Anti-Trust is Anti-Growth?

DOJ blocked the merger of AT&T and T-Mobile because it "allows consumers to benefit from competition." In other words, it allows for a deliberately structured organization of risk that makes the risk-taker retain the risk.

Deconsolidation of the risk empowers the consumer with value (the benefit) inherently coefficient to the risk (value that consolidation captures and redistributes in the form detriment, which demonstrates power). Risk-value is structurally coefficient, and in order to maintain that efficiency it is necessary to keep industry and markets unconsolidated.

Preventing consolidation of industry and markets is good public policy because it retains risk in the alpha dimension, and good public policy makes for sound investing. It reduces the uncertain probability--the beta volatility--of the risk and its accumulation in the gamma dimension where it resides as massive public debt.

If capitalism is synonymous with the free market, then why does it seek to avoid it in priority?

Wall Street will be sure to complain that anti-trust is anti-growth. Regulatory authority, they will contend, is preventing the "free" flow of capital, which inhibits growth and kills jobs. The truth, however, is just the opposite.

The anti-growth argument perpetrates a fraud.

Consolidation is a false efficiency. It is a false valuation of the risk proportion.

While the "urge to merge" is always touted to be a sign of recovery, it is really an indication of even more consolidated risk. Not only is risk more consolidated, it is more volatile.

Now that the risk accumulates and detrimentally distributes with an ever-higher frequency, the detriment is not only more extensive, but the cycle is becoming more compressed.

High-frequency compression of a growing risk proportion is beyond fully gamma, meaning it is being accumulated in a hyper-catastrophic proportion.

Anti-trust is supposed to relieve (deconsolidate) the growing pressure (the catastrophic risk proportion), but the current regulatory authority is far too little and far too late.

While the trend to administrate an alpha-risk proportion from the gamma-risk dimension may look promising, the Obama administration is too far right to effect the deconsolidation needed to reverse such a highly charged deflationary trend.

The Obama administration is nothing but a false positive. Populist rhetoric with a right-wing program will keep us trending deflationary.

If we are looking for signs of recovery, we must be sure to identify signs that only appear to be positive.

Signs of Recovery

Small investors need to keep in mind that capital is over-accumulated. Everything is over-priced and signals are easily manipulated into what appear to be irrational, unpredictable, technical parameters. Keep in mind that "irrational" indicators are really false valuations--it is not a pluralistic model, but an elitist model that predicts the direction of the risk.

It is important, however, to not use a pluralistic, free-market model only to account for the missing value of risk. The missing value not only predicts a crisis, but serves to indicate corrective (political) action in the dimension of unavoidable, gamma risk (where the value accumulates into a crisis proportion).

When a crisis occurs, the missing value represents the need to prevent it, not just predict it.

We can very simply prevent crises in the first order by ensuring practical operation of a free-market model in priority. It is much more risk averse to cure the problem than rely on complex treatment of late-order effects.

Focusing on complicated, symptomatic treatments only serves to support predictable recurrence of the risk to be avoided (like trying to increase GDP by reducing debt in the gamma-risk dimension). Alternatively, crises are easily resisted with a genuine free-market legitimacy (an easily recognizable, legal and proper consent of the governed--self-governance confirmed in the first order, alpha-risk dimension).

The Fed admonished policymakers at Jackson Hole saying it is unwise to cut spending if we want economic recovery. While low interest rates accommodate spending needed to fuel recovery, headline inflation is countering the effect.

Low interest rates should be a sign of recovery. Instead it is a sign of what caused the Great Recession to begin with--excessive speculative demand that is the direct result of overaccumulated wealth. Income needed to pay mortgages, buy goods and services, and keep people employed has been consolidated by bidding up food and fuel prices, and because so-called "headline" inflation is falsely attributed to increased, global demand, fundamental measures needed to control it are ignored, resulting in missing value that accumulates error--crises--that cannot be avoided.

If we do manage to ignore a crisis, by accommodating it, for example, like we are now, the bliss will inevitably turn into blame. The blameworthy, however, will not be accused of uncivil behavior, it will be the complainants. The effect--rising crime and civil unrest--will be indicted as the problem, which serves to perpetuate the cause (the incivility to be prevented). Whether we have a double dip or not, the current deflationary trend (falling income that without QE results in a declining rate of profit) is bad enough.

Deflation is bad for both labor and capital. Everybody's income is reduced, and in the case of capital, redistribution of the risk is more probable. As conservatives are apt to say, redistribution has to come from somewhere, and since the lower classes will have next to nothing, the probability it will come from the upper class becomes parabolic. It becomes impossible to make a profit when the income to support it has been completely consolidated--deflated. Thus, the declining rate of profit, which is a definitive sign of an impending deconsolidation of the risk proportion--not just a distribution from the accumulation, but a normative redistribution.

The income currently being consolidated is being used to deflate incomes even more, which is the deflationary spiral the Fed has prevented up to now. Unfortunately, as Bernanke points out, accommodation has done very little to indicate recovery, and at this point only serves to indicate an accumulative, deflationary risk (the problem to be avoided but, unfortunately, not eliminated).

Good public policy makes for sound investing. Adhering to disconfirmed hypotheses to satisfy your principles is, however, a very bad sign. While having predictable consequences, it is inherently unsound.

What the Fed is not Doing

The last time we applied reaganomics, the Fed raised the interest rate to record levels to control inflationary risk presented by record budget deficits (insufficient treasury income, like we have now). Predictably, but completely contrary to what proponents of reaganomics forecasted, we had both inflation and unemployment--stagflation--like we have now.

This time, however, being unaccommodative is exactly what the Fed is not doing.

Since doing the same stupid thing over and over again is the mark of insanity, Bernanke is more accommodative. While he could not prevent the reapplicaton of reaganomics, he could accommodate it.

Quantitative easing at near-zero interest rates is intended to turn accumulated wealth into capital. It is intended to cause a distribution, but capital is instead being used to accumulate even more wealth, which increases the probability that wealth will be "redistributed" in the form of public debt ($14 trillion and counting at this point).

When the upper class increases its slice of the pie over increasing the size of the pie, debt increases over GDP. The debt is not causing reduction of GDP, so it is fundamentally irrational to think we can reaganomically cause GDP by reducing debt.

Accommodating the debt is exactly what the Fed is not doing, and that is essentially what its chairman said today at Jackson Hole.

Bernanke knows very well that reaganomics is a foolish reiteration of a failed--disconfirmed--hypothesis. (Remember, when something is disconfirmed you throw it out, you don't keep it as a matter of principle, and if you do, you are either really impaired or really powerful.) Bernanke has tried his level best to deconsolidate the risk but has been defeated by the irrational tendencies of over-accumulated power (what a free market would quickly dispatch; and that the problem persists indicates the extent of the missing value, accounting for the accumulated risk the Fed has the authority to independently manage--see the article, "The Bureaucratic Model of Power and Political-Economy").

Causing the problem to be solved is what the Fed is not doing. What the Fed is doing, however, will provide definitive signs of recovery going forward.

Bank Gets Buffeted

Warren Buffet bails out Bank of America because it is too big to fail.

The economy of scale Bank of America represents is a false efficiency. It is risk prone, and Buffet is rewarding a firm that is in the business of counterpartying the risk--the risk manipulation that led to the Great Recession, which Buffet profits from by feasting on the famine.

Banks like Bank of America and Goldman Sachs short our economy. The richest tribes among us profit long at everyone else's expense, accumulating value in the form of late-order effects that are falsely rationalized as value lost. The value is not lost, it is gained zero-sum--it is consolidated into a too-big-to-fail, economy-of-scale proportion that does not enhance the free market, but serves to defeat it.

It is easy to go long and sell the economy short if you are too big to fail. It is easy to securitize mortgages, for example, and then invest in commodity futures to consolidate the income needed to pay the mortgages--effectively going long and selling short. No risk to you if you are too big to fail. Everyone else is left holding all the risk, and Warren Buffet has confirmed that hypothesis going forward.

Consolidation is not risk averse, it is risk prone. When combined with risk-transfer technologies, the risk is offset--it is made to be experienced as late-order effects that force us into liquidation, and because the effects occur later, it is easy to argue the benefit is not caused by the detriment (which is a false valuation that accumulates political, gamma risk).

Falsely valuing the risk proportion is what people like Eric Cantor do. They feather their nests with the misery of others, serving up magic spells in the court of the donor class to mesmerize the masses with the false hope of general prosperity.

Consolidated financials manufacture risk for class consumption--they make it and we take it. For financial firms, this is what it means to be productive. Those looking to be productive are turned into a counterparty (a tribe) to take the risk being accumulated, and isn't this the problem.

Too-big-to-fail, economy-of-scale firms are designed to divest the firm of all risk and invest the firm with all the reward. The risk does not just vanish--it is bourne by anyone that is not upper class and engenders "the risk" of class (tribal) warfare.

If we don't want class warfare because it is not productive, then we have to deconsolidate so that firms are not too big to fail. Instead of deconsolidation, Bank of America is getting support, and this value is supposed to trickle down to the lesser tribes that are really just parties to consume the risk.

While we are waiting for capital to cause growth, it is being invested to prevent (bail out) further contraction (it is falsely risk-averse when it is really risk prone). It is a false valuation of the risk proportion that will result in a crisis.

Bailouts do not prevent crises, they support it. As the economy declines, the rich (the upper-class tribes) get richer.

This is not really about bailing out what is too big to fail, however. While it looks positive (risk averse) in the first order, the bailout is really a means for exacting a late-order detriment. It is to support what causes everyone else to fail and the liquidation and consolidation of their assets (i.e., turning equity into debt--increasing debt to GDP).

After we lose our jobs because big banks are investing in commodities rather than growth, Bank of America, et. al. advises its mortgagees to divest their unsecured assets to prevent foreclosure. They are not in the business of supporting their customers, they are in the business of bankrupting them--liquidating their assets and making them even more dependent on debt (public debt, for example). Yes, Bank of America is "strong and well led." Once we are reduced to nothing, we will work for even less.

Unless you are a member of the elite tribe, saying that Bank of America is a good investment because it will be around for a long time bodes really bad for everyone else.

This is not a white night galloping to the rescue. This is a black night galloping off with the booty.

Look at how feudalistic this all is. We have yet to move from tribal to civil society.

Philosophy of Self-Governance

If we believe human nature is greedy and selfish, we will naturally tend to structure our lives in support of the proposition. It is a self-fulfilling prophecy that plays right into the hands of a power elite who rely on a philosophy of elite authority to legitimately govern the masses who are, so structured, incapable of governing themselves.

In Libya, for example, analysts are mulling over whether "The People" are capable of self-governance after elite rule. We see how the risk assessment depends on the tendency to move from tribal to civil society, and we have to consider, even a society as tribal as Libya's, with a fast and ubiquitous new media "We" are all citizens of a global, civil society. ("The medium is the message," which implies an ontology that many political-economists refer to as "technological pull." It is an unavoidable ontology--"the risk" presented by "an idea whose time has come." Our financial system innovates with the same kind of risk ontology. High-frequency trading and risk-transfer vehicles, for example, are a phenomenon in which technology appears to be leading us into an algorithmic, quantitative nightmare, but is really nature's way of invoking good ideas that will allow us to empirically govern ourselves.)

Libyans may have become dependent on a governing authority, but they are global citizens. Libya will experience the deconsolidation of power that even the U.S. needs to experience to join a civil society of self-governance.

Both Democrats and Republicans, we notice, rely on the philosophy of risk that structures a causal dependancy. This structural dependancy induces the evidence to support its hypothesis (i.e., creating an organizational tautology to routinely conserve the distributive value of the risk proportion). It psychologically manipulates the governed into a risk-averse belief in a higher authority (the angst principle--and the gamma-risk dimension--referred to in previous articles) rather than the risk-prone dimension of freedom and self-governance. (The risk-prone, alpha-risk, dimension, keep in mind, is really the more risk-averse because it is small enough for self-governance--the risk is well defined and fully culpable.) We are more likely to take risk (and increase GDP over debt) if it is not structured to offset into a too-big-to-fail, economy-of-scale proportion like business and government is "largely" organized now.

Both major parties contend We are not capable of rationally managing our own affairs. Leaving us to our own devices is too risky--in other words, it is too risky for the elite who psychologically rely on the aversion to risk. As long as we believe it is too risky to govern ourselves, we won't.

Psychology of Risk

Assessing the risk requires psychological valuation of the players, which indicates the probable direction the risk will take.

Currently, for example, in order to reverse the deflationary risk, we need to put capital to work. Instead, the players are hiding in fear, seeking safe haven to avoid losing value to a deflationary trend caused by trying to avoid the risk. Unfortunately, this means they are causing it by trying to avoid it. It's not exactly rational, but when you are rich and powerful, you can afford to be irrational at everyone else's expense (until "the risk" goes gamma, anyway).

As the risk accumulates, the more incentive there is to avoid it. Thus, the risk feeds back into a crisis (gamma-risk) proportion (which demands government intervention to save consolidated capital from itself, like the multi-trillion dollar bailout we just experienced and are now expected to pay for with deflationary spending cuts or an inflationary burden of debt).

Realizing that risk cannot be avoided, it accumulates (like in a deflationary spiral), requires an analytical cognition that is apparently inhibited by the profit motive.

The motive to profit by avoiding risk drives the direction of the risk. In the current environment, analysts that realize this assessment will predict a winning market position (and public policy analysts will be prepared to protect us from ourselves as we irrationally let the risk patriotically accumulate out of control in our self-interest).

Causing the risk to be avoided by trying to avoid it--the classic "dog chasing its tail"--is not exactly the model of sanity or intelligence. While economically the rich have little to lose by converting their wealth into working capital, the majority of the nation's wealth is being horded to avoid the risk, which foolishly puts it at risk of being confiscated at large. It is not the government putting their wealth at risk, it is themselves.

We can either infer they do not know what their self-interest is, or they are demonstrating power--projecting power by playing politics.

Perhaps we can reasonably conclude that chasing your tail is just a form of amusement, which is a very important aspect of the psychology of projecting power.

American politics is elegantly played to exact detriment by making the masses believe it is in their self-interest. For consolidated capital, this is what civil society is. If The People no longer believe the game is being played in their self-interest, then it is the responsibility, the noble obligation, of the power elite to maintain civil order. Raw power must then be applied, overtly demonstrated, to keep the capital safely consolidated, and protect us from ourselves. Is this not what we hear our elected representatives telling us about our representative form of government?

Democrats told us we would know what was in the health care bill after it passed. Now Republicans tell us that it is necessary to raise the tax burden for people who struggle just to pay the rent and put food on the table so that Bank of America can meet its capital requirements as they leverage our future into the pit of the next deflationary crisis. When that crisis occurs, too-big-to-fail entities will be there to feast on the famine--not to provide, but to deprive, consolidating value that will be leveraged into the next crisis in an ever-larger proportion.

So, we're mandated to buy a Democratic health care plan we cannot afford to pay with a Republican economic plan that has an outlook that is progressively more dismal. I dare say, the rating on this is hardly triple A!

Let's STOP and reverse right here.

Increasing GDP over debt is a coefficiency that works. Everyone benefits--even the upper class. The majority of Americans have the income to pay health care and the rich still get rich--unless, of course, we find it necessary to make people suffer to feel powerful, which is just sick! It is just a psychological disorder...criminal insanity that a real free market will in no way tolerate. The only way this insanity survives the marketplace is because it is bred into the false efficiency of economy-of-scale modeling.

Deconsolidate and this problem is solved!

Putting Democrats back in the majority will not solve this problem. According to them, bigger is better! Yes, indeed, $14 trillion and more better! So, who do you think is going to pay for that?

We have to demand that the capital be used to increase GDP. This means that industry and markets will expand, NOT consolidate (i.e., GDP increases over the debt). Economy-of-scale efficiency is a psychological trick--a con game perpetrated on good-natured people who want to pursue life, liberty, and happiness, not be the plaything of pious frauds who want us to believe that taking advantage of other people is a providence divinely endowed and legitimately earned.

Making it so that people have to struggle to make ends meet is not the pinnacle of civil society--it is not the measure of success--and it is not endowed by God.

It is time to stop empowering people who cause debt by consolidating capital into economies of scale, and people who solve this problem by consolidating the risk it accumulates into public debt.

We are psychologically manipulated by an increasingly consolidated risk proportion. It gets so big that it seems the only solution is a big solution. We have ample evidence that this is incorrect, but we are so risk averse, we are vulnerable to the machinations of a power elite who want to herd us like so much cattle and corral us into an economy of scale that is but a Skinner box for operant conditioning. We are so conditioned, we tend to rely on the bought-and-paid-for experts who manage and direct the affairs of business and government consolidated evermore into a controlling, sovereign authority.

No! We the People are Sovereign! We can think for ourselves. We are born free and will live free despite the ambitions of would-be tyrants.

Freedom reduces to a natural coefficiency of governance that has been cognitively dissonant. Now we must choose. It is time to actualize freedom by operantly conditioning our behavior through pluralistic processes, not the tyranny of consolidated processes. Human nature is greedy and selfish to a fault only if we are structurally conditioned to select those behavioral attributes for success.

In a free, unconsolidated marketplace, selfish greed reduces to providence. Those that seek to profit by greedy deprivation can only survive by rigging the market to consolidate its otherwise divisible, not-too-big-to-fail power into an indivisible, too-big-to-fail proportion.

We have been conditioned to believe that consolidating the risk provides security. It clearly does not! It intentionally provides debt well in excess of productivity...it intends to make us slaves to the debt proportion. The choice we have reduces to debt or GDP.

We can lower the deficit and reduce debt or raise GDP. Trying to do both at the same time does neither--it supports the dissonance. It is a psychological trick that will keep us in chains with what appears to be by the consent of the governed. No! We are Sovereign. We choose by Divine Right naturally endowed.

It is time to choose prosperity over debt. Although we are being conditioned to believe that reducing debt will bring prosperity, it will not! It will accumulate even more debt.

Reducing the deficit and debt does not increase GDP, increasing GDP reduces the deficit and debt.

The deficit is not the problem, it is a symptom of the problem. We have been conditioned to believe that the debt is the problem so we infer cutting the debt solves the problem. This is an error of fundamental attribution--it is a cognitive disorder that leads to dissonance and uncivil behavior due to failure of expectations. It is an unnecessary condition because WE are Sovereign! WE have the power to choose it not happen. WE have the power of self-governance.

A Working Coefficiency

Conservatives are quick to agree we need to turn capital into wealth in order to reduce the ratio of debt-to-GDP, but insist on measures that will make the problem worse.

Working coefficiently, there are two possibilities for reducing debt-to-GDP. We can increase GDP or lower debt.

The only problem with lowering debt is that it does not increase GDP, it lowers it.

We maximize the pursuit (the risk) of life, liberty, and happiness not by reducing debt, but by increasing GDP.

We solve our problem not by avoiding risk like Wall Street quants and MBA's do with risk-avoidance and economy-of-scale modeling, but by embracing it.

Increasing GDP over debt is a coefficiency that works. Everyone benefits unless, of course, demonstrating power requires its deprivation.

Reducing Debt-to-GDP

The reason the debt-to-GDP coefficiency is so difficult is because it is loaded with political risk.

By following the risk assessment discussion on this web site, we understand that the political risk tends to be undervalued if not ignored. Economic models, then, are loaded with unaccounted for risk--errors that confound the risk assessment, falsely valuing debt and productivity, liabilities and assets. Even more confounding, we learn, is that the false valuations not only provide beta value to the risk, but are politically motivated. This means that "the risk" is much more than the simple coefficiency of debt-to-GDP.

The massive debt we have, both public and private, is a liability, conservatives argue, if the wealthy have to pay it. It will consume the wealth of the nation. That is, it will reduce GDP.

Never mind that this wealth has been accumulated at the expense of productivity--low GDP (which increases unemployment and debt). This means that the accumulation is an economic liability falsely (politically) valued as an asset.

If we politically confuse assets and liabilities, public policy is perpetually confounded, condemned to political dysfunction, like we have now (with the accumulated value--a general liability--conserved as the general welfare).

With one-in-four American children living in poverty, it is difficult to argue what we have now is the general welfare, but conservatives argue that if we do not cut programs that benefit the poor (reduce debt-to-GDP), the poor will never be anything but poor.

Could it be that a distribution needs to occur from the accumulation to reduce poverty?

Yes, indeed! Distribution from the accumulation--not borrowing it--will reduce poverty. It will turn a liability into an asset. It will turn wealth into capital--it will reduce debt-to-GDP.

Since reducing debt-to-GDP means reducing the load of political risk, and convincing conservatives that narrow accumulation of wealth is a liability and not an asset has a probability of about zero, the prospect for "change we really need" does not look good.

If reducing debt-to-GDP is difficult because it is loaded with political risk, then it is necessary to demonstrate that turning wealth into capital (the paradox of thrift) is an asset and not a liability. It not only reduces the risk (the probability) of poverty, but reduces (coefficiently) the political risk of accumulating wealth that otherwise goes unaccounted for in a catastrophic proportion that will do anything but conserve it.

Debt-to-GDP

Economic expansion is not limited to, for example, the amount of gold in reserve. If it were, the Great Recession would have been the Great Depression all over again.

Now we have the Federal Reserve system. Economic value (expansion and contraction) is held in reserve and centrally managed independent of the political system, although in practice it serves a critical, political function as well.

To expand, the central bank buys bonds from banks in the system (it prints money, which is value held in reserve). To contract, the Fed sells its bonds back to the banks (reducing the supply of money, which puts the value back in reserve). The risk (the value being produced and consumed, or the risk-value) is either "on" or "off." It is binomial because dummy variables are unambiguous, easy to measure, and easy to manage.

While expanding the money supply should render a competitive, pluralistic economy in which inflation and unemployment are the least of our problems, the Fed reports that both will be critically problematic for years. The Fed is essentially just buying and selling bonds (sovereign debt), which gives basic value to the risk (basis points), but what the private sector does with the money determines the effect (the risk-value).

The Fed does not create risk. Risk is coefficiently constant, but it can be structured and restructured to accumulate value. If the marketplace is continuously consolidating with each boom-bust (risk on-risk off) cycle (with big firms being fittest to survive), the private sector is determined to consolidate the risk and consume the value (the GDP) it produces. The result is the crisis we have now with GDP being consumed by debt. This is not something grandma did by going to the doctor or needing hip-replacement surgery..., but because Wall Street overleveraged the risk into a crisis proportion (it expanded the money supply to consolidate rather than deconsolidate the risk). The probability grandma can afford her health care has been consumed by Wall Street (the value has been consolidated, putting grandma at the mercy of the so-called fittest to survive--"the smartest" by virtue of uncompromised self-interest).

Wall Street overleveraged the money supply so extensively, but with slow growth, that fiscal stimulus, QE-1 and QE-2 were not enough to cover it, and it looks like QE-3 will be needed to cover the extended debt proportion.

Without a third round of accommodative easing, the slow growth experienced during the Bush administration's throwback to reaganomics will keep us in a deflationary trend because the monetary expansion (the leveraging) did not trickle-down the income to pay for the homes or the second mortgages that were sold, or anything else for that matter. Consumer demand is consumed with debt, and this is not the paradox of thrift. It is a deliberate--knowing and willing--deprivation of income needed to prevent the current crisis and the consolidation of assets and income still to be consumed (foreclosed) in a crisis proportion going forward.

Keep in mind that, given the current political will in the representative form, a distribution on the accumulation will not occur until there is no one left to pay the debt but rich people. Thus, the long, deflationary tail of the cycle, and the S&P downgrade.

The downgrade occurred because the "paradox of thrift" is not what is in operation here. It is the deliberate consumption of equity by means of an over-extended (over-leveraged) risk proportion intended to force us into default and foreclosure (increased debt-to-GDP). Instead of increasing supply, supply is consolidated and sold with an increasing debt proportion.

The economy (GDP) did not expand in proportion to the amount of money leveraged by the private sector. Income, rather than being expanded to pay the debt, accumulated at the top, which causes deflationary crises and the need for the Fed to expand the money supply from its reserve (ex nihilo).

When the private sector over-leverages into crises, the Fed steps in and provides the liquidity to cover it. This, you see, provides our economy with millionaires and billionaires (a lot of money to trickle down according to the Hamiltonian model, and plenty of aspiring ideologues) but not a lot of GDP. Since being rich is supposed to be exclusive, ideologues press to turn off the spigot to consolidate their gains--and so while the rich trot off with all the booty, the Fed gets all the blame for a declining GDP ratio.

With the model of over-leveraging being successfully applied with virtually no liability, it will be replicated. That is, we will keep increasing debt at the expense of GDP. As long as the Fed is doing its job of preventing full-blown depression, entrepreneurs can be in the business of making money without risk (without creating jobs and the income to sanction them in the marketplace).

If the risk can be profitably offset to all the other poor suckers in the world, it will. As long as the means to sanction (the application of risk for consumption) is allowed to consolidate for redistribution, the value it produces will be retributive (negative GDP). The sanctioned (the non-elite who are forced to take all the risk rather than apply it) have no recourse but big government to counter the power of big business. Government, of course, is then falsely valued as being the source of the problem (the source of the retributive value).

We have to seriously question whether government has caused record budget deficits and public debt (the value to be retributed). If we attribute government to the retributive value of the risk, then the basis for future asset valuation and economic performance is determined to be contractionary (the uncertainty is effectively zero). The risk, then, is really high (it is fully gamma), and so then is the value of the reward.

If economic contraction is the model of success, income will not be available to ensure a free-market consensus. Hence, the Fed prints it "out of nothing" to hedge the inevitable, political risk, which at the same time supports economic entities that are modeled to gobble-up GDP with debt. The printed money (the potential, alpha risk of the free market) is turned into debt (kinetic risk of overwhelming force) that is "too big to fail" in a gamma-risk proportion.

Without adequate income (expansion of GDP-to-debt) the gamma risk is fully proportioned. Politics becomes the risk determinant, not economics, and the Fed is the perfect foil for what fails us in a too-big-to-fail proportion.

Now, for example, after the Great Recession, we can fallaciously blame the Fed, post hoc, for causing the problem when it is mitigating the effect of turning equity into debt (rising debt-to-GDP and likely default). Since, however, the private sector is responsible for adding GDP, but is not, the ex-nihilo funds are indeed producing next to nothing (except millionaires and billionaires by default). The added liquidity is being used to inflate commodity prices for capital gains which are reaganomically taxed at the lowest rate. The combination of high liquidity but low GDP, along with declining revenues against the need to spend, is trending us toward default. Dump reaganomics and this trend will quickly reverse!

We should reverse reagonomic tax incentives not because it is fair, but because, as Reagan proponents argue in support of marginal rate reduction, it is practical. It is the best way to achieve economic growth, reduce the need for government spending and the need to monetize an overwhelming debt burden despite record profits.

The reason equities get support on bad economic metrics is because the Fed is there to expand the money supply. Although the Fed is fingered to be the cause of the problem, it is there to "accommodate" it (manage the risk), not cause it.

At this point in our political-economic history, if we did not have a policy of accommodative easing we would be in the depths of another depression. Instead of wrangling over tax rates we would be looking squarely at the fundamental legitimacy of capitalism.

The accommodative policy of the Federal Reserve offsets the risk into a bureaucratic model (a stable, routine, quasi public-private management of risk and the distribution of its value). Risk is managed by a power elite in the gamma dimension not to deconsolidate it (to keep it in the alpha dimension where risk is divisibly controlled by The People), but to keep it consolidated, which defeats the free-market legitimacy of capitalism (accumulation of value only by the consent of the governed who solely own the value of the risk).

Much safer to argue about "fairness" of the tax code than to directly examine the legitimate (fundamental, alpha risk) distribution of income and, thus, the power to control the risk. Remember that during the boom phase, risk is on. If an expanding money supply does not produce alpha risk (GDP), the gamma risk is too high. The value is too consolidated and presents as high debt-to-GDP. When the gamma risk is switched on, the alpha risk is effectively off (equity is liquidating into debt) and the system is critically unstable no matter how hard we try to ignore it with ambiguous issues that tend to be safely symptomatic if related at all.

So, if reducing debt-to-GDP is the magic bullet, what's keeping us from killing the "job killer?"

Out of the Box

Here we are again with capital boxed in at the top in a too-big-to-fail proportion. Big financials are not financing growth because it does not produce a short term profit. The victims are the unemployed, and more broadly anyone that is not upper class. In other words, the profit is at the expense of economic growth, not the result of it (and remember, cutting taxes at the top is supposed to cause economic growth).

The product of this short-term profiteering is risk. Eventually the risk gets so big (as big as the institutions that accumulate it), that the victims end up bailing out the perpetrators. In other words, the risk is shifted (offset) to the public domain and presents as budget deficits and rising debt-to-GDP.

Once again we are testing the legitimacy of the risk proportion, which is what the Tea Party is all about. The Tea Party, you see, is outside the box, but because it is a right-wing, conservative faction, its influence is easily co-opted to conserve the value (the offset) of the risk proportion.

The Tea Party faction unwittingly supports policies and programs that are inimical to the middle-class interests that it is supposed to represent. Instead, what re-presents is the catastrophic, risk proportion.

Instead of being deconsolidated into the middle class, where it will be managed in a highly divisible proportion that is not too big to fail the system, the risk continues to consolidate. What survives the system, by design, are consolidated entities that are too big to fail.

Valuing the deflationary risk (financial compression) of default that consolidation causes appears to be chaos (wild, uncontrolled volatility), but it is really an organized tautology designed to make the profit look pluralistically derived from the chaos (randomly ontological); and in order to command the chaos (reduce the risk ontology), it is necessary to consolidate (which produces the problem to be solved). What trickles down is not prosperity, but detriment--liquidation of middle-class assets into the upper class (the class warfare we are not supposed to talk about because it "kills jobs").

The Tea Party is boxed in. It is co-opted. In order to break out of this box it is necessary to demand deconsolidation of the risk proportion. The more deconsolidated, the higher probability for growth, reducing debt by increasing GDP.

Reducing the deficit and debt does not produce growth. It is, instead, deflationary, and the current volatility we see is the extent of that risk being valued. Producing growth, however, will reduce the deficit and the debt, which has been fully discounted. The discount has downgraded sovereign debt, for example, while the expected value of profit (the volatility) is being measured that accrues to the top-income class with virtually no risk save the gamma (political) risk.

Extending tax-expenditures for the rich keeps the wealth consolidated. It is time, in the name of life, liberty, and the pursuit of happiness, to climb out of the box and deconsolidate the risk into a not-too-big-to-fail proportion.

In the Box

So, we see with S&P's downgrade that our economy is overweight with gamma risk. "The risk" is fully gamma--it is saturated with retributive (political) value (like I have been telling you for a very long time) and is at the top of the list of factors S&P identifies as putting our debt at risk of default.

Look at what supports S&P's gamma-risk hypothesis.

We have an increasing debt burden both public and private that consumers cannot pay, and if they are demanded to pay it they will be consuming even less. Thus, the outlook is extremely negative (i.e., the risk proportion is fully gamma).

Improbable as it may be, because the risk has been largely unaccounted for in the gamma dimension--hidden away (avoided) and accumulated into a crisis proportion, the probability of default (deflation) is nearly perfect. We have boxed ourselves into the devil's deal. We are "sandwiched" in detriment. If anything deserves a downgrade, this does!

Suddenly we are accounting for all the risk, which results in a significant risk premium. Having to pay more for the debt increases the negative outlook--it accumulates even more risk. The system is overloaded with Reaganomic detriment, and considering the Budget Control Act supports the trickle-down hypothesis of Reaganonomics the outlook is even more negative (like I've been telling you for quite some time).

Ironically, this is where the extended scheme of magnified detriment blows up in the face of conservatives. Eventually there is no one left to pay the debt but the very rich (the trickle-down hypothesis), and combined with a balanced budget amendment, either they pay it or we default. Since the conservative faction refuses to pay the debt no matter what because it is a "job killer," we have boxed ourselves into another downgrade and a higher debt premium which means the payer (the rich) will have to pay even more. (Like I said...we are officially stupid if not crazy!)

Maybe it's time we start thinking outside the box!

Like I have been telling you for a very long time, the binomial political structure we have only appears to be a stable form of government. While it conserves the stakes over time without much civil disorder, it does not eliminate risk, it accumulates it into an unavoidable, gamma-risk proportion. It boxes us into catastrophic detriment.

It's time to think and act outside the box of operant conditioning that consolidation of power provides and experience real freedom--doing things not because we have to, but because we want to.

What's the Problem?

If we put bad gas in the car and it runs bad, it's foolish to say the car should be junked. If we are so foolish, then we have two problems--bad gas and the inability, if not an unwillingness, to identify the problem.

Now that our sovereign debt has suffered a downgrade, we seem to be suffering from both a cognitive and affective disorder. Not only can we not identify the problem, but we are not willing to.

It's hard to be highly rated if our republican governors (the people that operate the vehicle of government) are intellectually impaired if not emotionally disturbed!

We are officially "stupid if not crazy"...not exactly an optimal environment for economic growth and sustainable debt reduction. AA+ may be too kind.

The conservative critique of the downgrade is a shock-and-awe barrage of cognitive deficiency and affective disorder. Blaming the President's policy program for the downgrade, considering his tax-expenditure and spending-cut policies align with the conservative program, miserably fails the test of cognitive capacity. At the same time, both the President and conservatives reference Ronald Reagan with the intent to affect popular sentiment. Both reference an era of stagflation and debt, only surpassed by what we have now, as a reasonable way to gain support for a policy program that causes the problem to be solved. Going back to the example of the car, this shows an irrational, affective fondness for exacting detriment since, surely, no one is that stupid.

Reagan acolytes want to fill the tank with bad gas. Even though rational folks keep telling conservatives that the gas is bad, they keep filling the tank with bad ideas. So the car spits and sputters down the road to ruin with Reaganytes at the wheel claiming what a smooth ride it is.

Putting bad gas in the car and driving it over a cliff is just bleep'n nuts, except, of course, if you get bailed out before it goes off the cliff and you survive the victims to cash in the default swaps.

Macro SAR (How to Get a Good Grade)

To go long, investors are looking for signs of recovery. A clear signal will be a counter-party to the Tea Party currently occupying a critical policy space with Democrats and Republicans hiding behind it to shield them from the extreme economic detriment that ensues.

Government, it seems, has downgraded our credit rating, but it has not. It is the policy program being pursued that is junk.

We turned the century on the path to prosperity...and here we are--busted! Downgraded!

So, what happened?

The long cycle trended negative with a return to Reaganomics, and the tail of that phase is proving persistently long, resulting in a downgrade of our sovereign debt. The nature of this downgrade is essentially this: while conservatives say businesses are not in the business of creating jobs, Eric Cantor, for example, at the same time, says we need to focus on creating jobs after having sustained policies and programs that confirm again and again to resist job creation and debt reduction. If you just keep doing the same stupid thing over and over again, you're likely to get a bad grade!

Signs that will indicate a macro-trend SAR so that investors can safely buy and hold again are: dumping the policymakers that insanely persist in error and, first and foremost, plopping Reaganomics right back on the junkheap of failed policy programs.

The S&P downgrade is not only an indictment of the political process, it is an indictment of an economic program that continuously fails its empirical measure of success with record debt and budget deficits. Considering that big money moved into treasuries to avoid the risk, the conclusion is perfectly clear--contrary to what Ronald Reagan said, government is not the problem.

If government is not the problem, then what is?

This is The End?

This K-Wave cycle has a long tail, so it is not exactly the end of the cycle.

While it may be time to repent (philosophically question our theories about the way it is and should be), the end is not exactly near.

We are not at the point in which the cycle repeats itself (i.e., not at a point in which investors should buy and hold).

The long tail makes investing too risky which, unfortunately, supports the deflationary trend and is negative for job creation. Demand will continue to be deficient. There is no uncertainty here, mind you, despite all the rhetoric to blame the benefit derived from this ongoing detriment on the probability (the uncertainty) of the risk (the risk ontology). Quite the contrary, the risk is being controlled to produce the detriment being exacted in the form of sovereign-debt crises. There is still a lot of counter-party, risk hedging to be executed between now and the end of the long-wave trend, which will be politically determined in the gamma-risk dimension (where risk is accumulated to be manipulated and controlled for specific performance).

The gamma dimension is where the signs occur that predict the direction and timing of the trend (the rate of monetary distribution and accumulation).

If, for example, a distribution occurs, like the Recovery Act and QE2, with a high rate of accumulation, because industry and markets are too consolidated to keep money circulating into economic recovery, then the deflationary trend gets constant support.

No, we're not at the end just yet, and predicting the beginning of a new cycle is both a prescriptive and descriptive soft snap.