Operation "Twist" aptly describes trying to make sense of all the data that could possibly indicate the direction of the risk. Signals are really twisted, and it is the Fed's job to make sure that signals are clear and decisive in order to instill market confidence.
Market confidence is dependant on confidence in the indicators. If you can direct the risk, as previously discussed, you're pretty confident about the direction of the risk. Everybody else, however, is determined by the direction of the risk rather than determining its direction (which is the difference between alpha and beta risk). Determination of one's self is reduced to a class distinction (which results in accumulation of gamma risk where confidence--predictive utility--gains the force and legitimacy of public authority, or the public trust).
It is readily apparent, self-determination is a function of class, and preventing class warfare is a function of self-determination. If as a matter of technical legitimacy we are, on the one hand, selfishly bound to our own determination, and the measure of its attainment is, on the other hand, the power to selfishly determine the fate of others, then we are presented with a rather twisted, philosophical conundrum at the root of technical analyses that determine a random walk into the next crisis of non-attainment.
At the root of an apparent spurious and confounding variability is really a twisted philosophy of risk that always begs the question.
It is hard to be confident when the predictors always beg the question.
If we want to reduce anxiety (the risk inherent to class) it is necessary to reduce risk to the alpha proportion from the gamma dimension where the risk of loss is fully assumed without question.
It's time for a really twisted turn of self-determined fate that really makes sense.
Wednesday, September 28, 2011
Monday, September 26, 2011
Covering Your Shorts
When a late-cycle compression breaks down, it's time to cover your shorts.
Despite counter-cyclical measures, what we are experiencing now is a classical, deflationary trend. While the effect is classical, it is neo-classically indicated. Signals are mixed and contrary. Up is down and down is up economically; and politically, left is right and right is left....
Assessing the risk is confounding and the late-cycle compression (classically turning debt into liquidated equity) breaks down--it stagflates. Pressure mounts both politically and economically to resolve the liquidity crisis with signals that clearly indicate assets have been liquidated to the fullest extent. (Monetary policy makes that assessment more difficult, stagflating the risk proportion, turning equity into debt leveraged to support its rising value--the big short position identified in the previous article--rather than debt into equity, or growth. Although the growth that occurs is retraced from negative growth that turns equity into capital and capital into wealth, causing political risk, the redistribution reduces the risk.) Those signals (that indicate economic growth and reduced political risk), contrary as they may appear to be, are currently presenting.
What do falling oil prices indicate, for example, or what does it mean when Berkshire Hathaway buys its shares back?
A falling oil price is bullish, despite the analytical sentiment, and a Buffet buyback indicates he is covering his shorts (positioning to be long). Risk analysts, however, will paint these stochastic events as negative, but it is a false negative. The falling price of oil, for example, will be attributed to money-flow measures rather than supply-demand. While the causal assessment (which directs the risk) is partially true, its present value is falsely negative. The risk assessment is "twisted" not because it randomly walks into a benefit here and detriment there, but because it is being directed (positioned) to counter-party a massive, accumulated risk proportion.
Yes, correctly assessed, rising prices are causally attributable to the flow of money. That money, however, is over-consolidated and flows to direct prices (position the counter party) at will.
When money flow is predicting prices, instead of prices (supply-demand) predicting money flow, the risk proportion is post-hoc. Signals are twisted into a maelstrom of positive and negative probabilities that are not a measure of fundamental attributes, but the probability a party can be stuck with the risk while expecting reward (which measures the retributive value of the risk proportion and predicts the probability it will go fully gamma).
Assessing the risk becomes a game of conflicting signals, and the reward a psychology of failed expectations. The market is full of surprises, which puts valuations at an exceptional premium. Long or short, depending on whether an investor can figure out what signals warrant taking a long or short position, the reward is high, but so are the losses, and politically we are fully engaged in questioning whether the market legitimately decides who the winners and losers are (when the risk goes fully gamma).
Realizing a fully gamma proportion is when the shorts will cover long. The signals, while still mixed and contrary, will indicate a "decisive" turn. Risk will be redirected (a distribution will occur) to avoid probable loss in the gamma dimension where the risk of loss (the risk coefficient with the accumulated reward) is fully assumed in priority.
Re-"direction" of the risk (deliberate--political--avoidance of fully assumed loss) indicates an elitist, not a pluralist, analytical model. The signals, too, can be fully expected to decisively fit that model. There is no uncertainty here. The risk is decisively positioned (stagflated) to conserve the value accumulated: either we allow its maximum consolidation (don't raise marginal tax rates) or we suffer slow, if any growth. The choice, by the way, is a false dichotomy since both are deflationary.
Deflation does not cure deflation, it accumulates risk until it collapses into civil unrest. That's why, after two world wars and the practical utility of capitalism seriously in question, we use neo-classical measures.
Risk can be extended, turning equity into debt with easy money, but not indefinitely.
Slow but sure, we are conditioned to take the risk (the market can wait longer than you have money). Confounded by confusing counter measures designed to appear risk averse, we are temporally conditioned for false positives (like tax cuts for the rich cause economic growth). Eventually, the expectation fails (the system is really risk prone) and in order to not be classically positioned to take the risk it is necessary, both individually and collectively, to read the neo-classical signs, contrary and confounding as they are.
If you recall, last summer, this web site expostulated that expecting higher oil prices to signal recovery is a false positive. At that time, risk analysts postulated higher prices indicate economic recovery (increased demand) while demand was really declining.
No, Ivy-League analysts are not stupid, but they are bent on driving false indicators to position investors to take the bate and consume the accumulated risk. The mis-call on oil prices, despite all the rhetoric to convince us that the capital is not purposely managed to effect a zero-sum game, was, and still is, a deliberate, knowing deceit--a fraud perpetrated to derive reward by positioning investors to take the risk.
Instead of recovery, we are still flirting with a strong, deflationary trend. Instead of emerging from recession, the late-cycle compression has predictably broken down under pressure from oil prices deliberately driven higher by an accumulation that by itself drives demand lower. So, not only do we have the accumulation driving the recession, but higher oil prices driving it as well. The signals cannot be more negative, and cutting the budget deficit does not fix, but exacerbates, the problem.
Higher oil prices did not predict recovery. Instead, it predicted a deepening recessionary trend, and if we are wondering why the economy is so messed up, deliberate deceit by the so-called best-and-the-brightest (without negative sanction) is why. While these captains of industry and finance are highly skilled and intelligent, they lack the moral intelligence required for leadership. Since moral intelligence is an attribute a free market favors (honesty and integrity being attributes we tend to naturally select if we have a choice), the free market is skillfully reduced to achieve so-called, large-scale efficiencies that a free market supposedly cannot provide (and since the efficiencies are really intended to deprive, we end up relying on government to provide).
These captains, who supposedly lower costs to invest in innovative means to add both quantity and quality, have consolidated the marketplace so much that they can cause detriment to make a profit with impunity. Morality is but a function of demonstrating raw power with the victims relying on a free-market mechanism that is deliberately disabled by consolidation of its value (the value of self-determination). When Ron Paul says we are not being self-reliant, it is not because we do not want to be, it is because the mechanism to do it has been disabled, deliberately!
Notice that conservatives like Senator Paul do not identify consolidation of industry and markets to be the cause of any problems. Instead they focus on the effects. It is the size of government, they say, not the size of the corporate, that reduces the liberty to sanction (exercise moral power) in the marketplace.
While Ron Paul, for example, says he is a libertarian and has studied economics, he comes up with what is an easily recognizable error of fundamental attribution that effectively crushes the liberty (the political power) to economically sanction in the marketplace. When big government is reduced (reducing regulatory authority, for example) what remains is big business unreduced (the cause of the problem). It is a fallacy, post hoc, to argue government causes the loss of liberty it is empowered to ensure in priority.
Conservatives generally postulate a fallacy of attribution with the confidence of intellectual honesty. The effect, however, is to perpetuate the problem their philosophy of risk management (self-determination diminished by liberal pursuit of economy-of-scale efficiencies) proposes to solve. Considering the benefit derived, it is hard to claim the error is not intentional. The system is riddled with errors--up is down and down is up. Signals are "twisted." It literally takes a degree in political economy to make sense of it all.
Despite counter-cyclical measures, what we are experiencing now is a classical, deflationary trend. While the effect is classical, it is neo-classically indicated. Signals are mixed and contrary. Up is down and down is up economically; and politically, left is right and right is left....
Assessing the risk is confounding and the late-cycle compression (classically turning debt into liquidated equity) breaks down--it stagflates. Pressure mounts both politically and economically to resolve the liquidity crisis with signals that clearly indicate assets have been liquidated to the fullest extent. (Monetary policy makes that assessment more difficult, stagflating the risk proportion, turning equity into debt leveraged to support its rising value--the big short position identified in the previous article--rather than debt into equity, or growth. Although the growth that occurs is retraced from negative growth that turns equity into capital and capital into wealth, causing political risk, the redistribution reduces the risk.) Those signals (that indicate economic growth and reduced political risk), contrary as they may appear to be, are currently presenting.
What do falling oil prices indicate, for example, or what does it mean when Berkshire Hathaway buys its shares back?
A falling oil price is bullish, despite the analytical sentiment, and a Buffet buyback indicates he is covering his shorts (positioning to be long). Risk analysts, however, will paint these stochastic events as negative, but it is a false negative. The falling price of oil, for example, will be attributed to money-flow measures rather than supply-demand. While the causal assessment (which directs the risk) is partially true, its present value is falsely negative. The risk assessment is "twisted" not because it randomly walks into a benefit here and detriment there, but because it is being directed (positioned) to counter-party a massive, accumulated risk proportion.
Yes, correctly assessed, rising prices are causally attributable to the flow of money. That money, however, is over-consolidated and flows to direct prices (position the counter party) at will.
When money flow is predicting prices, instead of prices (supply-demand) predicting money flow, the risk proportion is post-hoc. Signals are twisted into a maelstrom of positive and negative probabilities that are not a measure of fundamental attributes, but the probability a party can be stuck with the risk while expecting reward (which measures the retributive value of the risk proportion and predicts the probability it will go fully gamma).
Assessing the risk becomes a game of conflicting signals, and the reward a psychology of failed expectations. The market is full of surprises, which puts valuations at an exceptional premium. Long or short, depending on whether an investor can figure out what signals warrant taking a long or short position, the reward is high, but so are the losses, and politically we are fully engaged in questioning whether the market legitimately decides who the winners and losers are (when the risk goes fully gamma).
Realizing a fully gamma proportion is when the shorts will cover long. The signals, while still mixed and contrary, will indicate a "decisive" turn. Risk will be redirected (a distribution will occur) to avoid probable loss in the gamma dimension where the risk of loss (the risk coefficient with the accumulated reward) is fully assumed in priority.
Re-"direction" of the risk (deliberate--political--avoidance of fully assumed loss) indicates an elitist, not a pluralist, analytical model. The signals, too, can be fully expected to decisively fit that model. There is no uncertainty here. The risk is decisively positioned (stagflated) to conserve the value accumulated: either we allow its maximum consolidation (don't raise marginal tax rates) or we suffer slow, if any growth. The choice, by the way, is a false dichotomy since both are deflationary.
Deflation does not cure deflation, it accumulates risk until it collapses into civil unrest. That's why, after two world wars and the practical utility of capitalism seriously in question, we use neo-classical measures.
Risk can be extended, turning equity into debt with easy money, but not indefinitely.
Slow but sure, we are conditioned to take the risk (the market can wait longer than you have money). Confounded by confusing counter measures designed to appear risk averse, we are temporally conditioned for false positives (like tax cuts for the rich cause economic growth). Eventually, the expectation fails (the system is really risk prone) and in order to not be classically positioned to take the risk it is necessary, both individually and collectively, to read the neo-classical signs, contrary and confounding as they are.
If you recall, last summer, this web site expostulated that expecting higher oil prices to signal recovery is a false positive. At that time, risk analysts postulated higher prices indicate economic recovery (increased demand) while demand was really declining.
No, Ivy-League analysts are not stupid, but they are bent on driving false indicators to position investors to take the bate and consume the accumulated risk. The mis-call on oil prices, despite all the rhetoric to convince us that the capital is not purposely managed to effect a zero-sum game, was, and still is, a deliberate, knowing deceit--a fraud perpetrated to derive reward by positioning investors to take the risk.
Instead of recovery, we are still flirting with a strong, deflationary trend. Instead of emerging from recession, the late-cycle compression has predictably broken down under pressure from oil prices deliberately driven higher by an accumulation that by itself drives demand lower. So, not only do we have the accumulation driving the recession, but higher oil prices driving it as well. The signals cannot be more negative, and cutting the budget deficit does not fix, but exacerbates, the problem.
Higher oil prices did not predict recovery. Instead, it predicted a deepening recessionary trend, and if we are wondering why the economy is so messed up, deliberate deceit by the so-called best-and-the-brightest (without negative sanction) is why. While these captains of industry and finance are highly skilled and intelligent, they lack the moral intelligence required for leadership. Since moral intelligence is an attribute a free market favors (honesty and integrity being attributes we tend to naturally select if we have a choice), the free market is skillfully reduced to achieve so-called, large-scale efficiencies that a free market supposedly cannot provide (and since the efficiencies are really intended to deprive, we end up relying on government to provide).
These captains, who supposedly lower costs to invest in innovative means to add both quantity and quality, have consolidated the marketplace so much that they can cause detriment to make a profit with impunity. Morality is but a function of demonstrating raw power with the victims relying on a free-market mechanism that is deliberately disabled by consolidation of its value (the value of self-determination). When Ron Paul says we are not being self-reliant, it is not because we do not want to be, it is because the mechanism to do it has been disabled, deliberately!
Notice that conservatives like Senator Paul do not identify consolidation of industry and markets to be the cause of any problems. Instead they focus on the effects. It is the size of government, they say, not the size of the corporate, that reduces the liberty to sanction (exercise moral power) in the marketplace.
While Ron Paul, for example, says he is a libertarian and has studied economics, he comes up with what is an easily recognizable error of fundamental attribution that effectively crushes the liberty (the political power) to economically sanction in the marketplace. When big government is reduced (reducing regulatory authority, for example) what remains is big business unreduced (the cause of the problem). It is a fallacy, post hoc, to argue government causes the loss of liberty it is empowered to ensure in priority.
Conservatives generally postulate a fallacy of attribution with the confidence of intellectual honesty. The effect, however, is to perpetuate the problem their philosophy of risk management (self-determination diminished by liberal pursuit of economy-of-scale efficiencies) proposes to solve. Considering the benefit derived, it is hard to claim the error is not intentional. The system is riddled with errors--up is down and down is up. Signals are "twisted." It literally takes a degree in political economy to make sense of it all.
Wednesday, September 21, 2011
Stochastic Indicators and Risk Proportion
Previously, we discussed the post-hoc fallacy of the risk proportion.
When risk is consolidated from its otherwise free-market (not too big to fail) proportion to maximize the profit margin, GDP (and eventually the rate of profit) declines. Massive debt results and risk gains an increasing political (gamma) dimension.
For big, consolidated corporates, gaining the gamma proportion is critical for the administration of power (extracting value by extension of the risk proportion--shipping jobs to China, for example, where labor is largely a function of state control). Austerity is exacted (redistributed, or extended) from the top down with the force and legitimacy of public authority. (Keep in mind, risk that gains a gamma dimension relies on popular consent, and unpopular measures to pay the debt are systemically risky. The large, economy-of-scale proportion is inherently volatile and predictive control of the risk requires hard power. Maintaining the consolidated, risk proportion, while attributed to being the result of free-market mechanics by both the left and the right, is dependent on the administration of the state.) At this point, while the economy appears to get profitable support, the positive indicators are really negative. While it appears to be going long, the economy is really accumulating a massive, short interest.
Debt reduction will not cause GDP. Arguing that it will is a temporal fallacy. Risk, then, instead of reducing, becomes more extended.
Extension of the risk proportion is touted by both the left and the right to be pro growth. It is not! It is stagflationary. It psychologically sets us up for accepting an intentionally structured, crisis proportion as "the law of unintended consequences." This so-called "law" falsely exculpates the risk proportion, falsely reducing it to an unpredictable, stochastic oscillation. It is a clever, temporal fraud that extends the risk with the appearance of a legitimately undirected, fair-and-equitable, diffused, ontological proportion.
It appears, for example, that the President's latest debt-reduction program is fair and equitable because it flattens the rate we all pay to reduce it. Yes, raising taxes on the rich cleverly flattens a rate that the right wing argues is too progressive.
A flat rate, however, is not fair, nor is it equitable. The burden is regressive, and a regressive tax burden not only results in insufficient demand to drive the economy but insufficient revenue to pay the debt it generates.
Temporally--over time--extending the risk proportion is psychologically anchored-in to be the solution that solves the problem of over-extended risk. Cleverly, we have then a masterful execution of the post-hoc fallacy.
Temporal fallacy of the risk proportion results in what appears to be a random walk. A stochastic storm of contrary indicators emerge and subside with no apparent reason. Market valuation is like predicting the weather which, by no coincidence, relies on complex, fractal modeling that is the realm of quantitative gnosticists who have the secret knowledge to divine the present value of the risk by determining its future value. Predictors appear random, but are really known quantities black-boxed to appear stochastic.
The result is an oxymoron: stochastic oscillation of predetermined risk. It is a fraud, but there is no law that directly prohibits this arcane manipulation of market value that gains a benefit by causing deliberate detriment.
Legal remedy and regulatory authority is indirect and post hoc at best, and congress is making sure that where regulation does not promote even more consolidation of risk in a too-big-to-fail proportion, it will act to reduce the authority to regulate. Being free of government regulation, according to conservatives, is what a free market is (argued post hoc) with an apparent random walk being the evidence that profiles "the risk" and justifies the reward.
Notice how "the risk" (i.e., the reward in the gamma-risk proportion) is being characterized as "class warfare." Before analytically dismissing this as meaningless, ideological rhetoric, consider that it indicates the classical model of capitalism is fully operational despite neo-classical means to give its intended consequences the appearance of a free-market, stochastic ontology.
The consequences are no random walk. As long as "We the People" are not self-determined, the politics of elite control will always be reduced to a game of innovatively creating the appearance of a legitimate, risk ontology.
Notice that innovating the appearance--the predictable presence--of the risk is largely a function of political authority. While that authority is structured to binomially oscillate between what we call "liberal" and "conservative," the stochastics are, regardless, structured to be risk prone (the risk of loss is fully assumed), which means risk analysts will be fully prepared to cover their shorts by going long. The result is a stochastic (but predictable) oscillation of a predetermined risk proportion that has the appearance of random variability.
When risk is consolidated from its otherwise free-market (not too big to fail) proportion to maximize the profit margin, GDP (and eventually the rate of profit) declines. Massive debt results and risk gains an increasing political (gamma) dimension.
For big, consolidated corporates, gaining the gamma proportion is critical for the administration of power (extracting value by extension of the risk proportion--shipping jobs to China, for example, where labor is largely a function of state control). Austerity is exacted (redistributed, or extended) from the top down with the force and legitimacy of public authority. (Keep in mind, risk that gains a gamma dimension relies on popular consent, and unpopular measures to pay the debt are systemically risky. The large, economy-of-scale proportion is inherently volatile and predictive control of the risk requires hard power. Maintaining the consolidated, risk proportion, while attributed to being the result of free-market mechanics by both the left and the right, is dependent on the administration of the state.) At this point, while the economy appears to get profitable support, the positive indicators are really negative. While it appears to be going long, the economy is really accumulating a massive, short interest.
Debt reduction will not cause GDP. Arguing that it will is a temporal fallacy. Risk, then, instead of reducing, becomes more extended.
Extension of the risk proportion is touted by both the left and the right to be pro growth. It is not! It is stagflationary. It psychologically sets us up for accepting an intentionally structured, crisis proportion as "the law of unintended consequences." This so-called "law" falsely exculpates the risk proportion, falsely reducing it to an unpredictable, stochastic oscillation. It is a clever, temporal fraud that extends the risk with the appearance of a legitimately undirected, fair-and-equitable, diffused, ontological proportion.
It appears, for example, that the President's latest debt-reduction program is fair and equitable because it flattens the rate we all pay to reduce it. Yes, raising taxes on the rich cleverly flattens a rate that the right wing argues is too progressive.
A flat rate, however, is not fair, nor is it equitable. The burden is regressive, and a regressive tax burden not only results in insufficient demand to drive the economy but insufficient revenue to pay the debt it generates.
Temporally--over time--extending the risk proportion is psychologically anchored-in to be the solution that solves the problem of over-extended risk. Cleverly, we have then a masterful execution of the post-hoc fallacy.
Temporal fallacy of the risk proportion results in what appears to be a random walk. A stochastic storm of contrary indicators emerge and subside with no apparent reason. Market valuation is like predicting the weather which, by no coincidence, relies on complex, fractal modeling that is the realm of quantitative gnosticists who have the secret knowledge to divine the present value of the risk by determining its future value. Predictors appear random, but are really known quantities black-boxed to appear stochastic.
The result is an oxymoron: stochastic oscillation of predetermined risk. It is a fraud, but there is no law that directly prohibits this arcane manipulation of market value that gains a benefit by causing deliberate detriment.
Legal remedy and regulatory authority is indirect and post hoc at best, and congress is making sure that where regulation does not promote even more consolidation of risk in a too-big-to-fail proportion, it will act to reduce the authority to regulate. Being free of government regulation, according to conservatives, is what a free market is (argued post hoc) with an apparent random walk being the evidence that profiles "the risk" and justifies the reward.
Notice how "the risk" (i.e., the reward in the gamma-risk proportion) is being characterized as "class warfare." Before analytically dismissing this as meaningless, ideological rhetoric, consider that it indicates the classical model of capitalism is fully operational despite neo-classical means to give its intended consequences the appearance of a free-market, stochastic ontology.
The consequences are no random walk. As long as "We the People" are not self-determined, the politics of elite control will always be reduced to a game of innovatively creating the appearance of a legitimate, risk ontology.
Notice that innovating the appearance--the predictable presence--of the risk is largely a function of political authority. While that authority is structured to binomially oscillate between what we call "liberal" and "conservative," the stochastics are, regardless, structured to be risk prone (the risk of loss is fully assumed), which means risk analysts will be fully prepared to cover their shorts by going long. The result is a stochastic (but predictable) oscillation of a predetermined risk proportion that has the appearance of random variability.
Saturday, September 17, 2011
Monetizing Market Value
Understand that monetized, market value--added risk value--is to grow the economy, but it is positioned to grow profits with little or no growth (with little or no risk). Value, then, is derived from its accumulated deprivation, not legitimate distribution of capital. Understand that a legitimate distribution not only diffuses risk, it diffuses power--exactly what capitalists want to prevent.
A free market empowers consumers, meaning that power is exercised from the bottom up, not the top down, which is why capitalists tend to describe democracy as an unstable form of government. Capitalists work to consolidate power--create an economy of scale--not because it is more efficient, or generally beneficial, but because it accumulates power--risk--to be exercised from the top down.
Both politically and economically, monetarism is being used as a mechanism--a technology--for gaining a favorable market position. At the same time, however, technology also tends to naturally--empirically--pull us toward the right thing to do. Monetizing for deconsolidation (freedom) rather than consolidation (subjugation) is entirely possible.
Capitalists, despite forever singing the praises of an empirical, free-market efficiency, do everything they can to resist it (reduce the risk it presents). They do everything possible to make it look like free-market economics is a passe technology for organizing risk. They do everything to make the market-risk proportion look like it naturally progresses into its organized consolidation (which defeats its diffused, market value and the ability to sanction without government intervention).
To avoid the risk of direct, democratic accountability, capitalists do not want a free market to demonstrate. If it does, then we come to expect risk to be systemically diffused in priority. Crises will be prevented in a monetized, diffused, free-market proportion rather than a post-hoc proportion of consolidated risk (which provides the elite with the currency of power--massive debt).
We can see the post-hoc proportion currently at work. Deliberations of the Joint Deficit Reduction Committee have Democrats at least making an effort to identify attributions, but Republicans are determined to argue the consolidated, risk proportion post hoc.
According to the Republican delegation, the large size of the deficit (massive debt) causes reduction of GDP. Their participation on the Committee is devoted to proving this post-hoc fallacy of the risk proportion.
Consolidation of the risk proportion causes reduction of GDP. Massive debt is the effect. Therefore, debt reduction will not cause GDP. Arguing that it will is a temporal fallacy.
In order to avoid crises, capitalism monetizes massive debt to support the profit margin without employment (the income needed to support the margin). So, you see, in a complex way, value is systematically exacted (bought and sold) with the intention of being risk prone while appearing averse to a false, risk ontology. The result is an economy that is both stagnant and inflationary to avoid unemployment being transformed into the declining rate of profit.
Remember that "the" classical, unavoidable, economic "risk" capitalism innovatively offsets at any cost--falsely referred to as the paradox of thrift--is "the declining rate of profit." In order to avoid "the risk," capital is positioned and repositioned to maintain the profit margin which, when manipulated, accumulates the risk to be avoided.
While unemployment profitably increases the supply of labor, there is a point of diminishing returns. Unemployment (income deprivation) naturally reduces the profit margin (deflation, or general economic crises, naturally occurs). By monetizing the risk value, the diminished empowerment of the free market (unemployment, which accumulates into fully "gamma" risk in a political dimension) is turned into a profit, which provides the incentive to accumulate more and more of the risk (unemployment) like we have now.
Stagflation turns the liability of unemployment (the declining rate of profit) into an asset (which capitalism, in various forms, describes as "thrifty" or a necessary condition for growth). Instead of capital being transformed into productive value, it is conserved in the form of accumulating wealth. The consolidated value keeps the economy in a continuous state of crisis, like we have now, with highly compressed cyclical trending and high-frequency stochastic oscillations of an oversized, too-big-to-fail, risk proportion.
Shareholders are always renting risk to extract value from it (to exact detriment) rather than produce added value (GDP). The economy is organized to systematically produce ever-larger losses to derive, and consolidate, ever-larger gains at an ever-higher frequency in an ever-larger proportion that is too big to let it fail.
What the Joint Committee will do is accumulate even more risk. By elite authority, "the risk" will be extended, cleverly reasoned to save the free market with its continued consolidation.
Foolish to think that consolidation of power will save us from tyranny, but that is our fate constructed by joint committee, binomially self-determined.
There is another fate, nevertheless, to be constructed. Monetized, market value--added risk value--can be used to ensure economic stability. Rather than stochastically stumble into the next crisis, it is possible to position for profit without deprivation.
As long as we are always being conditioned for a random walk into the next crisis, it will always appear that value can only be derived with little or no risk from its accumulated deprivation. It is time we all understand--exactly the opposite is true.
Yes, we are all "Fed Up" and it is time to use the technical means evolved to manage the risk with market value traduced by capitalists who want to use it to crown themselves king.
Consolidation of power is what America is not.
Understand that a free market does not consolidate power. It not only diffuses risk, it diffuses power. It keeps want-to-be tyrants directly accountable to "the risk"--exactly what capitalists venture to avoid with what only appears to be a blamelessly random walk.
Those who think market value can be continuously consolidated will not be prepared to cover their shorts.
A free market empowers consumers, meaning that power is exercised from the bottom up, not the top down, which is why capitalists tend to describe democracy as an unstable form of government. Capitalists work to consolidate power--create an economy of scale--not because it is more efficient, or generally beneficial, but because it accumulates power--risk--to be exercised from the top down.
Both politically and economically, monetarism is being used as a mechanism--a technology--for gaining a favorable market position. At the same time, however, technology also tends to naturally--empirically--pull us toward the right thing to do. Monetizing for deconsolidation (freedom) rather than consolidation (subjugation) is entirely possible.
Capitalists, despite forever singing the praises of an empirical, free-market efficiency, do everything they can to resist it (reduce the risk it presents). They do everything possible to make it look like free-market economics is a passe technology for organizing risk. They do everything to make the market-risk proportion look like it naturally progresses into its organized consolidation (which defeats its diffused, market value and the ability to sanction without government intervention).
To avoid the risk of direct, democratic accountability, capitalists do not want a free market to demonstrate. If it does, then we come to expect risk to be systemically diffused in priority. Crises will be prevented in a monetized, diffused, free-market proportion rather than a post-hoc proportion of consolidated risk (which provides the elite with the currency of power--massive debt).
We can see the post-hoc proportion currently at work. Deliberations of the Joint Deficit Reduction Committee have Democrats at least making an effort to identify attributions, but Republicans are determined to argue the consolidated, risk proportion post hoc.
According to the Republican delegation, the large size of the deficit (massive debt) causes reduction of GDP. Their participation on the Committee is devoted to proving this post-hoc fallacy of the risk proportion.
Consolidation of the risk proportion causes reduction of GDP. Massive debt is the effect. Therefore, debt reduction will not cause GDP. Arguing that it will is a temporal fallacy.
In order to avoid crises, capitalism monetizes massive debt to support the profit margin without employment (the income needed to support the margin). So, you see, in a complex way, value is systematically exacted (bought and sold) with the intention of being risk prone while appearing averse to a false, risk ontology. The result is an economy that is both stagnant and inflationary to avoid unemployment being transformed into the declining rate of profit.
Remember that "the" classical, unavoidable, economic "risk" capitalism innovatively offsets at any cost--falsely referred to as the paradox of thrift--is "the declining rate of profit." In order to avoid "the risk," capital is positioned and repositioned to maintain the profit margin which, when manipulated, accumulates the risk to be avoided.
While unemployment profitably increases the supply of labor, there is a point of diminishing returns. Unemployment (income deprivation) naturally reduces the profit margin (deflation, or general economic crises, naturally occurs). By monetizing the risk value, the diminished empowerment of the free market (unemployment, which accumulates into fully "gamma" risk in a political dimension) is turned into a profit, which provides the incentive to accumulate more and more of the risk (unemployment) like we have now.
Stagflation turns the liability of unemployment (the declining rate of profit) into an asset (which capitalism, in various forms, describes as "thrifty" or a necessary condition for growth). Instead of capital being transformed into productive value, it is conserved in the form of accumulating wealth. The consolidated value keeps the economy in a continuous state of crisis, like we have now, with highly compressed cyclical trending and high-frequency stochastic oscillations of an oversized, too-big-to-fail, risk proportion.
Shareholders are always renting risk to extract value from it (to exact detriment) rather than produce added value (GDP). The economy is organized to systematically produce ever-larger losses to derive, and consolidate, ever-larger gains at an ever-higher frequency in an ever-larger proportion that is too big to let it fail.
What the Joint Committee will do is accumulate even more risk. By elite authority, "the risk" will be extended, cleverly reasoned to save the free market with its continued consolidation.
Foolish to think that consolidation of power will save us from tyranny, but that is our fate constructed by joint committee, binomially self-determined.
There is another fate, nevertheless, to be constructed. Monetized, market value--added risk value--can be used to ensure economic stability. Rather than stochastically stumble into the next crisis, it is possible to position for profit without deprivation.
As long as we are always being conditioned for a random walk into the next crisis, it will always appear that value can only be derived with little or no risk from its accumulated deprivation. It is time we all understand--exactly the opposite is true.
Yes, we are all "Fed Up" and it is time to use the technical means evolved to manage the risk with market value traduced by capitalists who want to use it to crown themselves king.
Consolidation of power is what America is not.
Understand that a free market does not consolidate power. It not only diffuses risk, it diffuses power. It keeps want-to-be tyrants directly accountable to "the risk"--exactly what capitalists venture to avoid with what only appears to be a blamelessly random walk.
Those who think market value can be continuously consolidated will not be prepared to cover their shorts.
Wednesday, September 14, 2011
Monetizing the Risk
With hearings of the Joint Deficit Reduction Committee underway, we have the opportunity to closely examine what caused the deficit in order to reduce it.
To control the budget, there is much to do about what we spend money on rather than the need to spend it. Remember, for example, Republicans said reducing marginal tax rates would create jobs. Now, with the highest unemployment rate since the Reagan administration, and after extending the ten-year-old, marginal tax-reduction program associated with it, Eric Cantor says, "We need to focus on creating jobs."
If the conservative program is so good, and ten years is certainly enough time to make it happen, why are we monetizing all this debt to counter a deflationary trend?
The conservative program causes unemployment, and without deficit spending (debt monetized by the Federal Reserve), the recession would turn into a depression. That value of risk--the deflationary risk--is empirically expressed as a budget deficit, which adds to that huge number we call the public debt.
Not only did the conservative economic program cause a massive budget deficit, like it did during the Reagan administration, but the money did not sufficiently circulate to jump start the economy. The stimulus did not fail, it is the conservative program that continues to fail us (and if you have been following the risk assessments on this website, the failures are not at all unexpected, which helps keep small investors in a safe, if not a winning, position). Money spent does not return to the treasury because it consolidates into the marginal tax bracket that continues to receive tax reduction to create jobs.
Massive failure of the conservative economic program "crowds out" (consolidates) value both before and after the budget deficit occurs, which means the program is a dead-weight loss. Both conservative and subsequent liberal measures fail to reduce debt-to-GDP (and the conservative program will make it worse). Everybody loses, even those big winners in the marginal tax bracket. (Remember that Pareto Optimality measures loss on the status quo. If the program yields losses to the beneficiaries of zero-sum gains, everybody experiences a loss. If employment gains from the accumulated value, however, especially without being borrowed, or monetized, from the treasury, the gain is non-zero-sum because it yields a return, a profit, on the investment--it increases GDP over debt, and everybody gains.)
A deflationary trend accumulates risk that for the economic elite is negatively valued. If the value is not monetized, the detriment exacted to finance the accumulation is so extreme that a change of elites is likely to occur. A political elite gains power at the expense of the economic elite (which is the gamma risk I have been telling you about). The result, in the final analysis, is not a zero-sum, the loss is dead-weight (a change of legitimacy that values the gamma-risk proportion).
Assuming the new boss, wielding power in a gamma-risk proportion, will be less detrimental than the old boss is likely to assume too much risk. "Probable" beneficiaries are not self-determined, but dependent, and once it is lost, it is hard to get it back.
To minimize the risk, we monetize it, but that does not mean we have to incur debilitating budget deficits. Unfortunately, the Joint Deficit Reduction Committee will not come to this conclusion without identifying what causes deficit spending and accumulated debt.
We are not condemned to monetizing accumulated risk if we focus instead on deconsolidation of its market value.
To control the budget, there is much to do about what we spend money on rather than the need to spend it. Remember, for example, Republicans said reducing marginal tax rates would create jobs. Now, with the highest unemployment rate since the Reagan administration, and after extending the ten-year-old, marginal tax-reduction program associated with it, Eric Cantor says, "We need to focus on creating jobs."
If the conservative program is so good, and ten years is certainly enough time to make it happen, why are we monetizing all this debt to counter a deflationary trend?
The conservative program causes unemployment, and without deficit spending (debt monetized by the Federal Reserve), the recession would turn into a depression. That value of risk--the deflationary risk--is empirically expressed as a budget deficit, which adds to that huge number we call the public debt.
Not only did the conservative economic program cause a massive budget deficit, like it did during the Reagan administration, but the money did not sufficiently circulate to jump start the economy. The stimulus did not fail, it is the conservative program that continues to fail us (and if you have been following the risk assessments on this website, the failures are not at all unexpected, which helps keep small investors in a safe, if not a winning, position). Money spent does not return to the treasury because it consolidates into the marginal tax bracket that continues to receive tax reduction to create jobs.
Massive failure of the conservative economic program "crowds out" (consolidates) value both before and after the budget deficit occurs, which means the program is a dead-weight loss. Both conservative and subsequent liberal measures fail to reduce debt-to-GDP (and the conservative program will make it worse). Everybody loses, even those big winners in the marginal tax bracket. (Remember that Pareto Optimality measures loss on the status quo. If the program yields losses to the beneficiaries of zero-sum gains, everybody experiences a loss. If employment gains from the accumulated value, however, especially without being borrowed, or monetized, from the treasury, the gain is non-zero-sum because it yields a return, a profit, on the investment--it increases GDP over debt, and everybody gains.)
A deflationary trend accumulates risk that for the economic elite is negatively valued. If the value is not monetized, the detriment exacted to finance the accumulation is so extreme that a change of elites is likely to occur. A political elite gains power at the expense of the economic elite (which is the gamma risk I have been telling you about). The result, in the final analysis, is not a zero-sum, the loss is dead-weight (a change of legitimacy that values the gamma-risk proportion).
Assuming the new boss, wielding power in a gamma-risk proportion, will be less detrimental than the old boss is likely to assume too much risk. "Probable" beneficiaries are not self-determined, but dependent, and once it is lost, it is hard to get it back.
To minimize the risk, we monetize it, but that does not mean we have to incur debilitating budget deficits. Unfortunately, the Joint Deficit Reduction Committee will not come to this conclusion without identifying what causes deficit spending and accumulated debt.
We are not condemned to monetizing accumulated risk if we focus instead on deconsolidation of its market value.
Monday, September 12, 2011
Psychology of Market Position
Contrary indicators instill the market with a psychology of uncertainty. There is a heightened sense of angst that directs participants into a defensive, risk-averse, feedback loop. The result is a deflationary trend marked by both inflation and unemployment, or stagflation.
Current uncertainty, however, is a market phenomenology. Markets are not causing a psychological disposition, psychology is causing the disposition of markets. Nor is government influence affecting the psychological condition of the marketplace.
Markets are being psychologically constructed to control the perceived legitimacy of the risk proportion and its distribution, which also influences the need for government to be in the loop. It sounds complicated because it is.
Affecting the "disposition" of market participants to take a position in the marketplace is inherently complicated, and complexity naturally appeals to authority, invoking an elitist, practical model to manage the uncertainty ("the risk"). Fusion of psychological and economic attributes are especially tricky because both rely on inferring a probable motive (the uncertainty). Risk proportion is large and intentionally complex, not because nature dictates it, however, but to mask an inherent culpability.
Directing the risk to secure a discrete, distributive benefit by means of deprivation (falsely referred to as the paradox of thrift) is not generally considered to be proper behavior. Capitalism, however, maintains that such behavior is only natural and causes markets to be more efficient as long as government does not regulate it or tax the benefit it yields.
Stagflation is the result of a discrete deprivation played out as a necessary condition for economic growth and general prosperity, but accumulating risk is what it really does.
Stagflation accumulates and distributes risk to a majority of non-elite citizens psychologically prepared (and economically positioned) to accept their fate as self-determined if not unlucky. Either way the legitimacy of the risk is phenomenologically constructed to exculpate the deliberate means of deprivation, describing liberty as the privilege--the reward--of deriving value in zero-sum.
When Jeff Skilling, for example, took the "liberty" to mark his risk-value schemes to the market (taking Ayn Rand's philosophy of self-determination to heart), the risk he accumulated was intended to be taken not by him, but by the so-called non-elite. Skilling went to jail, but not without taking the liberty to exact detriment in the self-interest, supposedly, of people he considered to be inferior and naturally subjected to his self-interest beyond what anyone considers to be good or evil. All that matters is the liberty--the capacity--to act in self-interest.
To the victor naturally goes the spoils, and when The People invoke a standard of morality (an otherwise arbitrary, changeable, measure of "the good life), Atlas shrugs.
Stagflation operates in much the same way on a macro, economy of scale. As industry and markets consolidate more and more to efficiently derive value to be converted into capital and consolidated into wealth, the vast majority of citizens are positioned to believe that this economy-of-scale efficiency is necessary to achieve optimal growth and employment.
Amassing capital is supposed to be for investment. Instead, the converted value is consolidated into wealth (deflation) where it is held hostage to secure public policies that favor its accumulation and, thus, stagflationary accumulation of risk.
An economy of scale accumulates risk that a free-and-unconsolidated marketplace otherwise keeps legitimately diffused in a non-catastrophic and highly productive proportion. The economy-of-scale efficiency is a psychological phenomenon constructed to fatefully position victims to accept detriment while minimizing the retributive (illegitimate) value of the risk proportion.
Stagflation spreads the risk, but it is a re-distribution from an accumulation (exercising power from a centralized source, which defines what a free-market is not). Risk is spread out (stagflated) to diffuse its large (gamma-risk) proportion. While the total amount of risk is not reduced, the current potential of its present value is reduced which, being derived from an accumulated source, tends to be retributive (fundamentally illegitimate). "The risk" is transformed into beta risk and the psychological uncertainty (potential future value discounted to the present) that positions us to accept policy programs that do not optimize free-market mechanics (deconsolidation). Instead, we are conditioned to accept more consolidation (accumulation of even more risk in the political dimension where its accumulated potential is unavoidably gamma).
Understand that Ayn Rand's archetype, Mr. Skilling, was manipulating market position. When his victims were properly positioned he moved to consolidate the value converted from the accumulated risk proportion, selling his position with a buy rating. This essentially describes how Wall Street works, and more broadly, and globally, our economy. In much the same way, stagflation consolidates value derived over time from accumulating risk, leaving the shareholders with all the risk.
Shareholders, then, tend to rent stocks and arbitrage the accumulated risk proportion in order to avoid it. Rather than invest growth, investors buy risk value, not employment and the income that enables economic stability. Earnings do not derive from adequate income, but from income rendered inadequate through inflation and unemployment, accumulating debt (the empirical value of the declining rate of profit) which is "the risk" to be avoided.
Keep in mind that a liquidity crisis triggers the creation of money "de novo" to prevent deflation. New money replaces the inadequate income (the income consolidated) to support profits, not increase purchasing power--the power to sanction in the marketplace, which would be the result of deconsolidation (reinvestment of capital, rather than its consolidation into wealth, which would legitimately spread the risk and the wealth, and would reduce debt without the political risk of extreme austerity). New money is given to banks ("ex nihilo") and the income is supposed to trickle down, but because the marketplace is so consolidated the income is quickly consolidated at the top (producing virtually "nothing"). The result is a long, stagflationary trend like we have now.
Stagflation is essentially the result of monetizing the risk. Instead of pluralizing the marketplace, a competitive plurality is minimized. Growth is limited to creating new markets rather than competitive expansion into old markets. The likely result of this deliberate consolidation, contrary to the espoused efficiency it is supposed to render, is the lowest quality (the lowest possible cost) at the highest possible price. Instead of adding supply (and employment), allowing for continuous consolidation of industry and markets will always result in a high ratio of debt to GDP.
Game theory that suggests markets are naturally limited to just a handfull of providers to maintain the profit margin is a part of the psychology constructed to justify reducing the general benefit of free-market mechanics. It is a classic case of fundamental attribution error.
Gaming theory assumes the free market causes consolidation to make a profit. High profits, however, are the incentive to enter a market, and thus the incentive to deny entry by consolidating the capital. Take away the barriers and what remains is the incentive to be both productive and to make a profit doing it. Participation in the marketplace does not reduce to only making a profit.
The free market does not naturally reduce to consolidation, but consolidation does naturally reduce the free market.
In a free market, what remains are those producers willing to be in the market for the sake of producing high quality goods and services at a competitive price, and the Ayn Rand archetypes are limited to innovatively venturing new markets because they are in business to make money, not employ people.
Rather than an interminable wrangle over what short-term measure, like tax cuts, will best jump-start the economy, the net result of simply ensuring a free-and-unconsolidated marketplace in priority will be full employment with the confirmed expectation of low inflation. Uncertainty reduces to fulfillment, and angst reduces to the adventure--the liberty--of taking risk.
Instead of monetizing consolidated debt that is too-big-to-fail, we should monetize risk valued in a small-enough-to-be-directly-accountable, free-market proportion. If we want to reduce debt and the size of government, we have to put ourselves in a free-market position.
Current uncertainty, however, is a market phenomenology. Markets are not causing a psychological disposition, psychology is causing the disposition of markets. Nor is government influence affecting the psychological condition of the marketplace.
Markets are being psychologically constructed to control the perceived legitimacy of the risk proportion and its distribution, which also influences the need for government to be in the loop. It sounds complicated because it is.
Affecting the "disposition" of market participants to take a position in the marketplace is inherently complicated, and complexity naturally appeals to authority, invoking an elitist, practical model to manage the uncertainty ("the risk"). Fusion of psychological and economic attributes are especially tricky because both rely on inferring a probable motive (the uncertainty). Risk proportion is large and intentionally complex, not because nature dictates it, however, but to mask an inherent culpability.
Directing the risk to secure a discrete, distributive benefit by means of deprivation (falsely referred to as the paradox of thrift) is not generally considered to be proper behavior. Capitalism, however, maintains that such behavior is only natural and causes markets to be more efficient as long as government does not regulate it or tax the benefit it yields.
Stagflation is the result of a discrete deprivation played out as a necessary condition for economic growth and general prosperity, but accumulating risk is what it really does.
Stagflation accumulates and distributes risk to a majority of non-elite citizens psychologically prepared (and economically positioned) to accept their fate as self-determined if not unlucky. Either way the legitimacy of the risk is phenomenologically constructed to exculpate the deliberate means of deprivation, describing liberty as the privilege--the reward--of deriving value in zero-sum.
When Jeff Skilling, for example, took the "liberty" to mark his risk-value schemes to the market (taking Ayn Rand's philosophy of self-determination to heart), the risk he accumulated was intended to be taken not by him, but by the so-called non-elite. Skilling went to jail, but not without taking the liberty to exact detriment in the self-interest, supposedly, of people he considered to be inferior and naturally subjected to his self-interest beyond what anyone considers to be good or evil. All that matters is the liberty--the capacity--to act in self-interest.
To the victor naturally goes the spoils, and when The People invoke a standard of morality (an otherwise arbitrary, changeable, measure of "the good life), Atlas shrugs.
Stagflation operates in much the same way on a macro, economy of scale. As industry and markets consolidate more and more to efficiently derive value to be converted into capital and consolidated into wealth, the vast majority of citizens are positioned to believe that this economy-of-scale efficiency is necessary to achieve optimal growth and employment.
Amassing capital is supposed to be for investment. Instead, the converted value is consolidated into wealth (deflation) where it is held hostage to secure public policies that favor its accumulation and, thus, stagflationary accumulation of risk.
An economy of scale accumulates risk that a free-and-unconsolidated marketplace otherwise keeps legitimately diffused in a non-catastrophic and highly productive proportion. The economy-of-scale efficiency is a psychological phenomenon constructed to fatefully position victims to accept detriment while minimizing the retributive (illegitimate) value of the risk proportion.
Stagflation spreads the risk, but it is a re-distribution from an accumulation (exercising power from a centralized source, which defines what a free-market is not). Risk is spread out (stagflated) to diffuse its large (gamma-risk) proportion. While the total amount of risk is not reduced, the current potential of its present value is reduced which, being derived from an accumulated source, tends to be retributive (fundamentally illegitimate). "The risk" is transformed into beta risk and the psychological uncertainty (potential future value discounted to the present) that positions us to accept policy programs that do not optimize free-market mechanics (deconsolidation). Instead, we are conditioned to accept more consolidation (accumulation of even more risk in the political dimension where its accumulated potential is unavoidably gamma).
Understand that Ayn Rand's archetype, Mr. Skilling, was manipulating market position. When his victims were properly positioned he moved to consolidate the value converted from the accumulated risk proportion, selling his position with a buy rating. This essentially describes how Wall Street works, and more broadly, and globally, our economy. In much the same way, stagflation consolidates value derived over time from accumulating risk, leaving the shareholders with all the risk.
Shareholders, then, tend to rent stocks and arbitrage the accumulated risk proportion in order to avoid it. Rather than invest growth, investors buy risk value, not employment and the income that enables economic stability. Earnings do not derive from adequate income, but from income rendered inadequate through inflation and unemployment, accumulating debt (the empirical value of the declining rate of profit) which is "the risk" to be avoided.
Keep in mind that a liquidity crisis triggers the creation of money "de novo" to prevent deflation. New money replaces the inadequate income (the income consolidated) to support profits, not increase purchasing power--the power to sanction in the marketplace, which would be the result of deconsolidation (reinvestment of capital, rather than its consolidation into wealth, which would legitimately spread the risk and the wealth, and would reduce debt without the political risk of extreme austerity). New money is given to banks ("ex nihilo") and the income is supposed to trickle down, but because the marketplace is so consolidated the income is quickly consolidated at the top (producing virtually "nothing"). The result is a long, stagflationary trend like we have now.
Stagflation is essentially the result of monetizing the risk. Instead of pluralizing the marketplace, a competitive plurality is minimized. Growth is limited to creating new markets rather than competitive expansion into old markets. The likely result of this deliberate consolidation, contrary to the espoused efficiency it is supposed to render, is the lowest quality (the lowest possible cost) at the highest possible price. Instead of adding supply (and employment), allowing for continuous consolidation of industry and markets will always result in a high ratio of debt to GDP.
Game theory that suggests markets are naturally limited to just a handfull of providers to maintain the profit margin is a part of the psychology constructed to justify reducing the general benefit of free-market mechanics. It is a classic case of fundamental attribution error.
Gaming theory assumes the free market causes consolidation to make a profit. High profits, however, are the incentive to enter a market, and thus the incentive to deny entry by consolidating the capital. Take away the barriers and what remains is the incentive to be both productive and to make a profit doing it. Participation in the marketplace does not reduce to only making a profit.
The free market does not naturally reduce to consolidation, but consolidation does naturally reduce the free market.
In a free market, what remains are those producers willing to be in the market for the sake of producing high quality goods and services at a competitive price, and the Ayn Rand archetypes are limited to innovatively venturing new markets because they are in business to make money, not employ people.
Rather than an interminable wrangle over what short-term measure, like tax cuts, will best jump-start the economy, the net result of simply ensuring a free-and-unconsolidated marketplace in priority will be full employment with the confirmed expectation of low inflation. Uncertainty reduces to fulfillment, and angst reduces to the adventure--the liberty--of taking risk.
Instead of monetizing consolidated debt that is too-big-to-fail, we should monetize risk valued in a small-enough-to-be-directly-accountable, free-market proportion. If we want to reduce debt and the size of government, we have to put ourselves in a free-market position.
Tuesday, September 6, 2011
Contrary Indicators
If we expected low interest rates to pull us out of recession, we were wrong. Low interest rates normally indicate recovery, but this time it is especially contrary.
Equities continued to get support on the tail of the Great Recession despite negative, technical sentiment. Earnings have been at record levels, thanks to the Fed and fiscal stimulus, while the economy has continued to trend deflationary. At this point, the technicals are so contrary it's not clear what a positive signal is.
Considering most of what supports prices for all asset classes is technically negative (inflation and unemployment), contrary indicators will also signal recovery. The predictors will be contrary to the normal indicators touted by professional, market analysts, and for small investors this is not a favorable buy-and-hold environment.
Ivy-League MBA's are skilled at luring investors in and then scaring them out at a loss, and it does not matter what the technicals look like. For them, the only technical is what your position is, and the only reason they can do this is because capital is too consolidated to be a free market (it is not favorable for buy-and-hold investing but high-frequency manipulation that arbitrages a large, consolidated, risk proportion).
As equity prices, for example, were moving up, each unit up was really, to the contrary, pricing-in the deflationary risk (like I have been telling you for the last three months). We have not been emerging from recessionary risk, but submerging into it. This is the way Ivy-League, Wall Street professionals work. They are not there to invest your money and share the wealth, they are there to take your money and make it look like an act of God (bad luck). Luck (uncertainty) has nothing to do with it. If it were, they would not be doing it.
Both politically and economically we see a complicated conflation of contrary variables being structured to instill confidence. Playing a game of confidence is what criminals do, and no one is better at it than Wall Street, Ivy-League professionals with the support of Ivy-League politicians considered to be the best and the brightest. Predictive utility requires an elitist, not a pluralist, analytical model.
Using an elitist model, we see the best and the brightest leading us into recession rather than out. Did we not have an Ivy-League graduate use anti-recession rhetoric to win the White House and then, along with his party in the majority, spend a lot of time not doing it?
The fiscal stimulus was not a strong positive. It indicated recovery in name only because it borrowed from the treasury without reversing the regressive tax program...and here we are with an increasing demand for debt against declining revenues. What an absolutely terrible, Ivy-League job!
If that's not enough, then we have the new House majority telling us that more of the same will cure the problem. What? That's like saying the best way to avoid driving off the cliff is to just gun it! Politically and economically, the indicators could not be more contrary.
Equities continued to get support on the tail of the Great Recession despite negative, technical sentiment. Earnings have been at record levels, thanks to the Fed and fiscal stimulus, while the economy has continued to trend deflationary. At this point, the technicals are so contrary it's not clear what a positive signal is.
Considering most of what supports prices for all asset classes is technically negative (inflation and unemployment), contrary indicators will also signal recovery. The predictors will be contrary to the normal indicators touted by professional, market analysts, and for small investors this is not a favorable buy-and-hold environment.
Ivy-League MBA's are skilled at luring investors in and then scaring them out at a loss, and it does not matter what the technicals look like. For them, the only technical is what your position is, and the only reason they can do this is because capital is too consolidated to be a free market (it is not favorable for buy-and-hold investing but high-frequency manipulation that arbitrages a large, consolidated, risk proportion).
As equity prices, for example, were moving up, each unit up was really, to the contrary, pricing-in the deflationary risk (like I have been telling you for the last three months). We have not been emerging from recessionary risk, but submerging into it. This is the way Ivy-League, Wall Street professionals work. They are not there to invest your money and share the wealth, they are there to take your money and make it look like an act of God (bad luck). Luck (uncertainty) has nothing to do with it. If it were, they would not be doing it.
Both politically and economically we see a complicated conflation of contrary variables being structured to instill confidence. Playing a game of confidence is what criminals do, and no one is better at it than Wall Street, Ivy-League professionals with the support of Ivy-League politicians considered to be the best and the brightest. Predictive utility requires an elitist, not a pluralist, analytical model.
Using an elitist model, we see the best and the brightest leading us into recession rather than out. Did we not have an Ivy-League graduate use anti-recession rhetoric to win the White House and then, along with his party in the majority, spend a lot of time not doing it?
The fiscal stimulus was not a strong positive. It indicated recovery in name only because it borrowed from the treasury without reversing the regressive tax program...and here we are with an increasing demand for debt against declining revenues. What an absolutely terrible, Ivy-League job!
If that's not enough, then we have the new House majority telling us that more of the same will cure the problem. What? That's like saying the best way to avoid driving off the cliff is to just gun it! Politically and economically, the indicators could not be more contrary.
Sunday, September 4, 2011
Positive Indicators
Looking for signs of recovery, investors want to see strong, positive indicators. Instead, investors are besieged with a negative ideological struggle, volatility, and false positives.
There is no reason to go long (buy and hold). Everything is near-term, not because there is uncertainty, but because it is profitable.
The margin is all but uncertain. It will continue to rise as long as the income is there to support it. Reaganomics, however, does not distribute income to the middle and lower classes. Income consolidates into the upper class, which causes large amounts of public and private debt. Eventually, income is so consolidated that the rate of profit can do nothing but decline. That is when markets crash, and we have every indication that will happen if the Fed is not accommodating the rate of profit (by increasing the supply of money).
Remember that as a practical, economic philosophy, trickle-down economics does increase the number of millionaires. Reaganomics, for example, by increasing the demand for (and supply of) money (known as "supply-side" economics), provides for a sub-class of upper-class elites that politically divides and conquers the population. That America is roughly half "liberal" and half "conservative" is (monetarily) no accident.
Although reaganomics fulfills its promise of prosperity, it only goes half way. Trickle-down economics otherwise suffers from small numbers since having accumulated wealth to be distributed as you see fit is, by definition, an exclusive function. Such an exclusive account of liberty expects to have an accountability problem, which is mitigated by splitting the nation ideologically in half.
Without a significant degree of deprivation, class is not exclusive, yet too much accumulates political risk. Instead of ensuring there is a distribution that fully diffuses the risk proportion, whether Democrat or Republican, the risk proportion is only partially consumed, which always maintains an exclusive degree of deprivation that conservatives argue provides the incentive to produce and innovate.
In order to provide, so the argument goes, it is necessary to deprive, and since being productive requires being excluded from its reward, the deprivation (the accumulated value of the risk) must be ideologically, rather than materially, maintained as generally beneficial since it is an obvious contradiction. Resolving the contradiction, keep in mind, according to conservative philosophy, requires an exclusive depth of intelligence--secret knowledge revealed to those who successfully innovate and accumulate wealth. Thus, acceptance of the ideology rewards sharing in the wealth whether you actually believe it or not. In order to be exclusive, however, that number is technically limited to the best and the brightest, implying if you aren't conservative, you must not be too bright because it increases the probability you will share in the wealth.
The best and the brightest are the power elite who Ayn Rand, for example, identifies as those exercising liberty to its fullest advantage, and in a free-market environment, they represent the utilitarian ideal--the measure to which we all aspire. The elite earn the privilege of power and naturally--legitimately--exercise the liberty it endows. Defying this natural law--this principle of exclusive numbers--is literally, according to conservative philosophy, counter-productive.
While the numbers to maintain elite privilege (what conservatives refer to as "liberty" constitutionally endowed) are by definition lacking, conservatives "only need fifty-plus-one to prevail" as Vice President Cheney, for example, explains it.
Ideology is absolutely critical for "liberty" to prevail as "privilege," and roughly half the population makes a career of supporting the principles that rationalize the benefit of deprivation. If allowed to go fully deflationary, however, the practical philosophy they support will deprive them of the privilege. The more ideological the debate becomes, the more exclusive the system is likely to be, turning more and more equity into more and more debt.
The current ideological struggle bodes bad. It is a highly negative indicator. There is also a highly visible disconnect between public sentiment and public policy as more and more Americans feel the fear of their financial fate determined at an ever-higher frequency. Proper principles provide pale protection when confronted with the technical truth.
When the accountability function of government breaks down, it is a sure sign of an impending crisis proportion. Beneficiaries of "the way it is" resort to raw power to keep it that way.
Hard power is necessary to maintain the status-quo ante, and for investors, this is a very bad sign.
Trending into a hard-and-fast, republican form of government can be reversed, however. It is critical, for example, to not maintain the current House majority with the Tea Party being co-opted by both major parties to scapegoat policies and programs that have a high degree of deflationary risk. Keep in mind, for example, the President sustained tax cuts for the rich despite having campaigned that they were deflationary. According to Democrats, the devil is making him do it while well-healed liberals haul off a boatload of booty with their conservative colleagues. This does not mean that a third-party element is always a false positive, but it has been easily co-opted to move the center to the right, which has strengthened the deflationary trend and expanded the debt proportion.
Turning out the current majority will be a very clear indication of recovery. The new majority will have a clear economic mandate. The current crisis of accountability will resolve and provide a strong-positive indicator.
To the contrary, as well, keep in mind, maintaining the current majority is strongly negative--it is deflationary, and deflation is negative for everybody, even, if not especially, for a power elite.
There is no reason to go long (buy and hold). Everything is near-term, not because there is uncertainty, but because it is profitable.
The margin is all but uncertain. It will continue to rise as long as the income is there to support it. Reaganomics, however, does not distribute income to the middle and lower classes. Income consolidates into the upper class, which causes large amounts of public and private debt. Eventually, income is so consolidated that the rate of profit can do nothing but decline. That is when markets crash, and we have every indication that will happen if the Fed is not accommodating the rate of profit (by increasing the supply of money).
Remember that as a practical, economic philosophy, trickle-down economics does increase the number of millionaires. Reaganomics, for example, by increasing the demand for (and supply of) money (known as "supply-side" economics), provides for a sub-class of upper-class elites that politically divides and conquers the population. That America is roughly half "liberal" and half "conservative" is (monetarily) no accident.
Although reaganomics fulfills its promise of prosperity, it only goes half way. Trickle-down economics otherwise suffers from small numbers since having accumulated wealth to be distributed as you see fit is, by definition, an exclusive function. Such an exclusive account of liberty expects to have an accountability problem, which is mitigated by splitting the nation ideologically in half.
Without a significant degree of deprivation, class is not exclusive, yet too much accumulates political risk. Instead of ensuring there is a distribution that fully diffuses the risk proportion, whether Democrat or Republican, the risk proportion is only partially consumed, which always maintains an exclusive degree of deprivation that conservatives argue provides the incentive to produce and innovate.
In order to provide, so the argument goes, it is necessary to deprive, and since being productive requires being excluded from its reward, the deprivation (the accumulated value of the risk) must be ideologically, rather than materially, maintained as generally beneficial since it is an obvious contradiction. Resolving the contradiction, keep in mind, according to conservative philosophy, requires an exclusive depth of intelligence--secret knowledge revealed to those who successfully innovate and accumulate wealth. Thus, acceptance of the ideology rewards sharing in the wealth whether you actually believe it or not. In order to be exclusive, however, that number is technically limited to the best and the brightest, implying if you aren't conservative, you must not be too bright because it increases the probability you will share in the wealth.
The best and the brightest are the power elite who Ayn Rand, for example, identifies as those exercising liberty to its fullest advantage, and in a free-market environment, they represent the utilitarian ideal--the measure to which we all aspire. The elite earn the privilege of power and naturally--legitimately--exercise the liberty it endows. Defying this natural law--this principle of exclusive numbers--is literally, according to conservative philosophy, counter-productive.
While the numbers to maintain elite privilege (what conservatives refer to as "liberty" constitutionally endowed) are by definition lacking, conservatives "only need fifty-plus-one to prevail" as Vice President Cheney, for example, explains it.
Ideology is absolutely critical for "liberty" to prevail as "privilege," and roughly half the population makes a career of supporting the principles that rationalize the benefit of deprivation. If allowed to go fully deflationary, however, the practical philosophy they support will deprive them of the privilege. The more ideological the debate becomes, the more exclusive the system is likely to be, turning more and more equity into more and more debt.
The current ideological struggle bodes bad. It is a highly negative indicator. There is also a highly visible disconnect between public sentiment and public policy as more and more Americans feel the fear of their financial fate determined at an ever-higher frequency. Proper principles provide pale protection when confronted with the technical truth.
When the accountability function of government breaks down, it is a sure sign of an impending crisis proportion. Beneficiaries of "the way it is" resort to raw power to keep it that way.
Hard power is necessary to maintain the status-quo ante, and for investors, this is a very bad sign.
Trending into a hard-and-fast, republican form of government can be reversed, however. It is critical, for example, to not maintain the current House majority with the Tea Party being co-opted by both major parties to scapegoat policies and programs that have a high degree of deflationary risk. Keep in mind, for example, the President sustained tax cuts for the rich despite having campaigned that they were deflationary. According to Democrats, the devil is making him do it while well-healed liberals haul off a boatload of booty with their conservative colleagues. This does not mean that a third-party element is always a false positive, but it has been easily co-opted to move the center to the right, which has strengthened the deflationary trend and expanded the debt proportion.
Turning out the current majority will be a very clear indication of recovery. The new majority will have a clear economic mandate. The current crisis of accountability will resolve and provide a strong-positive indicator.
To the contrary, as well, keep in mind, maintaining the current majority is strongly negative--it is deflationary, and deflation is negative for everybody, even, if not especially, for a power elite.
Thursday, September 1, 2011
Looking for False Positives
As industry and markets become more consolidated, the more contractionary (deflationary) the economy tends to be.
As firms get bigger, the economy gets smaller, and each deflationary phase of the business cycle becomes the opportunity for firms to "grow" larger. According to Wall Street, this consolidation of value is economic growth. Thus, preventing consolidation prevents economic growth.
Capitalism's interpretation of consolidation as a growth indicator is a false positive--it indicates contraction, not expansion. It is a false efficiency intentionally structured to defeat free-market mechanics, not support it. So we see, then, a disconnect between what capitalism says it is and what it really is.
Wall Street is famous for fraud, and it is no less the case--in fact, it is absolutely critical--when it comes to valuation of the risk proportion.
We can only come to one conclusion based on the evidence: capitalism is not synonymous with free-market economics, and if we rely on a pluralistic model for predictive utility, we will fail politically and economically.
Looking at, for example, the anti-trust action against AT&T--with interest rates at near zero, there is ample capital available to build out a 4-G network without borrowing the money to merge existing firms. If capital is used to add supply by increasing the number of firms, the incentive to innovate increases along with the incentive to add employment (and reduce the deficit) without the taxpayer paying the employer to have a job which, by the way, is a false positive.
The way it is now, the incentive is perverse. The more firms consolidate, the more money is made available to reduce the deflationary risk. Instead of adding supply and producing growth, the incentive is to merge and acquire, achieving an economy of scale to survive the deflationary risk being accumulatively added. More money is then added to mitigate the risk, which provides the incentive to accumulate even more risk at a higher frequency.
Instead of adding supply, we are accumulating risk in the guise of promoting economic growth. When, for example, we trade tax incentives or provide subsidies for jobs, and firms then merge and unemployment rises, not only is there more incentive to pay the employer to have jobs, but the revenue to support it is regressively insufficient. The employment that subsequently occurs does not increase disposable income, but is used to pay the debt incurred to pay the employer to have a job.
While subsidies and tax incentives are supposed to indicate growth, they are really deflationary. The President, for example, proposes paying employers from the treasury to provide jobs, and John Huntsman proposes to eliminate capital gains taxes. Each has a clearly defined, near-term benefit, but also a late-order, deflationary effect. Both programs are false positive.
Wall Street is supposed to manage the risk to provide the greatest good for the greatest number of people, but "The People" suspect this is a false positive. This has political risk that Wall Street manages by shifting to other parties--political parties and administrative adjuncts like the Federal Reserve.
When the utility of Wall Street comes into question, government is there to absorb the risk. When the risk accumulates out of proportion (when it goes gamma), the cure is to reduce government authority, which is a false positive because when government is reduced the gamma-risk proportion remains. The remainder (the consolidated risk proportion) then becomes a plaything that toys with our sensibilities and drives us to distraction.
"Playing the Fed," for example, is Wall Street's current, favorite pass time. Again, the incentive is perverse, and the reason for the perversion is because the capital is too consolidated. This means capital, industry and markets need to be less consolidated, not more consolidated as capitalists suggest, if we are to cure the problem.
The incentive perversely feeds back on itself--the more deflationary Wall Street's investment program, the more accommodative the Fed becomes.
As the Fed tries to ease the deflationary trend with easy money, Wall Street uses the added capital to support the deflationary trend. It is not the Fed causing the perverse incentive, it is the consolidation of the risk. Ending Fed accommodation will result in the deflation it is avoiding, so the prospect of ending accommodative easing is falsely positive.
Of course, Wall Street renders the Fed counter-party to the risk. It is held responsible for mismanaging risk Wall Street contends is accumulated by government malfeasance in a crisis proportion.
Meanwhile, the Fed has been buying the time to deconsolidate the risk for years. The needed correction, however, has been mired in the gamma-risk dimension, and remember when the risk goes gamma it cannot be avoided--the probability is perfect.
Wall Street's latest game is culpable yet there is no prosecution of the risk detriment. All we have is indictment of government and our prudential regulators for causing what ails us, which falsely infers eliminating government and regulatory authority will cure the problem. It is a false positive, and more important, it is an accumulation of fundamental attribution error that signals our economy only gets worse before it gets better.
In order to clearly see indications of recovery it is critical to identify false positives. It is also critical to not operationalize false positives with recovery because the cycle occurs at an increasingly higher frequency, which means a recovery will quickly compress to consolidate gains.
The only reason it is so volatile is because the risk is too consolidated, and while capitalists define this as "the efficiency of markets," it is neither efficient or a free market.
In order to have the efficiency of a free market it is necessary to deconsolidate capital and industry--just exactly what we are not doing by deferring to false positives.
As firms get bigger, the economy gets smaller, and each deflationary phase of the business cycle becomes the opportunity for firms to "grow" larger. According to Wall Street, this consolidation of value is economic growth. Thus, preventing consolidation prevents economic growth.
Capitalism's interpretation of consolidation as a growth indicator is a false positive--it indicates contraction, not expansion. It is a false efficiency intentionally structured to defeat free-market mechanics, not support it. So we see, then, a disconnect between what capitalism says it is and what it really is.
Wall Street is famous for fraud, and it is no less the case--in fact, it is absolutely critical--when it comes to valuation of the risk proportion.
We can only come to one conclusion based on the evidence: capitalism is not synonymous with free-market economics, and if we rely on a pluralistic model for predictive utility, we will fail politically and economically.
Looking at, for example, the anti-trust action against AT&T--with interest rates at near zero, there is ample capital available to build out a 4-G network without borrowing the money to merge existing firms. If capital is used to add supply by increasing the number of firms, the incentive to innovate increases along with the incentive to add employment (and reduce the deficit) without the taxpayer paying the employer to have a job which, by the way, is a false positive.
The way it is now, the incentive is perverse. The more firms consolidate, the more money is made available to reduce the deflationary risk. Instead of adding supply and producing growth, the incentive is to merge and acquire, achieving an economy of scale to survive the deflationary risk being accumulatively added. More money is then added to mitigate the risk, which provides the incentive to accumulate even more risk at a higher frequency.
Instead of adding supply, we are accumulating risk in the guise of promoting economic growth. When, for example, we trade tax incentives or provide subsidies for jobs, and firms then merge and unemployment rises, not only is there more incentive to pay the employer to have jobs, but the revenue to support it is regressively insufficient. The employment that subsequently occurs does not increase disposable income, but is used to pay the debt incurred to pay the employer to have a job.
While subsidies and tax incentives are supposed to indicate growth, they are really deflationary. The President, for example, proposes paying employers from the treasury to provide jobs, and John Huntsman proposes to eliminate capital gains taxes. Each has a clearly defined, near-term benefit, but also a late-order, deflationary effect. Both programs are false positive.
Wall Street is supposed to manage the risk to provide the greatest good for the greatest number of people, but "The People" suspect this is a false positive. This has political risk that Wall Street manages by shifting to other parties--political parties and administrative adjuncts like the Federal Reserve.
When the utility of Wall Street comes into question, government is there to absorb the risk. When the risk accumulates out of proportion (when it goes gamma), the cure is to reduce government authority, which is a false positive because when government is reduced the gamma-risk proportion remains. The remainder (the consolidated risk proportion) then becomes a plaything that toys with our sensibilities and drives us to distraction.
"Playing the Fed," for example, is Wall Street's current, favorite pass time. Again, the incentive is perverse, and the reason for the perversion is because the capital is too consolidated. This means capital, industry and markets need to be less consolidated, not more consolidated as capitalists suggest, if we are to cure the problem.
The incentive perversely feeds back on itself--the more deflationary Wall Street's investment program, the more accommodative the Fed becomes.
As the Fed tries to ease the deflationary trend with easy money, Wall Street uses the added capital to support the deflationary trend. It is not the Fed causing the perverse incentive, it is the consolidation of the risk. Ending Fed accommodation will result in the deflation it is avoiding, so the prospect of ending accommodative easing is falsely positive.
Of course, Wall Street renders the Fed counter-party to the risk. It is held responsible for mismanaging risk Wall Street contends is accumulated by government malfeasance in a crisis proportion.
Meanwhile, the Fed has been buying the time to deconsolidate the risk for years. The needed correction, however, has been mired in the gamma-risk dimension, and remember when the risk goes gamma it cannot be avoided--the probability is perfect.
Wall Street's latest game is culpable yet there is no prosecution of the risk detriment. All we have is indictment of government and our prudential regulators for causing what ails us, which falsely infers eliminating government and regulatory authority will cure the problem. It is a false positive, and more important, it is an accumulation of fundamental attribution error that signals our economy only gets worse before it gets better.
In order to clearly see indications of recovery it is critical to identify false positives. It is also critical to not operationalize false positives with recovery because the cycle occurs at an increasingly higher frequency, which means a recovery will quickly compress to consolidate gains.
The only reason it is so volatile is because the risk is too consolidated, and while capitalists define this as "the efficiency of markets," it is neither efficient or a free market.
In order to have the efficiency of a free market it is necessary to deconsolidate capital and industry--just exactly what we are not doing by deferring to false positives.
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