What's the Limit?

In the previous article we discussed indicators that technically delimit the risk proportion. Having at this point exceeded the nation's debt limit, we can very clearly describe the factors that have led us to the current risk proportion rather than focus on extending it.

With the influence of a third-party element, we are testing the limit. The current risk proportion is default on the national debt, which technically means we have insufficient funds (insufficient income) to pay the debt. The Tea Party, rather than allow the debate to focus on the perils of not extending the risk proportion, is focused on a stop-and-reversal. Since SAR technically means identifying the factors that cause insufficient income (default on the debt), the focus will be on measures that can be truly attributed to causing debt--what Republicans explicitly delimit to government spending.

According to the Republican delegation, government spending is the determining variable. It causes the debt. Cutting government spending, therefore, reduces the debt. Despite the appeal this has for keeping it simple, this argument suffers fundamental attribution error that will accumulate into a catastrophic, risk proportion.

When hedge-funds use strategies to offset economic risk (with "Structured Investment Vehicles," for example), debt (the offset) accumulates into an economic crisis proportion (like the Great Recession). As the risk of default increases, simply cutting government spending to pay down the debt derived (offset) from the economic equity accumulates political risk as well. Added to the current, economic-risk proportion of the recession, both the political and economic risk factors converge into a fully gamma dimension in which the risk of loss is consumed (current) rather than assumed (offset to the future). If the economic risk is not transposed into political risk (monetized, for example), the converged proportion is fully gamma (critically retributive with current--ready to use--value).

With the risk no longer offset, but currently consumed, the probability that wealth will be transformed into working capital on terms typically favorable to its consolidation is nearly zero. Causing a distribution without all the regressive tax incentives and subsidies the accumulated capital otherwise commands is highly improbable; and as the tax code becomes more progressive, the debt is paid down without a deflationary effect. (Keep in mind that the deflationary effect is a net benefit for the consolidation of capital which relies on cyclical trending to ontologically justify its continuous, organized consolidation into an economy-of-scale efficiency--which, of course, accumulates debt into a deflationary trend--in the name of securing the general welfare).

Redemption of the risk value is highly destabilizing, and for the power elite, detrimental. It is a catalyst for a more pluralistic, organized deconsolidation of power (Senator Schumer suggesting to deconsolidate oil companies, for example, to produce a more competitive, free-market price for fuel). Avoiding the detriment (the probability of deconsolidation) means redemption of the risk value (which is fully assumed in priority) will be resisted. The risk will be monetized (accumulated) rather than redeemed (distributed) in the form of austerity in a gamma proportion.

Structured Investment Vehicles (SIV's) are still being used, supposedly to finance the recovery. While Dodd-Frank is supposed to regulate their use, they tend, nevertheless, by design, to have a deflationary effect (high yield/low growth to, supposedly, form the capital for investment by providing minimal risk). SIV's create debt from equity and accumulate political-economic risk, consuming what is otherwise its assumed, offset value (the divergent, minimal risk on the high return). When the risk converges with the reward (the crisis proportion created by offsetting risk and thereby accumulating it), the risk is not being offset, it is being consumed, creating a falsely positive valuation of the risk.

(It is important to understand that SIV's are an arcane and highly adaptable technology for risk avoidance. It easily adapts to avoid changing regulatory authority intended to control it because, remember, risk is not actually avoided--it is fully assumed. Avoided risk accumulates, and when it gets to a critical, crisis proportion it tends to transform into political--"gamma"--risk.

Being settled by means of public authority, risk then "assumes" the status of a public good--and if the risk is not assumed, it will be consumed. Even though there were no laws in place to bail out our troubled financial system in 2008, for example, government acted ad-hoc, and therefore illegally it can be argued, to avoid consumption of the risk proportion.

The risk was successfully avoided in 2008 and consolidation of the risk did not suffer a deconsolidation. Instead, "the risk" continues to be organized to fit an economy-of-scale modeling that conserves the value "derived" from cyclical trending. It is allowed--determined by political process--to be even more consolidated to solve the problem of over-consolidation. Since the risk--what is too big to fail--cannot be avoided, we now face the possibility of default on our sovereign debt; and if allowed to accumulate unassumed--like we see with a populist demand for reducing debt with a legal limit--the risk will go fully gamma to achieve an unavoidable, SAR proportion.

Since econometric modeling tends to consider risk an avoidable quantity, and once avoided should not be accounted for, being ideologically verboten because it suggests a political liability, it tends to be spurious and confounding. Schumpeter, for example, described this as the influence of "exogenous variables." Hence, the term "gamma-risk" is used in my analysis to describe and explain a determining variable that is otherwise modeled to be deliberately spurious and confounding. It delimits a risk proportion that is not ignored, but is deliberately organized and cyclically trended, in a seemingly spurious and confounding way, to reliably accumulate predictable value through false attributions...otherwise known as fraudulent means, which entails a prosecutable liability.)

The accumulated risk means that equity valuations, for example, are overvalued (not "irrationally" valued, but "falsely" valued). Financials generally are not valued to reflect the risk proportion...so don't be surprised when it presents with a so-called "unexpected" value (a sudden SAR). Keep in mind, as well, that "we should not be surprised" does not relieve the perpetration of fraud (falsely valued assets, for example) of liability. That it is knowingly and willingly perpetrated with the intent to gain value by means of fraud and deceit is enough to prosecute. Since the most cost-effective and efficient means of prosecution is through free-market sanction, it is critical then to ensure a highly consolidated corporate body that is too big to fail (immune to direct, democratic accountability that a free market provides), and then organize, or capture, public processes within the corporate to limit the liability (but remember, limiting the liability does not avoid the risk--it allows it to unaccountably accumulate with critical errors, as Schumpeter described it, into an econometric crisis proportion).

An unexpected SAR is caused by errors of fundamental attribution, systematically modeled to present with unexpected risk. It produces a "surprise," risk-value premium to be consumed in the form of debt--the insufficient income that is subsequently offset as public debt to avoid general economic crises, like the Great Depression. Government spending does not cause "the debt." Insufficient income in the form of capital gained (with a Non-Pareto-Optimal, zero-sum detriment) is the source of the risk. This zero-sum risk, subsequently avoided, accumulates (assumes) the sum of the errors into the form of public debt for political settlement (to be monetized or cut from the budget), exacting austerity indirectly with the force and legitimacy of public authority. The attribution error, and the risk proportion it represents, is then reinforced--legitimized--by validation rather than verification, which means it is allowed to accumulate into an impulsive rather than a corrective wave. The demand for government, rather than being reduced, impulsively increases with all manner of political-rhetorical artifice employed to technically resist the impulse (typically by invoking the moral hazard argument).

Keep in mind that if we cut spending to increase revenues, we will not reduce the demand for debt because government spending is not the cause of the debt, it is the effect. Rand Paul argues, however, that government spending causes government debt, and the demand for spending (reliance on government) is the effect.

Nevertheless, despite the traditional, libertarian argument to the contrary, government spending occurs because there is demand for it. Government does not cause itself, there is a demand for it, and transposing the cause (the need) with the effect (government) vitiates the argument, making the problem worse by irrationally, or falsely, turning the problem into the solution.

The transposition of cause and effect indicates an error accumulation that continues without limit until it is politically stopped and reversed. It is a function the Tea Party is actively pursuing despite being a primary exponent of the error to be corrected.

By resisting counter-cyclical deficit spending, which is the effect, not the cause, of a persistent recessionary trend, the Tea Party is actually supporting the trend by transposition, which clearly indicates technical error (discovering the truth in spite of belief). The accumulation of error accumulates risk to be bourne by the Party's membership, empirically delimiting the source of the risk.

Since reducing government spending will not reduce the debt (the accumulative error) because it does not cause it, the error will be ideologically transposed into private debt bourne by the Party's middle-class membership, effectively turning their equity into debt. The burden (the error--the cognitive dissonance--of self-imposed detriment) will be pragmatically transposed back into public debt by popular demand to offset the risk.

Political settlement of the risk is demanded to offset the probability of general default (a depressionary trend) with an unlimited debt ceiling, conserving (causing) its accumulative value (the ongoing, cyclical detriment) in an ever-larger, crisis proportion.

The debt and the interest on the debt is the effect. Political demand to reduce spending without reducing the economic demand will proportionally increase the need for it both politically and economically. The risk proportion is neither politically avoided or economically reduced, but increased into an even larger, unavoidable proportion.

When Republicans say they want to reduce our dependancy on government, they are really saying there should be no demand made when there is the need. Thus, for example, the Ryan-budget plan contends that after trillions of dollars spent to bail out Wall Street, we cannot afford the luxury of taking care of the needy and the elderly! Essentially, what this means, if implemented, the rich will get richer by not caring for the needy and the elderly, but this detriment will be offset, conservatives say, by reducing the detrimental dependancy on government and, thus, the debt burden it causes.

Whatever makes the rich richer--like Alexander Hamilton prescribed (and the political-economic, Hamiltonian model both parties still use to shape public policy)--is the public good. Even when Democrats have their way, the rich get richer, do they not? Look at the income distribution data throughout the Clinton Administration, for example. The rich got richer than ever before.

Was it not the purpose of bailing out rich bankers in 2008 to ensure WE HAVE, rather than HAVE NOT, the economic means to care for our needs?

The apparent purpose of the bailout was not to have, but to have not. The austerity being exacted--insufficient economic demand that has been deliberately accumulated into the upper class--causes the demand for public debt. We can, then, "not" afford to pay the debt without making the rich less rich which, Hamiltonians contend, threatens the safety and soundness of our economy with slow growth and inflation (stagflation resulting from high debt to equity).

The stagflation we have now is falsely referred to as "the paradox of thrift" which is really a deliberate deflation of value that turns equity into debt. It makes the rich richer and the poor poorer, causing the demand for public debt, rather than a distribution, to prevent a macro crisis of fundamental, SAR proportion (i.e, to avoid the fully assumed "systemic risk" that our technical, bureaucratic elite are still clamoring to arrest in the "public interest").

Hence, the demand for debt is systematically monetized to provide the needed distribution from the accumulation (which technically admits it has been accumulated in error). Monetized distribution (monetizing the debt) occurs, however, not to satisfy the demand and provide for the public's need, but to limit the liability and conserve the accumulated value of the risk without actually sacrificing its accumulated effect (which is the public need that technically accumulates in error and measurably admits by monetized means).

Monetarism is the measurable effect of the accumulated error, it is not the error--that is, it does not cause the problem (a high debt-equity ratio) to be solved. Reducing it, therefore, will not reduce the demand for debt but will act to turn even more equity into debt.

Redistribution of wealth into the upper class by cyclical means that appear to be ontological (and thus exculpatory) creates the public need for debt. By putting pluralistic distribution of wealth (expansion) at risk of consolidation (contraction), equity is cycled to systematically (i.e., predictably) turn into debt.

Since predictably turning equity into debt infers a liability associated with gaining a benefit by deliberately causing detriment (i.e., knowing the value of the risk and thus timing market positions to predictably capture that value--the reward--without risk), the derived risk value is monetized to politically manage this "derivative" (gamma) risk proportion. The needed distribution is borrowed from the accumulation--it is monetized, inflating the debt (and the risk) proportion to indirectly exact the austerity needed to support the accumulation.

Effectively, monetizing the debt, rather than growth, is a tax on the middle class, and the poor, in the form of inflation. It is the stagflationary trend we are in now--rising prices conflated with falling demand; and without a more progressive tax burden is sure to keep us in a recessionary trend with over-exacted middle and lower-class incomes, and lower tax revenues, that accumulates the debt.

The over-accumulated debt technically indicates over-accumulated wealth in the upper class, which over-extends the proportion of debt to equity. Technically, in order to correct for this, a distribution must occur from the accumulation. A distribution will do what a debt limit will not do--stop and reverse the accumulation of debt without liquidating the net worth (the equity) of the middle class into the upper class any further. A debt limit will deepen the deflationary trend, not reverse it, increasing, not reducing, the demand for debt. A distribution must occur from the accumulation, not borrowed from it.

Just like we did for Wall Street, an interest-free bailout for Main Street needs to occur. Quantitative easing is supposed to bail out Main Street at rates next to nothing. QE, however, has operated to fuel inflation (energy prices, for example), keeping growth next to nothing; and now that QE is coming to an end, Wall Street is telling us we can expect higher interest rates and, thus, even slower growth! (What an absolutely terrible job provided by our so-called "best and brightest" Ivy Leaguers. Yes, they certainly are in a class by themselves!)

Monetizing the debt finances the detriment exacted and the over-accumulated benefit provided. Spread out over time, being cyclically trended, the detriment--the error--is slowly exacted and accumulated, assuming the risk of loss ad infinitum.

So, what's the limit? Theoretically, since numbers are infinitely large, or small, the risk can be considered to have an absolute, unmeasurable value and accumulative proportion. However, this erroneously assumes that the risk can be infinitely offset to constantly increase value in zero-sum (like Wall Street's "quants" did, engineering the Great Recession), with the rich getting richer and all other incomes infinitesimally smaller (insufficient) in the form of debt. The Tea Party, for example, technically indicates the limitation of this risk proportion, indicating that it is fully valued and assumed (determined) in priority.

While the distribution of the value is ultimately a function of political self-determination, the current, economic value of the risk can be politically manipulated into cyclical and counter-cyclical trends that conserves the retributive value (the risk of loss fully assumed) without being consumed or redeemed. This occurs by means of tax and subsidy that demands debt be regressively paid in zero-sum to conserve (save) rather than consume (spend) the capital for investment, but results in insufficient funds and the risk of default. (The zero-sum is indicated by a persistent, false dichotomy: save and pay down debt, or spend and run up debt. In either case, we encounter the risk of default; but this is in error, and the error is directly attributable to consolidation of the risk. Consumption of savings--the capital--is supposed to come in the form of investment, which expands supply to be consumed with low inflation and low unemployment, which reduces the risk of default by providing adequate income to pay a declining burden of debt. Instead, the capital is organized--consolidated--into an economy-of-scale, yielding the zero-sum and the false dichotomy known as "the paradox of thrift." Instead of being invested, a person's savings is liquidated...it is spent...consumed--it is systematically consolidated to supposedly reduce the risk it causes, increasing the burden of debt and the need to tax to cover, or monetize, the debt.) While big oil companies, for example, do not have to give up their tax breaks and subsidies to technically ensure adequate supply and reduce prices, rising prices, technically due to reduced supplies, reduces the income needed to pay the debt and prevent default without raising the debt ceiling.

Since the tax code is set up to allow for minimum tax to allow for maximum investment and, therefore, maximum income, why do we have insufficient funds? According to Republicans, and the Tea Party delegation, the insufficiency of funds (the budget deficit) causes insufficient income (unemployment, for example) and the budget deficit. Therefore, to stop-and-reverse the default, it is necessary to stop spending, which will reverse the recessionary trend that is causing the insufficient income. This argument is made to form this hypothesis to be tested: reducing government spending will increase income and, thus, reduce the debt because it reduces the need for government and its regulatory authority.

The argument conservatives present is called a tautology. It is a circular argument that masquerades its conclusion as the empirical truth of a verifiable hypothesis. It is a deliberate deceit, substituting a deductive process for an inductive empirical process that tests the truth of the premise, in this case being, "reducing government spending reduces the need for government."

Deceit is required when the test has failed to verify, or confirm, the hypothesis. In this case, the premise has undergone extensive testing; and after having undergone the process of verification, the premise is found to be false--it is disconfirmed. In order to conserve the value (the stakes) the deceit represents, it is necessary to falsely induce the verifiable value of the argument by deductive process. The tautology is extended to conserve the value of the risk by organized means, resulting in organizational tautologies, like economy-of-scale efficiencies, that tautologically cause the risk it is organized, on an ever-larger scale, to diminish.

Government is a part of this fractile tautology of accumulated risk proportion, which has led us to the question--the hypothesis to be tested: What's the Limit?

The question, stubbornly applied by the Tea Party, is in the process of being politically settled, which means it will not be answered by verifiable means, but by ideological dogma that intellectually throws us back to the Middle Ages. Nevertheless, it presents the opportunity for an Enlightenment favored by a bunch of revolutionaries willing to test the political limits in an exceptionally American way--by verifiable means organized into the empirical confirmation (the popular consent) of the governed.

Building an ever-larger organizational tautology defeats the quest for freedom through verifiable means--it makes us slaves to truth validated by the ambitions of power rather than verified by the measure of our own existence. What makes Americans exceptional is that we tend, by democratic, pluralistic means, not to allow power to validate, but to verify its legitimate truth.

This is where science converges with philosophy...where politics intersects with the will to self-determine.

Power is not determined by the strength of its exercise but by virtue of limitations verified by the intellect of a moral existence naturally endowed and pursued by pluralistic means to which "We the People" popularly consent.

The Tea Party, whether we all agree on its intended purpose, has forced us to find the limit by verifiable means rather than the authored validations of a technical regime.

Tea is served and everyone is invited to the party!