Avoiding the Risk of Default

If you are following risk modeling and assessment on this web site, you are not surprised by a dismal employment report.

For the financial analyst representing upper-class incomes, a dismal report is good news. Everything is going as planned. The detriment--high unemployment--extends the benefit derived (an accumulation of income into the upper class that is literally bankrupting our economy). The risk to be avoided is to keep it from being taxed and distributed to create jobs, which according to Republicans is the ways and means to tax and spend ourselves into default.

If we follow the Republican plan for "shared prosperity," everyone will be bankrupt but the upper class. Our nation, however, will be more solvent and the dollar will be much stronger, but that is scant consolation if you have to go bankrupt to keep the nation solvent (to make the rich richer at your expense, which is "shared prosperity").

Curious, isn't it, how middle-class Republicans support policies that will effectively bankrupt them to keep the nation solvent; and as the dissonance accumulates, so does the angst and the risk of political default.

With trillions of dollars available in the private sector and trillions of dollars to monetize a too-big-to-fail financial system, we should not be in any way anxious about sovereign-debt default. There is plenty of money available, but it is not being used to pay debt. It is being used to create debt instead of jobs, and this causes risk to accumulate into default (deflation) which, at this point, presents as global, sovereign-debt crises.

While risk cannot be created, it can be proportioned to cause angst. The political opportunity is then created to manage the accumulated effect of the risk to derive, consolidate, and manage economic value into an ongoing surplus.

In order to keep the risk consolidated in an economy-of-scale proportion, it is necessary to make people believe it is in their self-interest to not tax the surplus, turn it into capital and create jobs. Economies of scale, for example, we are told by mainstream, Ivy-League economists, create jobs and lower prices when just the opposite happens. (Keep in mind, for example, we may get a lower price at WalMart, but the price rises as income declines when the only place to work is at WalMart. While Ivy-League economists are quick to tout the benefit of lower prices, they neglect the full cost against the benefit to please their masters and falsely induce the belief that economies of scale are a non-zero-sum model of efficiency.) So, working with this "belief" (this failed, practical, philosophy of the risk), what we have now are massive economies of scale, unemployment, rising prices, and a whole lot of angst.

On the one hand, we have both Democrats and Republicans telling us we need to create jobs but both are relying on economies of scale to get us there. Both parties agree that we need to create jobs to pay the debt because relying on rich people to pay it pulls capital away from investment that creates jobs. On the other hand, we have an increasingly consolidated marketplace full of economy-of-scale firms that cause both inflation and unemployment, which leaves no one to pay the debt but rich people. Despite what we are told to believe, this is not an unresolvable paradox. It is a function of false, impractical modeling.

Allowing the economy to consolidate does not achieve pluralistic results. It accumulates risk to the point of sovereign-debt crises...and we are there, anxiously awaiting the trappings of our abuse to disabuse us.

The high level of angst indicates a problem that is beyond the capacity of the current political-economic system to solve. On the economic side there is no incentive with an economy-of-scale proportion, and politically there is no will in the current republican form. Overall, there is a critical deficiency of consensuality (pluralism) both politically and economically, and with third-party elements like Eric Cantor, for example, firmly fisting the purse strings, there seems to be no recourse to an incessant barrage of irrational, unempirical, policy options.

Despite the apparent hopelessness, all is not lost, however.