Deregulation Without Deconsolidation

Deregulation without deconsolidation effects all manner of abuse. It results in uncivil behaviors that proponents of consolidated capitalism falsely refer to as free-market economics.

Allowing capital to consolidate is antithetical to free-market economics, so the priority of regulators is to keep the market free and open. Just regulating the effects to reduce the externalities and abuses renders additional barriers in posteriori, demanding the efficiency of even more consolidation to overcome the effective costs of the barriers rather than compete to reduce the costs.

Competing to reduce regulatory costs, of course, reduces both the marginal profit and, as the proponents of consolidation contend, the financial support needed to reduce unemployment. Thus the argument: regulation causes unemployment, and in order to absorb the cost and maintain the marginal profit (resist unemployment), it is necessary to consolidate. Even better is to deregulate industry and markets. Combined with consolidation (being bigger and better able to position for boosting the proprietary profit), deregulation will provide the maximum marginal support necessary to reduce the unemployment rate.

(Keep in mind that while deconsolidation will reduce the marginal profit of big firms, the margin is not lost as opponents would have us believe. The fully assumed risk is conserved. It distributes to competing firms who add innovative capacity to reduce costs and improve quality. The added number of firms also reduce unemployment and add the demand needed to resist the declining rate of profit without a crisis proportion. The marginal distribution reduces the proportion of consolidated, proprietary risk--the crisis proportion--that requires big-government intervention and regulation complained to be out of proportion.)

We see, then, deregulation and an especially low, marginal (proprietarily positioned) tax rate, rather than employment, now having the highest priority of the new, Republican congressional majority, with the President, and the Democratic minority along for the ride. The political settlement, while rationalized to be the application of "less government," operationalizes government to tolerate uncivil enterprises (the S&L crisis, Enron, the Great Recession...) as proprietarily legitimate. Rather than less government, it actually increases the need for it in the face of political platitudes like, "government is not the solution, it is the problem." It makes a free market look like a ridiculous proposition. It makes it look like ensuring a free market through deconsolidation of the risk (not to be confused with deregulation without deconsolidation) enables and supports a criminal element when, quite the contrary, it resists it, thus resisting the need for government authority as well.

Through deconsolidation, the risk of liability is fully assumed in priority, not offset. The need for regulation is then an empirical measure of the remaining externalities. Government becomes a credible ally rather than an adversary, legally and properly limited and affordably applied to resist the criminal element. Deconsolidation cuts regulatory costs by preventing them in priority and allows us to empirically identify what "needless government regulation" really is.

Rather than encouraged by offsetting the market-risk liability into a bought-and-paid-for political, civil settlement, uncivil behavior is resisted with a facile, empirically verifiable measure not confounded by the art of compromise. Activities that produce a benefit by causing detriment (like the sum of business practices that leads to a Great Recession) are self-determined to be proprietarily impractical--inimical to the self-interest of the firm and the success of the enterprise.

Instead of expensively trying to control the effects (like the trillion-dollar budget deficits to treat the effects of the Great Recession), we "effectively" prevent them through the cost-efficiency and effectiveness a free-market deconsolidation of the probable risk provides (prevention by deconsolidation of the detrimental risk proportion).

Remember that risk has a proprietary proportion. If you buy a skateboard, you assume the risk of skateboarding. You not only own the skateboard (the intended benefit), but you own the risk (the potential loss or detriment it may cause). If you sell a skateboard, you assume the risk of it being defective and unmerchantible (safe and effective). Similarly, a consumer has the power to say no--you have the power to exact detriment in the proportion of your proprietary, self-interest (with the risk of loss to the counter party fully assumed in priority, or in the alpha-risk proportion). If you do not have the power to say no, to whom does the risk belong and in what proportion? How does the buyer hold the seller accountable?

Even more complex and arbitrary, how much proprietary risk does a person own in the macro dimension? After the Great Recession, for example, how much of the risk you own depends on your proprietary position and its political settlement. If you have an upper-class income, the risk to you has been minimized. How much power does the average income have to say "no" and command the risk consumed in a proprietary proportion?

To effectively and legitimately assume a proprietary-risk dimension, we must be sure the system is prepared, in priority, to allow it be managed in that proportion (i.e., it requires deconsolidation of the risk in proportion to the divisible unit in which the risk is ultimately assumed and the reward consumed).

By ensuring a free-market proportion instead of consolidation, "the risk" is fully assumed in priority rather than being offset. Deconsolidation into a free market organizes a caveat-vendor business environment. Big business tries to pass-off deregulation as a free market environment because deconsolidation of industry and markets puts a direct democratic process in control. The collective sum of divisible market value (the unconsolidated risk, or ontological law, of large numbers--pluralism--fully assumed in the form of full employment and purchasing power) subjects the over-extended ambitions of elite power, and the republican form of government, to the will of The People. Freedom rules rather than the technical exigencies of an indivisible crisis management that eventually creeps into controlling every aspect of our lives.

Primarily, the extent of control exerted by indivisible crisis management is to regulate the amount of risk-to-reward and debt-to-equity that confirms the proprietary, divisible dimension of class distinction by limiting the inherent liability (the fully assumed risk) associated with it. The distinction is the power to offset the risk to the lower class through an indivisible (collective) management of the risk in posteriori.

Offsetting risk into a macro proportion is technically organized by both business (through economies-of-scale and enigmatically complex financial structures) and government (by political settlement and regulatory authority). The two entities, public and private, are cross-effectively organized (which adds "exogenous" complexity, as Schumpeter describes it) to conserve the divisible, proprietary value of the risk proportion with the indivisible legitimacy of ensuring the general welfare.

Government is effectively captured--organized with business--to support the economy of scale efficiency that consolidates the risk and causes the need for government. Risk is then offest into a political settlement and regulated to support the need for economies-of-scale. The result is a mutually supportive, cross-effective organizational tautology that tyrannizes the marketplace and reduces individuals to being subjects of a proprietary ruling class who claim their misfortunes are legitimately self-determined by the free market.

To deal with the misfortunes of a so-called free-market ontology, consolidation of industry and markets forces labor, for example, to consolidate in order to collectively bargain. Deconsolidation reduces the gamma-risk (political) proportion, allowing the risk to be collectively bargained in a more pluralistic, alpha-risk (economic) dimension. Both inflation and deflationary risks are more likely to be controlled without sacrificing self-determination (proprietary management of the risk) for the general welfare.

Rather than the individual being overpowered and dominated by organized collective action, the individual is empowered to collectively bargain and freely self-determine. Through deconsolidation, the political and economic dimensions converge, controlling the proportion of risk through a clearly legitimate means of direct, democratic accountability. (Keep in mind that "democracy" is a practical term common to both dimensions. We, for example, can very well experience a democratic political environment yet experience tyranny in the marketplace at the same time.)

Deconsolidation of the risk does not politically sacrifice freedom to secure the general welfare. Instead, it maximizes and easily verifies freedom with the easily detectable and unfiltered measure of its deprivation. The uncivil intentions of would-be gangster capitalists, for example, are quickly and easily dispatched with the divisible ontology of a free-market collective action, avoiding the costly machinations of political settlements easily manipulated by the ambitions of power cleverly endeavored to offset the risk through the consolidation of industry, markets, and government processes.

Without ensuring a free market in priority, the risk of liability is transformed into the risk of default (turning equity into debt--intending to deprive while pretending to provide) and becomes an extortionist tool of gangster capitalists (people that gain profit by causing harm, or creating detriment, which becomes the liability, the risk, to be assumed and thus avoided by means of consolidation and co-optation of public processes). The fully assumed risk of loss a free market provides is reduced to a proprietary risk managed at the proprietary desks of big financial interests that are extortionately too big to fail. That conserved market value (the assumption of risk) is transformed into general economic risk known as "systemic risk."

Systemic risk accumulates, by design, into crisis (gamma-risk) proportions. The risk is then managed by regulatory authority to not only protect the public from consolidated power, but protect consolidated power from the public (effectively protecting the powerful from themselves). By protecting the public from the full effect, regulatory authority protects the offset that converts risk into consolidated value.

Converting value and consolidating it by detrimental means--by causing risk--is what gangsters do, and gangsters are apt to extort protection payments to protect their "clients" from "the risk." This takes the form of increasing reserves. The Fed, for example, has been buying toxic bank assets and the proceeds increase bank reserves to protect us from their toxicity (the risk fully assumed--the endogenous, fully expected and intentionally avoided declining rate of profit organizationally offset by corporate consolidation and regulatory authority). The proceeds, however, are not circulating in the "real" economy but held in reserve and applied to headline inflation--arbitraging risk via derivatives like options, futures, and swaps.

Traging the inherent risk of the reserve assets without liability supports profitability without risk, which increases the value and security of the bad assets in the Fed's accounts (but without putting the homeless back in their homes or to replevin the lost equity of homeowners which, understand, is the value being gained in capital and held in reserve, being used to derive a detriment from The People). Thus, the banks are wealthier (the risk has been offset) and "we" are all protected from the risk systemically perpetrated from their proprietary desks (making most of us poorer).

The macro-arbitration of the risk proportion (the offset, or protection payment originating from the central bank) occurs to protect "us" from inevitable, endogenous risk (like a Great Depression). A public good (a collective, supposedly indivisible, public benefit) is provided, all legal and proper by means of civil authority (by consent of the governors, not the governed, which is, arguably, "the risk" perpetrated and arbitraged to gain the value of civil protection). While it is sold as a general benefit, it is really a game of confidence and ultimate extortion, converting value and consolidating it into a too-big-to-fail (gamma-risk) proportion.

If the risk of default is fully assumed and systematically assigned to the lower classes, the liability associated with the risk is also fully assumed and takes the form of political risk. Economic risk converted into political risk is then consolidated and conserved, thus limiting it to a civil liability and a political settlement. The value is then prepared to be re-extended from its reserve in the form of public debt, which reduces the value--the currency--to pay it, accumulating the need for more debt while the ability to regressively pay it diminishes (i.e., the declining rate of profit).

While the value of the risk is consolidated and conserved, the more the debt is churned the more risk (liability) accumulated. To mitigate the endogenous liability (the risk of loss fully assumed, or unsustainable without exogenous influence), the risk is shifted to a counter party--government (e.g., the Fed and Treasury)--to be politically managed as a public good.

By monetizing the debt, the burden is regressively distributed (countered, or "offset," even with the new risk-retention rules of Dodd-Frank) in the form of reduced purchasing power and net worth. Without creating the counter party, the endogenous risk of loss (sending yourself a check in the mail--paying yourself interest and dividends from your own principal resulting in a declining rate of profit) is fully assumed.

The reserve system is effectively a counter party created to absorb the endogenous risk, allowing for its continuous accumulation into a political, exogenous, gamma-risk dimension. (Schumpeter describes and explains this as a process of "creative destruction." If we apply it to the current discussion, it acts to transform the "exogenous" taste and preference of the electorate into the expected value of "endogenous" risk. We expect the risk of default, for example, and although we may not prefer it, profiting from the detrimental loss of others is the expected value to be consumed.) The value being held in reserve allows for continuous overextension of the economic rent without the risk of default (what is known as "the full faith and credit of the Federal government").

Tea Party delegates counter that reducing both spending and taxes is the political correction needed to apply an economic solution. Tax reduction will finance growth, offsetting the need for public debt. The adjustment (balanced budgeting) will provide the liquidity (the demand) needed for growth necessary to both reduce unemployment and strengthen the dollar, increasing both purchasing power and the value of savings.

Keep in mind that a strong dollar, according to mainstream economic theory, makes our exports more expensive, and reducing unemployment is being closely correlated with increasing our exports. Thus, labor is the counter party to headline-inflation risk.

The more employment we have the higher the inflation risk. While inflation (too much money demanding a limited supply) provides a weaker dollar to make our exports more competitive, it reduces purchasing power, the value of savings (net worth) and dollar-denominated assets (like oil), generally pushing inflation risk higher and the dollar lower.

A devalued dollar also weakens our counter-party relationship with China in zero-sum, for example. Apparent economic coefficiencies (like reducing inflation with unemployment) become more complex with an accumulated, and countervailing, political risk that confounds trending analyses, which then become the exclusive domain of a technocratic, public-private regulatory authority. The domain is exclusive because the authority is not only assessing the risk, it is directing it. The divisible, ontological legitimacy of market mechanics is diminished.

If, for example, financial markets were more ontological--directed, or driven, by a more divisible collective action--speculation would be more like gambling because the outcome would not be exclusively and esoterically determined by the invisible hand of a power elite.

With the risk less consolidated, headline inflation would be much less a problem confounding economic recovery. There would be much less probability speculative trends will move in the predicted direction with entrepreneurs free to innovate and expand the economy rather than consolidate it in zero-sum in the employ of a large, conglomerated corporate body.

Through deconsolidaton, rather than just deregulation, risk becomes deleveraged, less speculative and will be applied to more predictable, and stable, organic growth. Debt turns into equity and provides the purchasing power (the consumer demand, or discretionary spending) needed to utilize the excessive spare capacity (including entrepreneurial utilization) that causes deflation and turns equity into debt.

Speculation that turns equity into debt--causing detriment to make a profit--is less likely if it is a real gamble. If it is really a free market, ontologically determined, rather than the manipulations of an exclusive, elite, interlocking directorate who risk the loss of principle in the divisible world of alpha proportion, there is less need for a regulatory authority operating to prevent the-loss-fully-assumed in a consolidated, gamma-risk proportion.

To technically resolve the so-called endogenous, economic dilemma of inflation or unemployment, for example, (the so-called paradox of thrift in which, supposedly, we must sacrifice jobs for capital formation), the more unemployment we are likely to exogenously create.

Unemployment is not merely a trade-off with inflation considering inflation amply occurs despite high unemployment. It is, in practice, rather, exogenously created to destroy the endogenous, natural tendency to trend a declining rate of profit (the disinflationary tendency of deconsolidation, which would effectively control inflation at full employment without an inflationary regulatory authority).

Technical, regulatory expertise supports the ability to raise prices despite declining demand (a whipsaw effect in which the margin is increased by reducing income and net worth), allowing the political, gamma risk to accumulate. That accumulated proportion must be creatively managed, and so it is regulated using the spare capacity of raw, economic, animal spirit consolidation affords. The spare entrepreneurial capacity (the otherwise unlikely opportunity for upward class mobility) is used to consolidate rather than expand the economy.

Instead of increasing the number of firms in an alpha-risk proportion, adding supply to control both inflation and unemployment--instead of organic economic expansion--there is extension of regulatory authority and the risk it represents. Regulation and technical maneuvers are innovatively added, with reserve entrepreneurial spirit, to mitigate the risk of loss rather than proliferate firms to add supply and employment toward a non-deflationary effect (a diminishing risk of default that turns debt into equity rather than equity into debt like the Great Recession).

Consolidation is intended to control the animal spirit--the alpha risk that shares the wealth, causes innovation and growth, and keeps ambition tied to that goal. At the same time, letting the animal spirit run wild in the alpha dimension also renders a close, direct accountability of that ambition ("the pursuit of happiness," or property and power) with less need for government (and debt).

Consolidation is intended to civilize (regulate) the animal spirit--unruly, inefficient, rebellious.

Alpha-risk gone wild is too messy, too inefficient, too unpredictable. It is too risky, too spurious and confounding. It is too radical--creative, imaginative, innovative--for the public good. It's like mob rule, right?

Reduction of spurious and counfounding variables renders a more predictably stable trending pattern in which to creatively position and arbitrage the value of countervailing parties in the gamma (political risk) dimension. It brings civility (the politics of power brokering) to the marketplace. It brings buyers and sellers (winners and losers) together with a level of clever sophistication and intellectual elegance that only the elite among us can properly understand and successfully manage toward the general welfare (toward a proper political settlement of the risk proportion, cleverly innovating the means of setting off the risk from the accumulated reward).

While the risk is deliberately derived--constructed to transfer (or hedge)--to another party, it has the exculpatory appearance of being either exogenously derived and unintended by popular demand (whether by changing preferences in a free market or government by popular consent), or confounded by endogenous error accumulation. Either way, it is the political risk to be monetized, reliably transforming equity into debt (causing both inflation and unemployment).

Schumpeter, for example, describes macro management of accumulated risk as the complexity of combined political-economic variables. The complexity causes econometric errors that correlate with independant variables and, Schumpeter explains, the errors endogenously accumulate resulting in unintended consequences--like capitalism unintentionally transforming, or trending, into socialism. His theory is not to expound a political position, but expostulate the probable outcome of ideology combined with policy programs.

Despite the most technically deliberate intentions of the best and the brightest, Schumpeter observed, whether so-called capitalist or so-called communist, the elite compete among themselves for hegemony. The most successful are those that operationalize ambition with popular consent and the general welfare (hence, the endogenous trend is always pluralistic, resisted by exogenous, elitist trends in a crisis proportion).

The recent protests of a well-educated class of workers in Madison, Wisconsin, and elsewhere around the world, would seem to confirm Schumpeter's theory of elite authority naturally progressing to accommodate populist sentiment. Qadafy, for example, claims he has been "holding the reins of power for The People," implying a populist purpose despite the reactionary political program under way. Reactionary elements are, naturally, resisting the trend, but only to strengthen the resolve of "middle-class" labor.

To a well-educated middle class, the machinations of a power elite are readily apparent. Americans, for example, very clearly observe their proprietary, middle-class position being put at risk by the clever manipulations of an elite class who, after having increased the supply of labor (having swapped credit for default), would claim dominion over their right to self-determine. Serfdom, they have very clearly determined, is not an improvement over self-determination.

Labor is being effectively positioned to take all the risk while capital takes all the reward, entrepreneurially "swapping" equity (the capital) for debt instead of growth (the credit-default swap). The infusion of capital needed to prevent deflationary risk (monetizing the debt) fuels headline inflation (risk-on hedging), which supports a deflationary trend (deficient demand and deficit spending). The result is a low interest rate (high bond prices), starving the economy to allow the top income class to keep getting fatter (accumulating political risk). The low rate of interest (the high economic rent) "accommodates" the demand for debt over equity, weakening the dollar and positioning the lower classes to take all the risk (the risk-on proportion that the Tea Party is supposed to counter).

The Tea Party scheme will encounter binomial resistance because it reduces the debate to recognizing where the accumulation (the deflationary risk) resides, revealing the stakes being binomially conserved. Neither Democrats or Republicans intend for growth to be financed from the accumulation. Doing that reduces the effectiveness of creating and applying the binomial, counter-party scheme to control the political risk.

Circulating debt conserves the value of the risk of default, and controlling the political risk keeps the accumulation accumulated by monetizing growth (debtor financing) instead of paying it off (the value of swapping credit for default in the form of an "insurance" product). Rather than turn debt into equity, risk-prone distribution through counter-party classification and assignment conserves ownership of the equity in the form of debt.

Credit is always available to those that need it the least because they own it, which also includes the value regulated in reserve. That consolidated value is currently being distributed by the Fed and Treasury at a near-zero rate of interest and instead of being invested in growth and jobs is being plowed into commodity futures. While the deflationary effect is classical (liquidating equity), the means is newly engineered through the Commodity Futures Trade Act and physics engineers hired into Wall Street from the natural sciences to turn growing middle-class equity into debt by what appears to be free-market means.

Instead of engineering the means of preventing deflation, the means to have inflation and deflation at the same time has been created by Wall Street. Its financial engineers have created the means to command and control the timing and pitch of a deflationary trend through algorithmic, risk programs.

Risk is engineered to algorithmically arbitrage. By positioning risk to cause detriment, predictable profits can be provided without the risk. While the risk has been displaced, the reward, however, is not completely had without liability.

Since deriving a benefit by deliberately causing harm incurs a civil if not a criminal liability, algorithmically or otherwise, the risk that accumulates with the reward must be managed (controlled or regulated) to protect both the accumulated value and the means to derive it from the risk.

Cleverly, the hedging algorithm also provides the exculpatory means of market (quantum) mechanics. It makes it appear that the profit margin accumulated, resulting in the Great Recession on the macro scale, for example, was decided by the free market and not directed, or engineered, by means of a divisibly culpable command-and-control. If there is any elite authority culpable of exacting harm, it is government authority.

If there is any one thing to be blamed, it is government intrusion in the marketplace according to reactionary elements looking to avoid a huge tax liability. Government regulation is fundamentally causing this exogenous problem of inflation and deflation risks existing at the same time (the means of deriving the accumulated risk-value that the reactionaries say they have legitimately "earned"). It is keeping unemployment high and allows that value, and middle-class net worth generally, to accumulate into the upper class.

Not recognizing big government to be the problem, and thus deregulating, according to conservatives, results in fundamental attribution error, or what Schumpeter described as "exogenous" risk. It econometrically accumulates errors resulting in, for example, a confounding inflationary-deflationary risk existing simultaneously in the same quantum, policy space.

Keep in mind that the quantum accumulation into the upper class is supposed to "endogenously" trickle down and prevent the "exogenous" need for government spending and the risk of default, both public and private, associated with it. The accumulation, however, has not trickled down, supposedly because investors fear an excessive tax burden (what should be described as an "endogenous" or inherently assumed risk, but presented by conservatives as exogenous). So, the bargain plays out like this: if we do not release the endogenous liability associated with the accumulation, it will be withheld until the fear has been alleviated (which means it will be withheld in perpetuity because the accumulated benefit and the liability cross-effectively accumulate coefficiently).

Not supporting what causes the problem will deliberately make the problem worse by consent of the governed who are being extorted into accepting detrimental terms in the form of a false dilemma (the lesser of two evils). The limitations of this so-called "bargain" confirms a pernicious, extortionist, criminal-like cohort intending to derive and consolidate value by causing detriment. Supported by organized consolidation of industry and markets, which causes the need for big government, this cohort is inimical to a civil society and needs to be relentlessly prosecuted if we are to deregulate without deconsolidation.

To reverse the deflationary trend, according to conservative elements, it is now necessary to lend the accumulation back to the middle class (increasing the debt burden, which is what conservatives mean by "trickle down"). Without being taxed or otherwise confiscated and retributed, the value must be re-earned (un-monetized and conserved), keeping the middle class solvent and paradoxically thrifty (i.e., willingly productive) by increasing their divisible, proprietary, debt proportion.

It makes little sense to loan money to yourself, so it is lent from the reserve counter party--the Fed. All the risk is "reserved" for those with the least tolerance, protecting (insuring) the accumulation from the probability of being distributed without retaining ownership (without losing legal title to the equity, which defines the insured extent of the risk--the real rate of investment interest--in the form of debtor obligation). The risk is conserved, insured in the gamma proportion, to be politically distributed (assigned) from the reserve at the real rate of political interest.

Democrats blame Republicans, and Republicans blame Democrats for creating the demand for debt. These elite factions of party politics game for popular sentiment to verify (legitimize) the extended value of the risk, the loss of which is fully assumed and transformed into counter-party risk. As long as equity is shared in the form of debt (accumulating economic rent), the accumulation can expand over time without the political risk being fully assumed. It is, instead, monetized in the gamma dimension to perpetuate the demand for debt (the classic extension of the rent), causing a distribution without risking title to the accumulated equity.

Growth is not the product of accumulated equity as the proponents of consolidated capital promise. Over time, the amount of equity is not expanded. It is conserved through a process of creative-destruction that is falsely argued to be the innovation that spawns growth through economies of scale. The process is nothing more than a cycle of boom and bust that innovatively conserves the distributive value of the risk (the overextension of debt into a crisis proportion) and the assignment of risk (the detriment) by organizing the means of positioning the counter party to take it as a matter of propriety (by income classification). "The risk" is then organized into a political settlement with a regulatory authority that limits if not legitimizes the liability of causing detriment to generate profits, like the Great Recession, thus encouraging and perpetuating the detriment by organizational design.