Constant Coefficiency

When consumers can fully sanction risk producers (having equal capacity to say "yes" or "no" to price, quantity, and quality), we can say that the risk proportion is co-efficient. Both parties have equal power to provide and deprive, but as soon as producers are too big to fail, the co-efficiency loses its equilibrium and detrimental value accumulates in the system.

Throughout the articles on this website, risk is described and explained as a coefficient constant. It cannot be increased or reduced (created or destroyed) but it can be accumulated and distributed.

The amount of risk remains constant but varies coefficiently with reward. This is what it means to say that the risk of loss is fully assumed--that it cannot be avoided. Avoiding it accumulates reward but also accumulates the risk associated with it coefficiently. If the value accumulated is disconnected (shifted to unassuming parties), it will be retributed (re-assumed) one way or another and this retributive value (the risk of loss fully assumed) is the coefficient that keeps the value constant (the unavoidable ontology of the risk proportion that is referred to in these articles as the retributive value of the risk).

Our founders, for example, operationalized the concept of risk ontology and retributive value with a revolutionary form of government to peacefully process pluralistic tendencies (the risk of loss fully assumed) into productive capacity. This capacity--a legacy of legitimacy we struggle with today--included a continuous debt proportion to keep the revolution productively revolving rather than slumber into static coefficiency (low demand due to liquidity crisis like we have now). Since the system always coefficiently tends to equilibrium (the efficient-markets theory), value does not accumulate retributively and cause crises as long as government does not interfere with its inherent efficiency. Thus, according to Hamiltonians, when crises do occur it is because government, not business, is too big and powerful, which is the hypothesis we struggle to confirm today as both business and government get coefficiently bigger to manage risk in a disfunctionally too-big-to-fail, crisis proportion.

The crisis we are experiencing now is technically philosophical. The Hamiltonian model of perpetual debt emerged into the 20th Century as a monetized risk proportion that, technically, conflates with traditional, conservative principles to form a cognitive dissonance (political-economic uncertainty) struggling to be resolved. If technical analysts want to achieve predictive utility, it is necessary to identify and assign probable value to the source of the uncertainty. Normative valuations that are considered to be apodictic principles (like welfare causes unemployment) can no longer be taken for granted, which is to recognize the ontological value--the constant coefficiency--of the risk to the reward.

That risk cannot be increased or reduced (created or destroyed) but it can be accumulated and distributed is the crisis of psychological dissonance struggling to be philosophically determined.

Are we ontologically or teleologically determined? If we cannot self-determine, then freedom is just an illusion and we are condemned to a coefficiency of probable risk that Schumpeter described as "creative destruction." At this point, such a hypothesis is evermore dismal as we are being told we can't get rich without cutting back on government programs that keep us from being poor. The dissonance is overwhelmingly dismal and appears to be philosophically unresolvable.

Take the philosophy of government, for example. As we debate the size of government, budget deficits and debt, we tend to compare it with household budgeting or running a business. Of course, neither a household or a business is managed by the consent of the governed. For the most part, they are legitimately managed, and fully sanctioned, from the top down. While many of our leaders would like to make our government operate like a household or a business, it Constitutionally does not. Thus, the recent call by Republicans for an amendment so that it does legitimately operate, and fully sanction, from the top down.

The reason Republicans object to new regulations that require over-sized financial institutions (SIFI's) retain risk is because that is how they do business. It is a patented model of success. Entrepreneurs indeed patent business models that derive value by causing detriment, and these models are "successful" because the value derived is disconnected from the risk in a too-big-to-fail proportion from the top down. Risk-retention requirements do not, of course, solve this problem.

Firms that are too big to fail are "too big" to fail (the risk is coefficiently constant, and in this case, constantly detrimental to a fault). It is ridiculous to say institutions that are too big to fail will be allowed to fail. It normatively values detriment and utilizes angst as a means of exercising power from the top down rather than the pursuit of happiness pluralistically self-determined from the bottom up.

Technically, conservatives claim truth cannot be compromised, and because the masses do not understand why it is better for our nation not to compromise conservative, philosophical principles, it will have to occur without its consent. Hence, the value this consumes is fully retributive--it demands strong, authoritative leadership to resist the natural, pluralistic coefficiency of power. It is a full-blown, Constitutional crisis of legitimacy that has been stewing for over 200 years (and if our technicals are fixed to the VIX and contrary, it only indicates we have assumed too much, or maybe not enough).

The incentives that govern the direction of the risk perversely align to surplus detriment into a cataclysmic, crisis proportion.

It is wrong to assume the system can be maintained in a perpetual state of disequilibrium. The inequity accumulates into an ever-larger proportion of debt-to-equity like we have now. It is inherently unstable and trying to fix it without deconsolidating the risk proportion only makes the value being accumulated more retributive (more unstable)--it exacerbates the problem making the system even more prone to crises.

Consumers being culpable for assuming risk they cannot control is clearly a false assumption--it is illegitimate.

Without reconnecting risk producers with consumers we will continue to slumber with slow demand. As long as the incentive to produce (taking risk) is not aligned with consumer demands (as long as it is not deconsolidated), the economy will continue to operate to derive value by causing detriment.

As long as producers are making risk instead of taking risk--offsetting and accumulating risk to be consumed rather than adding supply--the risk of default looms ever larger.

Avoiding default is not as simple as raising the debt ceiling. Nor will raising, flattening, or cutting taxes and entitlements actually reverse the trend to default. It's like hitting yourself in the head with a hammer. Just because you switch to a bag of beans doesn't mean you won't have a headache, and it's just a matter of time until you beat yourself into a coma.

In order to cure the problem we must reconnect (retribute) the risk to the profit makers who falsely claim to be risk takers and thus claim that the reward is legitimately earned (i.e, that the risk has been fully consumed by taking it, which is verified by producing a profit or not). This is not a function of risk retention. It is a function of risk taking. Risk can always be cleverly offset and yet be falsely attributed to making a profit. It is just another version of the same problem--offsetting risk rather than taking risk and adding supply to make a profit.

In order to cure the problem we must deconsolidate the risk proportion. The risk has become so consolidated and disconnected from the profit that the disease--more consolidation--looks like the cure.

So that we do not continue to try and cure a hemorrhage with bloodletting, we need to look at some examples of how the risk is disconnected to cause detriment cleverly disguised as benefiting the victims.