False Valuations

In the previous article we explored the disconnection between risk producers and consumers. The incentive to offset risk rather than take it is, obviously, the profit motive.

Risk is detriment but it can be manipulated to be beneficial. It can be structured and processed to produce a profit. Since deliberately deriving benefit from detriment has civil and criminal liability associated with it, techniques designed to derive value from it are reasonably suspect and much effort is spent to minimize the liability through regulation and legal prudence.

Arguing that outcomes are unintended is a philosophical argument of ontological legitimacy. It is an affirmative defense because it is nearly impossible to prove a negative despite it being reasonable to infer that a benefit is being deliberately derived from detriment by either causing it or offsetting it.

Ontology is an effective argument applied to offsetting risk. When risk is disconnected from the reward we naturally infer that the risk is intentionally shifted to unassuming parties to make a profit. There is really no other reason to do it because, by taking the risk, success comes by consent of the consumer who governs with the full power to sanction the risk taker who, thus, retains the risk. The detriment is not consumed unless the risk taker is sanctioned by the consumer. Capturing this power is highly rewarding and easily defensible, which is why offsetting risk is so pervasive, and why valuations have a strong tendency to be false.

False valuations occur, and accumulate as econometric errors, because the probability that the risk will be retributed to its source is a political function. It is purely gamma risk that is largely unaccounted for because it has been offset (thus, for example, a highly improbable downgrade of our sovereign debt). Suddenly the risk is being accounted for by a third-party element, and to identify the risk and publicly recognize it is to admit to its liability, which is a hidden motive structured and processed to be otherwise argued ontological (which avoids the risk and accumulates errors).

Most salient among the false valuations is the "principle" that the self-interest of the rich beneficially aligns with the non-rich. It apparently does not, however, to the tune of a $14 trillion public debt that will effectively bankrupt our nation if paid by the non-rich. It will produce the classical result of consolidated capitalism (foreclosure by default) in which the rich get richer and the poor get poorer, supposedly in everyone's self-interest.

Blaming the President for busting the debt limit avoids admitting that tax cuts for the rich are not the self-interest of the vast majority. It is a false valuation--a false convergence of risk with reward--that can be believed in but does not verify, and that lack of fundamental verification accumulates errors, supporting the crisis proportion it purports to resist. At the same time, Democrats want us to believe that the debt ceiling is just a number that needs to be raised. That, too, is a fundamental error--a false valuation that just continues to accumulate risk into a crisis proportion.

Since the Pareto-Optimal hypothesis that ensuring the welfare of the rich is everyone's self-interest has been classically disconfirmed, and the risk it assumes neo-classically structured, processed, and offset to form the welfare state, "We the People" now face the angst of consuming the accumulated risk proportion. It is a risk proportion that is by no "ways and means" falsely valued. It is a truly empirical value that the "God" in which "We Trust" will not allow us to ontologically ignore.

The "principle" to be identified here is, indeed, Pareto Optimality of risk alignment--the "angst principle" of a perverse alignment that We can Trust will re-align and re-tribute the value offset and accumulated. (The more consolidated the risk-value becomes the more likely it will be deconsolidated.) False valuations will be reconciled, and activists like the Tea Party indicate the probability of the risk (the loss is, indeed, fully assumed in priority, which is the angst principle and the predictive value it has to indicate tendency to a natural condition).

Now we have "The Budget Control Act" being considered to "control" the fully assumed risk (the angst), and here we have the perfect example of how the risk is disconnected to cause detriment cleverly disguised as benefiting the victims.

The Budget Control Act and the Democratic Party's answer to it demonstrates what our political-economic system is intended to accomplish. It is structured to process the detriment (the risk) cleverly disguised as benefiting the victims, converging (compromising) the interests of the non-elite with the self-interest of the elite by means of sovereign authority and the accumulation of its debt (debt owned by "We the People"). We see very clearly how the risk is disconnected (offset) and reassigned (redistributed) for consumption, but not without assuming even more risk.

Marginal tax cuts and financial consolidation has put social security, for example, at risk. Even though it has been deliberately offset from this risk, it has been "put" at risk, nevertheless, because "We" are bankrupt. The empirical evidence for bankruptcy is possible default on our national debt. We are officially "on watch." We are being rated by the same people that caused the Great Recession, and default always forecloses (consumes) the assets of the defaulting party (to whom which the loss is fully assumed). Although default will not occur as long as we pay what comes due like we always have (and as Hamilton said we should), the angst principle is in full operation to exact the detriment, anchoring-in the possibility that things could be worse if we don't, and testing that hypothesis is, of course, too risky.

Cutting entitlements exacts detriment in a way similar to how corporates have raided pension funds. The Pension Guarantee Corporation is broke. By means of bankruptcy and reorganization of debt in the private sector, private firms legally converted pension value and consolidated it. In much the same way, the effect of our public-debt crisis will convert and consolidate entitlements by restructuring its obligations. The lost value will be effectively foreclosed--consumed in priority by the creditors that now have us "on watch" for our own protection after the Great Recession.

Over time the cause and effect disconnects and acquires a misattribution. Americans are not in debt because they refused to pay it, but because they do not have the income to pay it. That income has been consolidated in the upper class and they refuse to pay it because they say it is a moral hazard--it will kill jobs.

Misattribution of the risk falsely values the reward. While equities, for example, will continue to get support from the accumulation (the deflated demand--the purchasing power of the unemployed--consolidated by the upper class), they are falsely valued. Eventually the reward actively converges with the offset proportion of risk (like a sovereign-debt crisis) to retribute the value (the fundamental attribution error).

A crash diet for consumers will certainly be even more detrimental--it accumulates even more risk. An economy that is overweight at the top and underweight at the bottom will surely collapse--it will crash, and knowing when it will crash is a function of reading the signs.

The signs we choose to read must fully value the risk proportion free of confirmation biases. If we do not pursue intellectual freedom with verifiable hypotheses, controlling the risk will be falsely valued (corrupted) by dogmatic ideology and psychological tricks, like we have now with the budget-control debate.