of loss fully assumed is at the core of social contract theory that is the dominant feature of revolutionary philosophy. Rousseau's fantasy of the "noble savage" is merely an ideal expression that measures the natural extent of the risk (the freedom to choose). Of course, there are perennial attempts to renegotiate the contract (novation of the risk), giving renewed legitimate value to the fully assumed risk of loss in the form of popular consent. We had "The Contract With America" that, when fully applied, gave us the Great Recession, and that agenda has been subsequently renewed in the form of "The Pledge" following "Change We Can Believe In." These elite-negotiated political settlements are a means of extending the value of the risk which can never be reduced, only avoided, accumulated, and inevitably redistributed.
The wealth of the English crown, for example, continues to decline to this day; and instead of economic catastrophe, the Revolution produced wealth of unprecedented proportion without the divine direction of the crown. We have more people now with a royal-size sense of self-proportion than Hamilton himself could have ever imagined or, perhaps, would care for, suggesting that wealth tends to be progressively pluralistic when the risk becomes progressively more extensive (overleveraged) from multiple sources. Thus, in order to conserve the concentration of wealth and protect it from political risk, it is necessary to keep the extent of the risk in close account. It is necessary to keep the risk consolidated and centrally controlled, like with a central banking system.
The tendency to pluralistically avoid accumulated risk is demonstrated, for example, when investors diversify portfolios. Ironically, while the more pluralistic the economy is the less risk accumulated, there is still a tendency to organize for consolidation (too big to fail). To accommodate this contradiction of values, the extent of the risk is closely accounted for at the margin to measure the effect at the core, formulating the working hypothesis that the number of jobs, for example, directly correlates with the marginal profit which if reduced (i.e., taxed or in any way disinflated or deconsolidated) causes unemployment or deflation. This is a false hypothesis that must be maintained with a centralized authority that keeps the risk from naturally deconsolidating.
The Federal Reserve's accounts are now brimming with both qualitative and quantitative easing. Its current account reflects an extent of liability (overleveraging) not seen since the Great Depression. In order to prevent the liability extending into an unmanageable, inevitable distribution that pluralizes (deconsolidates) the system with political authority, the central bank must act to reduce the liability. The bank takes action so the risk is politically manageable, resisting the pluralistic tendency of power over time and political space.
Following the Great Depression it was decided market stability is best accomplished by closely controlling and accounting for the distribution of risk from a centralized authority. Since risk is a conserved quantity, however, having a constant value of coefficiency, a philosophical risk occurs with the distributive value. The legitimacy of the coefficiency must also be interpretatively managed.
Monetizing market stability from a central authority means it is not a free market unless, of course, the authority intends monetizing to pluralize and expand a competitive marketplace with disinflationary tendencies at full employment. Since that would be detrimental to the accumulation and consolidation of wealth, markets are monetized to "ease" the risk of consolidated capital and markets so that when crises occur there is not a punctuated political leap into a more pluralistic marketplace (a more free and unconsolidated marketplace) to add supply, increase employment and avoid crises.
Instead of pluralism, the marketplace is monetized to allow for economy-of-scale efficiencies (maximum margin with minimum employment, like we have now). Monetizing accommodates the crises that result without economic collapse, creating what is "too big to fail." These large-scale firms can horde cash and deflate the economy, and the more the economy deflates, the more valuable their cash reserves become. If the cash is put in commodity futures, for example, prices rise and extends the risk (raises the economic rent). The risk becomes so consolidated that it is unstable. To prevent the beta volatility going gamma, it is monetized to lower the rent (QE), but not without increasing the debt, which overextends the risk. Overextension of consolidated risk re-distributes wealth by credit default, reducing the net worth of average payers as the value of cash reserves increases.
Consolidation of risk is evident in sudden trend reversals (implied uncertainty that tends to panic the marketplace). These trends (impulsive and corrective waves) are postulated to track the extent of the risk. Saying, for example, that a weak dollar causes oil to rise is a hypothesis that, oops, is sometimes expostulated to demonstrate a highly consolidated extension (a demonstration of power) that is of questionable, legitimate value. (Keep in mind that trying to rig the market is, in fact, a criminal activity. It can hardly be considered, as one Goldman Sachs employee put it, "doing God's work" if The People are expected to lose by means of credit defaults swapped in free-and-open exchange by entities with the power to manage its fullest extent with an economy-of-scale efficiency.)
At this point, the free-market legitimacy of accumulated wealth and power is so far gone that expressing the need for a more pluralistic legitimacy is reduced to a perfidious left-wing ideology that endeavors to destroy the productive efficiency (the economy of scale) that is the "natural" course of capitalism (the trendline to be managed).
Rather than being applied to confirm a free-market legitimacy, monetarism is being applied to confirm the efficiency of large, economies of scale (firms that survive the business cycles that consolidation causes). Essentially, monetarism is used to resist the effects of a disconfirmed hypothesis, easing the burden of risk that is cyclically overextended into a crisis (gamma-risk) proportion.
The time, effort, and resources spent easing the effects of accommodating consolidation would be better spent deconsolidating the risk. Instead of monetizing deflationary debt, we should be accommodating disinflationary growth and let free-market economics manage the risk without a centralized authority.
Risk that is deconsolidated and pluralistically managed in priority ensures that no one component is too big to fail the system, or even cause a large spike in unemployment with a deflationary effect.
Ensuring free-market economics ontologically provides in priority (with a naturally occuring empirical, consensual legitimacy) what central banking badly approximates in posteriori--market stability.
Forcing the trendline is more like a vector analysis that tracks the velocity of opposing forces. While the Fed, for example, is being accommodative, it is also trying to encourage (vector) capital into employment, but without disinflation (growth). We see then that the central bank is serving two agendums--to achieve employment without growth.
If, for example, capital seeks employment, less capital is being applied to bid-up commodity futures, signaling a core recovery and the risk of core inflation. With capital consolidated in oversupply (the consolidation of the risk), supply is not being added relative to prices, and commodity prices are again pressured with headline risk. As that risk consolidates, the trendline retraces the deflationary track, resulting in a stall (a double dip). The risk of core inflation is then forestalled with an economy-of-scale-efficiency accommodated by the central bank.
The frequency of expansion and contraction renders QE policy an ex nihilo addition to the public debt. It becomes a component of a perpetual debt machine that perfectly fits the Hamiltonian model. If we want balanced budgets (no budget deficits and less need for government spending), this model must be thrown out.
The copious amounts of added liquidity required to maintain a deflationary, debt model rather than a disinflationary, equity model supports clever invention and use of capital that makes "taking risk" not a function of growth, but creating risk and shifting it to the uninitiated. Options markets, for example, are a mechanism for "making the market."
Making markets means creating and transferring risk. It is a means of controlling risk, but creating something does not mean it is in control (thus the need for the central bank's authority to headline the risk). Pressuring commodity prices without adding supply, for example, arbitrages the risk and sets up trades (call-put options) that indicate, or headline, the extent of the risk.
(Keep in mind that risk is not created from nothing. Risk, like capital, is a coefficient constant with accumulative and distributive value. Leverage schemes "create" the opportunity for capital gain by manipulating the coefficiency. For example, a 30-1 leverage ratio does not increase the amount of risk, it extends it, pushing it into a gamma--political risk--proportion. The extensive ratio induces a philosophical risk of legitimacy--the kind of risk that manifests the accumulation of revolutionary attributes demanding a corrective wave that distributes value. The choice, then, is nature or nurture. We can peacefully nurture the value--continuously monetizing the debt into a pluralistic extent, for example--or let nature take its ontological course and realize the dystopian ideal of the "noble savage." Pluralism is the ontology to be opted for here. A free and unconsolidated marketplace ensured in priority prevents the impulse to savage the meek in the name of nobility.)
Otherwise known as hedging schemes, "making markets" (rather than adding supply and the employment--the demand--it requires) magnifies the margin with an over-extension of the risk (risk without growth resulting in a net loss, or deflation caused by an overaccumulation at the margin). If that margin is not distributed to add supply, the risk tracks an inflationary trend at the core which, according to the Fed, signals a recovery. Unfortunately, if that false signal is used to indicate less need for government spending (deficit reduction), we will be tracking a depressionary trend and a political, gamma-risk proportion that will not be monetized (hedged) into the future with any credibility.
The time will have arrived for the Hamiltonian model to be abandoned, but that is not going to happen. The deficit will never be reduced enough because the demand (the gamma risk accumulated at the core value) will be too high.
The political will to shape the trendline (to shape the probability of the future), and the tools to shape it are well in hand. It is time, however, to switch to a more pluarlistic model that ensures (accommodates) growth rather than arbitraging the risk in priority. It does not mean that arbitrageurs are put out of business. It means the risk is arbitraged into deconsolidation instead of consolidation.
Growth (added supply rather than an inflated rate of interest in a declining supply) is a reward that distributes with the risk rather than consolidated into a crisis proportion.
Friday, November 5, 2010
Deriving Strength from Weakness
Too-big-to-fail (bailed-out) financials are short the dollar and long commodities. The weak dollar strengthens their balance sheets, repaying the TARP with a profit supported by quantitative easing ($2 trillion so far with another half trillion expected).
QE--considered free, easy, no-risk money by big financials--weakens the dollar to make too-big-to-fail strong, which is exactly what we do not need.
First of all, the QE supporting the economy-of-scale is not, free, easy, and at no risk. It weakens everyone else to make too-big-to-fail strong (Hamiltonian political-economic modeling).
For every virtue (strength) there is a vice (weakness), and it is philosophically loaded. The Hamiltonian model, for example, postulates that making sure the elite stay economically strong in zero-sum (levying taxes that the non-elite pay with a regressive burden) makes everyone strong (promotes the general welfare).
Jeffersonians, arguing in opposition, expostulated the Hamiltonian model bonds the non-elite to a ruling class elite that has bonding authority through the force and legitimacy of public authority, extending the rents (the risk) just like the crown did.
Jeffersonians were technically correct. Essentially, the rich buy bonds (the debt) to be paid by the non-rich. The business cycle ensures the bonding authority--reduction of net worth, bankruptcy, foreclosure and an increased demand for debt. The debt over-accumulates into a crisis proportion. It is supported by leveraging schemes perpetrated by an over-accumulated capital that "makes" (rigs) markets, extending the risk (the rent) for non-elite consumption, just like the crown did.
The non-elite are stuck with the risk and the elite enjoy the reward, making us all strong?
The Hamiltonian thesis is not only logically inconsistent but empirically, technically, disconfirmed with a persistent tendency to weaken the dollar with inflation and slow growth. It is no coincidence that a weak dollar benefits the wealthy and hurts everyone else.
A weak dollar punishes fixed incomes and incomes that are in decline, like we have now. It is the result of an over-accumulation of wealth and slow growth (what is supposed to make us all strong, and growing, in a Hamiltonian fashion).
That free, easy, no-risk money QE provides big banks is not free--it is the product of declining net worth. It is not easy--there is nothing easy about living with your net worth in decline and nothing easy about applying the political process to keep it that way. It is not without risk--keeping it that way is at considerable political risk (like King George found out) and, despite what mainstream economists say, the risk does not vanish into thin air like middle-class net worth supposedly does. It is conserved. It goes somewhere.
Technically, it is clear that bailing out too-big-to-fail firms, and a monetary policy (QE) that finances this economy-of-scale consolidation instead of growth, is a scheme for deriving strength from weakness. The risk is consolidated (conserved) and distributed to "the masses" (The Sovereign People) just like the crown did, accumulating royal-sized bank accounts (and gamma risk) derived at the expense of commoners. The model is clearly Hamiltonian.
QE is modeled to support a weak dollar, benefiting the rich at the expense of everyone else. If the $2.5 trillion is not used to write down the principle and generally replevin the losses of the middle class, QE will be a net gain for the elite and a net loss for the non-elite. It strengthens our weaknesses, supporting the deflationary trend and the need for budget deficits, which is the core-inflation component the Fed is trying to achieve.
Supposedly, the slow growth will check the Fed's bias for inflationary risk. The model is largely void of adding supply which strengthens the dollar and reduces unemployment--it does not fit the Hamiltonian model of gaining strength from the weakness of others (a moral hazard that is not assumed by the model).
The moral hazard is the most important assumption of economic modeling, giving philosophical content to empirical values. A certain, critical value of the model is considered to be a categorical virtue or vice, and therefore imperative, depending on the assumed moral hazard.
While we tend to think of ethics as being value that is unempirically derived, we still have to measure and identify what indicates the assumed value, or how we "know" something is a hazard (the psychology of signal detection). In the same way, we tend to think science yields value not philosophically derived. Knowing something, however, is a philosophical pursuit.
How you know when you "know" something is a function of the scientific method (the philosophy of science), distinguishing between belief (like ideology) and knowledge (objective truth). Arguments that tend to adhere to ideological assumptions tend to ignore objective truth to avoid having to throw out the model based on legitimate, empirical knowledge.
For example, the Fed has announced QE-2 and, at the same time, that big banks can once again pay dividends. This means that QE will begin distribution to shareholders (and the risk inversely distributed in proportion to the number of shares you own). The reward largely distributes to rich people with newly consolidated middle-class wealth, and the risk distributes proportionately to commoners whose wealth has been recently consolidated.
The new (ex nihilo) capital will be converted into more consolidated wealth (the power to command the marketplace) just like Hamiltonians say it should (by moral imperative).
Based on all the empirical evidence, however (technically speaking, of course), consolidation is the problem to be solved, not the solution. What is empirically confirmed (signaled) is the political will (the exercised imperative of power) to support the Hamiltonian model.
Confirmed is the power to apply a model that assumes consolidation of wealth and power is a virtue that paves the path to the good life (moral living), not a vice. How does this model, however, stand up to what we know?
QE--considered free, easy, no-risk money by big financials--weakens the dollar to make too-big-to-fail strong, which is exactly what we do not need.
First of all, the QE supporting the economy-of-scale is not, free, easy, and at no risk. It weakens everyone else to make too-big-to-fail strong (Hamiltonian political-economic modeling).
For every virtue (strength) there is a vice (weakness), and it is philosophically loaded. The Hamiltonian model, for example, postulates that making sure the elite stay economically strong in zero-sum (levying taxes that the non-elite pay with a regressive burden) makes everyone strong (promotes the general welfare).
Jeffersonians, arguing in opposition, expostulated the Hamiltonian model bonds the non-elite to a ruling class elite that has bonding authority through the force and legitimacy of public authority, extending the rents (the risk) just like the crown did.
Jeffersonians were technically correct. Essentially, the rich buy bonds (the debt) to be paid by the non-rich. The business cycle ensures the bonding authority--reduction of net worth, bankruptcy, foreclosure and an increased demand for debt. The debt over-accumulates into a crisis proportion. It is supported by leveraging schemes perpetrated by an over-accumulated capital that "makes" (rigs) markets, extending the risk (the rent) for non-elite consumption, just like the crown did.
The non-elite are stuck with the risk and the elite enjoy the reward, making us all strong?
The Hamiltonian thesis is not only logically inconsistent but empirically, technically, disconfirmed with a persistent tendency to weaken the dollar with inflation and slow growth. It is no coincidence that a weak dollar benefits the wealthy and hurts everyone else.
A weak dollar punishes fixed incomes and incomes that are in decline, like we have now. It is the result of an over-accumulation of wealth and slow growth (what is supposed to make us all strong, and growing, in a Hamiltonian fashion).
That free, easy, no-risk money QE provides big banks is not free--it is the product of declining net worth. It is not easy--there is nothing easy about living with your net worth in decline and nothing easy about applying the political process to keep it that way. It is not without risk--keeping it that way is at considerable political risk (like King George found out) and, despite what mainstream economists say, the risk does not vanish into thin air like middle-class net worth supposedly does. It is conserved. It goes somewhere.
Technically, it is clear that bailing out too-big-to-fail firms, and a monetary policy (QE) that finances this economy-of-scale consolidation instead of growth, is a scheme for deriving strength from weakness. The risk is consolidated (conserved) and distributed to "the masses" (The Sovereign People) just like the crown did, accumulating royal-sized bank accounts (and gamma risk) derived at the expense of commoners. The model is clearly Hamiltonian.
QE is modeled to support a weak dollar, benefiting the rich at the expense of everyone else. If the $2.5 trillion is not used to write down the principle and generally replevin the losses of the middle class, QE will be a net gain for the elite and a net loss for the non-elite. It strengthens our weaknesses, supporting the deflationary trend and the need for budget deficits, which is the core-inflation component the Fed is trying to achieve.
Supposedly, the slow growth will check the Fed's bias for inflationary risk. The model is largely void of adding supply which strengthens the dollar and reduces unemployment--it does not fit the Hamiltonian model of gaining strength from the weakness of others (a moral hazard that is not assumed by the model).
The moral hazard is the most important assumption of economic modeling, giving philosophical content to empirical values. A certain, critical value of the model is considered to be a categorical virtue or vice, and therefore imperative, depending on the assumed moral hazard.
While we tend to think of ethics as being value that is unempirically derived, we still have to measure and identify what indicates the assumed value, or how we "know" something is a hazard (the psychology of signal detection). In the same way, we tend to think science yields value not philosophically derived. Knowing something, however, is a philosophical pursuit.
How you know when you "know" something is a function of the scientific method (the philosophy of science), distinguishing between belief (like ideology) and knowledge (objective truth). Arguments that tend to adhere to ideological assumptions tend to ignore objective truth to avoid having to throw out the model based on legitimate, empirical knowledge.
For example, the Fed has announced QE-2 and, at the same time, that big banks can once again pay dividends. This means that QE will begin distribution to shareholders (and the risk inversely distributed in proportion to the number of shares you own). The reward largely distributes to rich people with newly consolidated middle-class wealth, and the risk distributes proportionately to commoners whose wealth has been recently consolidated.
The new (ex nihilo) capital will be converted into more consolidated wealth (the power to command the marketplace) just like Hamiltonians say it should (by moral imperative).
Based on all the empirical evidence, however (technically speaking, of course), consolidation is the problem to be solved, not the solution. What is empirically confirmed (signaled) is the political will (the exercised imperative of power) to support the Hamiltonian model.
Confirmed is the power to apply a model that assumes consolidation of wealth and power is a virtue that paves the path to the good life (moral living), not a vice. How does this model, however, stand up to what we know?
Thursday, November 4, 2010
Staying With the Technicals
The mid-term election cycle always presents a technical correction with an ideological interpretation. Considering that Republicans are as unpopular as Democrats, if not more, arguing a popular mandate for a Republican agenda strains credulity.
The popular vote is negative. It is a no-confidence vote. It just happens what voters can vote for is a vote against what we have had, including Republican policies and programs, and the latest vote in opposition just happened to be Republican by default.
It is also no accident that the empirical value of the popular vote tends to be a referendum on past performance with extensive limitations. Its value is limited to two possible choices which are ideologically delimited.
Relying on these systematic delimitations (with a fully expected empirical value), Republicans are immediately claiming that voters have voted for "The Pledge." According to Republicans, they will oppose the Democratic executive when it is contrary to the will of The People which they presume to represent (despite an unpopularity that rivals the opposition).
The presumption of conferred power technically confirms an unpopular mandate validated by a binomial default. It perpetrates a fraud that limits the liability to a political sanction that is binomially determined. It is far from the model of self-determination that We the People Constitutionally expect, and is clearly being violated with bogus, partisan mandates.
Technical rigging of the political process is an abuse of process not to be ideologically suffered.
If we stick to the technicals, rather than suffer the abuse for the sake of ideology, the empirical value of the popular vote is more likely to have a positive progression. For example, healthcare reform. Technically, we went from prohibitively high prices to a mandate to purchase--good for the healthcare sector and insurance, terrible for consumers and economic recovery. A negative vote is technically reasonable.
As a popular mandate, the healthcare reform is pure political junk; and if you were legislating it, you wouldn't want voters to realize what was in it until after it passed. Where this process does not lack competence it is deliberately corrupted. The empirical value (legitimacy) of popularity that keeps the Sovereignty of the People from being usurped by elite authority, and the self-satisfied incompetence that often comes with it, is corrupted; and technically speaking, the mandate delivered to the new congressional delegation is this: all the risk will not be mandated to The People without the reward that goes with it.
The unemployment rate went from 7% in 2008 to nearly 10% now. Technically, the people that have jobs have to wonder if "the risk" will be mandated to them. "The Pledge" (the plan) is to cut the deficit while unemployment (the need) continues to rise. Technically, the risk has momentum to the middle and the reward to the top, supporting the deflationary trend, especially if the Bush tax cuts are extended for the top 2%. That extension of the risk to the middle class is ideologically satisfying (i.e., the principle that ensuring the welfare of the rich ensures the general welfare) but technically (empirically) impractical if we want to reverse the deflationary trend, and cut the budget deficit, by increasing discretionary spending of the middle class.
By experience (by trial and error), cutting tax rates at the top margin supports a deflationary trend and budget deficits. Marginal tax cuts accumulates wealth at the top and causes a liquidity crisis, shifting the marginal risk to the middle without the benefit, in every case. Technically, correcting for this requires shifting the marginal risk accumulated in the middle back to the top, which will cause the benefit needed in the middle to reverse the over-leveraged (over-marginalized) risk. Everybody benefits, not just a few at the top who seek value in providing by virtue (the strength) of mass deprivation (in zero-sum).
What we are talking about here is the legitimacy of the risk. While legitimacy is philosophically loaded with value judgments, the distributive value of the risk technically suggests that the capital is too accumulated in the form of wealth.
Wealth is what we want...it is good, it is a virtue, it makes us strong, but when it is too consolidated, growth is slow if not negative. Its accumulation without growth technically results in a zero-sum detriment. While this detriment can be valued as a social benefit (capital for investment) it is technically used to derive value from the risk, not to produce more wealth, but to deprive it.
When capital is too accumulated in the form of consolidated wealth, the risk distributes by fiat of consolidated power. Repudiating the distribution of risk by fiat (the consolidation of risk) is what the American Revolution was all about.
Producing new business ventures, jobs, and growth, in that order, is dependant on the deconsolidation of the risk, just like it was at the time of the Tea Party when the crown consolidated the wealth and exclusively distributed risk at its discretion. That discretion, of course, was used to cause a detriment, depriving The People the full value of their wealth, extending the risk into a crisis proportion (raising the economic rent).
If the risk is distributed to cause a detriment--like Goldman Sachs and Bank of America positioning the customer (the investor and the homeowner) as a counterparty to consume a detriment to their benefit--crisis is the fully expected result. Again, the exculpatory "who could have known" hypothesis expresses incompetence where it is not corrupt...values (vices) not to be encouraged with record profits and bonuses.
Politically, in the same way, the popular vote has been set up as the counterparty to the benefit, "Pledged" to be "the will of The People" in the Tea Party form. It is a game, a hustle, intended to usurp the power of The People in the representative form. Extending tax cuts for the top 2% is not a general benefit. It is a general detriment distributed to The People, financing a benefit to the top 2%. For the top 2% it is a technical success, for everyone else a technical failure.
While it is technically possible for everyone to succeed, it is not public policy because ideology rules the political process. Though the mid-term realignment is being billed as an ideological shift--accepting conservative philosophy, policies and programs that are confirmed failures--we should not continue to suffer a politics of abject empirical fraud with bogus popular mandates if not the technical incompetence of an habitual ideological conviction.
The popular vote is negative. It is a no-confidence vote. It just happens what voters can vote for is a vote against what we have had, including Republican policies and programs, and the latest vote in opposition just happened to be Republican by default.
It is also no accident that the empirical value of the popular vote tends to be a referendum on past performance with extensive limitations. Its value is limited to two possible choices which are ideologically delimited.
Relying on these systematic delimitations (with a fully expected empirical value), Republicans are immediately claiming that voters have voted for "The Pledge." According to Republicans, they will oppose the Democratic executive when it is contrary to the will of The People which they presume to represent (despite an unpopularity that rivals the opposition).
The presumption of conferred power technically confirms an unpopular mandate validated by a binomial default. It perpetrates a fraud that limits the liability to a political sanction that is binomially determined. It is far from the model of self-determination that We the People Constitutionally expect, and is clearly being violated with bogus, partisan mandates.
Technical rigging of the political process is an abuse of process not to be ideologically suffered.
If we stick to the technicals, rather than suffer the abuse for the sake of ideology, the empirical value of the popular vote is more likely to have a positive progression. For example, healthcare reform. Technically, we went from prohibitively high prices to a mandate to purchase--good for the healthcare sector and insurance, terrible for consumers and economic recovery. A negative vote is technically reasonable.
As a popular mandate, the healthcare reform is pure political junk; and if you were legislating it, you wouldn't want voters to realize what was in it until after it passed. Where this process does not lack competence it is deliberately corrupted. The empirical value (legitimacy) of popularity that keeps the Sovereignty of the People from being usurped by elite authority, and the self-satisfied incompetence that often comes with it, is corrupted; and technically speaking, the mandate delivered to the new congressional delegation is this: all the risk will not be mandated to The People without the reward that goes with it.
The unemployment rate went from 7% in 2008 to nearly 10% now. Technically, the people that have jobs have to wonder if "the risk" will be mandated to them. "The Pledge" (the plan) is to cut the deficit while unemployment (the need) continues to rise. Technically, the risk has momentum to the middle and the reward to the top, supporting the deflationary trend, especially if the Bush tax cuts are extended for the top 2%. That extension of the risk to the middle class is ideologically satisfying (i.e., the principle that ensuring the welfare of the rich ensures the general welfare) but technically (empirically) impractical if we want to reverse the deflationary trend, and cut the budget deficit, by increasing discretionary spending of the middle class.
By experience (by trial and error), cutting tax rates at the top margin supports a deflationary trend and budget deficits. Marginal tax cuts accumulates wealth at the top and causes a liquidity crisis, shifting the marginal risk to the middle without the benefit, in every case. Technically, correcting for this requires shifting the marginal risk accumulated in the middle back to the top, which will cause the benefit needed in the middle to reverse the over-leveraged (over-marginalized) risk. Everybody benefits, not just a few at the top who seek value in providing by virtue (the strength) of mass deprivation (in zero-sum).
What we are talking about here is the legitimacy of the risk. While legitimacy is philosophically loaded with value judgments, the distributive value of the risk technically suggests that the capital is too accumulated in the form of wealth.
Wealth is what we want...it is good, it is a virtue, it makes us strong, but when it is too consolidated, growth is slow if not negative. Its accumulation without growth technically results in a zero-sum detriment. While this detriment can be valued as a social benefit (capital for investment) it is technically used to derive value from the risk, not to produce more wealth, but to deprive it.
When capital is too accumulated in the form of consolidated wealth, the risk distributes by fiat of consolidated power. Repudiating the distribution of risk by fiat (the consolidation of risk) is what the American Revolution was all about.
Producing new business ventures, jobs, and growth, in that order, is dependant on the deconsolidation of the risk, just like it was at the time of the Tea Party when the crown consolidated the wealth and exclusively distributed risk at its discretion. That discretion, of course, was used to cause a detriment, depriving The People the full value of their wealth, extending the risk into a crisis proportion (raising the economic rent).
If the risk is distributed to cause a detriment--like Goldman Sachs and Bank of America positioning the customer (the investor and the homeowner) as a counterparty to consume a detriment to their benefit--crisis is the fully expected result. Again, the exculpatory "who could have known" hypothesis expresses incompetence where it is not corrupt...values (vices) not to be encouraged with record profits and bonuses.
Politically, in the same way, the popular vote has been set up as the counterparty to the benefit, "Pledged" to be "the will of The People" in the Tea Party form. It is a game, a hustle, intended to usurp the power of The People in the representative form. Extending tax cuts for the top 2% is not a general benefit. It is a general detriment distributed to The People, financing a benefit to the top 2%. For the top 2% it is a technical success, for everyone else a technical failure.
While it is technically possible for everyone to succeed, it is not public policy because ideology rules the political process. Though the mid-term realignment is being billed as an ideological shift--accepting conservative philosophy, policies and programs that are confirmed failures--we should not continue to suffer a politics of abject empirical fraud with bogus popular mandates if not the technical incompetence of an habitual ideological conviction.
Tuesday, November 2, 2010
Risk and Raising the Rent
Back in the day when tea was an indispensable consumer commodity, the crown decided it would increase the rent. It not only raised the tax on tea, but decreed that all economic activity had to go through the crown from the colonies. That meant, while the price of an indispensable commodity would go up, the income to buy it would go down as well. (Sound familiar?)
The crown was effectively (technically) increasing the economic rent (the cost of participating in economic activity). It was an accumulated extension of the risk that the American colonists were unwilling to bear, and so We the People had a Tea Party.
The economic risk was so high compared to the expected reward (to be accumulated into the sovereign authority of the crown) that the political risk to the colonists was extensively low while the risk to the crown was proportionately high. (Sound familiar?)
The crown, of course, perceived its power and authority to be so extensive (so consolidated), the Tea partiers posed no real risk because the crown distributed the risk at will (by fiat rather than market mechanics). The crown was not only the legal sovereign, but it demonstrates its sovereignty in a too-big-to-fail proportion--raising the rent on its subjects, literally subjecting them to the risk of default (like being subjected to the credit score).
The crown miscalculated the extent of the risk, which was fully gamma. Even if the crown decided to reduce the rent, at that point, just that it had the power to manipulate the rent and force markets at will was enough to warrant a revolution and secure Sovereignty of The People. The revolution was unavoidable.
(The rent was just too damn high!)
The crown was effectively (technically) increasing the economic rent (the cost of participating in economic activity). It was an accumulated extension of the risk that the American colonists were unwilling to bear, and so We the People had a Tea Party.
The economic risk was so high compared to the expected reward (to be accumulated into the sovereign authority of the crown) that the political risk to the colonists was extensively low while the risk to the crown was proportionately high. (Sound familiar?)
The crown, of course, perceived its power and authority to be so extensive (so consolidated), the Tea partiers posed no real risk because the crown distributed the risk at will (by fiat rather than market mechanics). The crown was not only the legal sovereign, but it demonstrates its sovereignty in a too-big-to-fail proportion--raising the rent on its subjects, literally subjecting them to the risk of default (like being subjected to the credit score).
The crown miscalculated the extent of the risk, which was fully gamma. Even if the crown decided to reduce the rent, at that point, just that it had the power to manipulate the rent and force markets at will was enough to warrant a revolution and secure Sovereignty of The People. The revolution was unavoidable.
(The rent was just too damn high!)
Monday, November 1, 2010
Playing the Game
With a marginal profit there is a marginal risk. Securing the full value of the gain requires minimizing the marginal risk (present value being reduction of probable risk in the future based on past performance).
Minimizing the margin of risk to reward requires a gaming strategy. It is necessary to gain the confidence of buyers in the value of the marginal risk-to-reward. Politically, voters need to be convinced that they will not be stuck with all the risk (reduction of net worth and declining income) like it was with the previous Republican regime to produce the promise of future gain.
Since being stuck with all the risk is of recent memory, House Whip, John Boehner, says the Republican Party will not be running the same game as last time.
For the majority of voters, the question is then: what is the probability of being stuck with the risk that correlates with the reward? Backtesting, the probability is 100% without an additional catalyst. If the reward is not economic growth (i.e., less need for budget deficits), the promise of a Republican game indicates the need for growing budget deficits, like we have now.
The prospect of making the need worse is unthinkable, but if Republicans plan to cut the deficit without growth, the need (the risk to be bourne) increases. It will be like being offered a short-sale of your home. If you do not take the entire loss of your equity, you will be stuck with the loss and what you owe the bank on the loan. It will be the same with the budget deficit.
Budget deficits are a measure of need, not just out-of-control, wasteful spending like Republicans say it is. Record budget deficits directly correlate with Republican administration--the Reagan and Bush administrations in most recent memory.
The new game is to "Pledge" cutting the deficit. There is no bait-and-switch here, just cutting the deficit pure and simple. Combined with the tax-cut agendum, of course, the risk of general detriment (the need for deficit spending) will, supposedly, reduce proportionate to the extent of the cut. Democratic opposition to the tax cut (a compromise to the full extent of the cut) will be blamed for the extent of the detriment which will be a deepening recessionary trend into 2012. The game would then be politically perpetrated with virtually no risk of liability. The marginal risk would be successfully minimized and absorbed into the fully expected risk of realignment, which is virtually (binomially) no risk at all.
Ideology will shape policy when technical analysis is needed. Ideologically, budget deficits, for example, are best eliminated, but it technically begs the question.
If budget deficits are ideologically reduced by popular demand of Tea Party candidates, the populace it is intended to represent will suffer a tremendous detriment when aggregate demand is reduced even further. It will be a technical disaster unless budget deficits are the technical result of a distribution that must occur from the accumulation, which is a fundamental, technical principle of capitalism (and the understanding is they want to return to the fundamentals). Without a distribution from the accumulation, budget deficits result.
Budget deficits largely measure the amount of distribution that needs to, but did not, occur. When the distribution is sub-optimal, basic needs go unmet without budget deficits.
Deficits occur as a technical, practical measure to provide for the general welfare. In order to technically eliminate budget deficits it is necessary to have an adequate distribution from the accumulation, not from the Congress, not from the Treasury, not from the Fed.
Without attending to the technicals, an ideological game of confidence is being played in which Tea Party (middle-class) populists have been burned too many times and intend to do something about it (minimize the marginal risk). So, the Republican Party is now saying it is not the same party that led the charge to pillage and plunder the middle class. As long as the Tea Party sticks to the technicals (reducing the value of its presence to a probable risk in the future based on reversing past performance), the republican form of government has a higher probability of being truly representative of the golden mean--the middle class.
The Republican Party has always tried to have a populist aspect, but the results have always failed the expectation of distributive value. Working from the inside out, however, the Tea Party is looking to game the party system to a positive, populist, middle-class default. The cognitive dissonance of being ideologically conservative but operationally liberal can be sufficiently reconciled with technical reality, realizing that the detriments we suffer have not always been by fault, but by default.
Minimizing the margin of risk to reward requires a gaming strategy. It is necessary to gain the confidence of buyers in the value of the marginal risk-to-reward. Politically, voters need to be convinced that they will not be stuck with all the risk (reduction of net worth and declining income) like it was with the previous Republican regime to produce the promise of future gain.
Since being stuck with all the risk is of recent memory, House Whip, John Boehner, says the Republican Party will not be running the same game as last time.
For the majority of voters, the question is then: what is the probability of being stuck with the risk that correlates with the reward? Backtesting, the probability is 100% without an additional catalyst. If the reward is not economic growth (i.e., less need for budget deficits), the promise of a Republican game indicates the need for growing budget deficits, like we have now.
The prospect of making the need worse is unthinkable, but if Republicans plan to cut the deficit without growth, the need (the risk to be bourne) increases. It will be like being offered a short-sale of your home. If you do not take the entire loss of your equity, you will be stuck with the loss and what you owe the bank on the loan. It will be the same with the budget deficit.
Budget deficits are a measure of need, not just out-of-control, wasteful spending like Republicans say it is. Record budget deficits directly correlate with Republican administration--the Reagan and Bush administrations in most recent memory.
The new game is to "Pledge" cutting the deficit. There is no bait-and-switch here, just cutting the deficit pure and simple. Combined with the tax-cut agendum, of course, the risk of general detriment (the need for deficit spending) will, supposedly, reduce proportionate to the extent of the cut. Democratic opposition to the tax cut (a compromise to the full extent of the cut) will be blamed for the extent of the detriment which will be a deepening recessionary trend into 2012. The game would then be politically perpetrated with virtually no risk of liability. The marginal risk would be successfully minimized and absorbed into the fully expected risk of realignment, which is virtually (binomially) no risk at all.
Ideology will shape policy when technical analysis is needed. Ideologically, budget deficits, for example, are best eliminated, but it technically begs the question.
If budget deficits are ideologically reduced by popular demand of Tea Party candidates, the populace it is intended to represent will suffer a tremendous detriment when aggregate demand is reduced even further. It will be a technical disaster unless budget deficits are the technical result of a distribution that must occur from the accumulation, which is a fundamental, technical principle of capitalism (and the understanding is they want to return to the fundamentals). Without a distribution from the accumulation, budget deficits result.
Budget deficits largely measure the amount of distribution that needs to, but did not, occur. When the distribution is sub-optimal, basic needs go unmet without budget deficits.
Deficits occur as a technical, practical measure to provide for the general welfare. In order to technically eliminate budget deficits it is necessary to have an adequate distribution from the accumulation, not from the Congress, not from the Treasury, not from the Fed.
Without attending to the technicals, an ideological game of confidence is being played in which Tea Party (middle-class) populists have been burned too many times and intend to do something about it (minimize the marginal risk). So, the Republican Party is now saying it is not the same party that led the charge to pillage and plunder the middle class. As long as the Tea Party sticks to the technicals (reducing the value of its presence to a probable risk in the future based on reversing past performance), the republican form of government has a higher probability of being truly representative of the golden mean--the middle class.
The Republican Party has always tried to have a populist aspect, but the results have always failed the expectation of distributive value. Working from the inside out, however, the Tea Party is looking to game the party system to a positive, populist, middle-class default. The cognitive dissonance of being ideologically conservative but operationally liberal can be sufficiently reconciled with technical reality, realizing that the detriments we suffer have not always been by fault, but by default.
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