Demand Destruction

Capitalism claims to be synonymous with a free market but also claims it is inefficient. To make the marketplace more efficient it is necessary to consolidate it. This is called efficient-markets theory and dominates our current, political environment.

Repeal of Glass-Steagall is the product of efficient-markets theory. Subsequently, having produced the Great Recession, the market is to be made more efficient with thousands of pages of legislative initiatives to make the market more efficient.

It is not difficult to figure out that the theory is a technical failure, but as previously discussed, this depends on what the objective technically is. If you recall, when Mr. Obama campaigned for president, too-big-to-fail banks were the problem, not the solution. Having succumb to efficient-markets theory at the behest of his Ivy-League colleagues, demand continues to decline despite record budget deficits and low interest rates.

During the Reagan-Bush era, by contrast, when we had trickle-down tax cuts like we've had for the past 10 years, Fed chairman Volker moved interest rates up to record levels to cover the booming deficit. Spending was not cut because tax cuts for the rich, contrary to trickle-down theory, did not destroy demand for government spending but added it. The theory was an empirical failure but was replaced with efficient-markets theory, which during the Clinton era culminated in repeal of Glass-Steagall.

An unconsolidated, free market is supposed to be self-correcting, avoiding systemic risk. Instead, using efficient-markets theory as the working model, the marketplace yields the accumulation of risk to be avoided. Industry and markets are too consolidated as per the economy-of-scale efficiency the theory says cures shortages by adding supply. Objectively, it turns out, supply is added by destroying demand, which adds demand for government.

The Fed, by objective, is currently keeping rates low--manipulating rates to resist demand destruction. That is not a bad thing except that the marketplace is too consolidated--the added supply of money is being used to support the price of equities against declining demand. The capital that drives (empowers) demand is being horded to secure a regressive tax burden that will cause the demand destruction (the deflationary risk) supposedly being avoided by objectives both public and private.

CEO's of big corporates, for example, operating with limited liability, insist that consolidation creates value, which in turn creates jobs. The opposite is true, however. Value is created with demand destruction--combination of unemployment and rising prices, which accumulates deflationary risk.

Big CEO's claim that by creating value (growth) they create demand (jobs), but growing a company (creating value) by consolidation (attaining economy-of-scale to make the market more efficient) is to the detriment of jobs. The capacity to demand jobs (and empower consumers with proprietary risk) is destroyed, not created, to add value (systemic risk) to the company. This is what is "twisted" about Fed policy. If big corporates, who we rely on to create jobs, destroy jobs to create them, the result is what we have now, stagflation--high prices and profits with high unemployment.

As long as unemployment remains high, the Fed tends to add new money to support demand (i.e., resist the declining rate of profit). Relying on the "job creators" to demand jobs from the top down turns them into gods to be supplicated. Growth requires sacrificing the capacity to demand it. The result is inorganic growth--merging and acquiring industries, markets, and proprietary risk to resist the declining rate of profit, financed by the Fed at low interest rates to support the demand for added supply.

With diminished capacity to demand the supply (demand destruction), supply is added and proprietary risk accumulates solely into the hands of the gods who falsely claim the result is the legitimate effect of the invisible hand. Supply-side advocates claim that collective action in the marketplace results in a beneficial detriment (naturally occurring risk in the aggregate referred to as "margin compression"), and since it results in detriment (stagflation), the marketplace needs to be made more efficient. Thus, the foundation of efficient-markets theory.

It is readily apparent that causing unemployment in order to effect job creation is irrational. (While it may be irrational to me, conservatives contend, it is only because I do not possess the secret knowledge of the elite. It is not so much that the knowledge is secret but that I am not capable of comprehending it. I am blinded by the light of empirical evidence that loses its truth value when elite status is achieved. Once I possess wealth and power I will understand, as Rand puts it, what objective reality is. I will be rational.) So, to rationally accommodate what is irrational, we have "Operation Twist" to de-compress the rate of interest (not deconsolidate it, mind you, because that would reduce the capacity to make the market more efficient...more rational). Technical inversion (decompressing the demand for yield that bids up supply instead of adding it) indicates consolidation of risk into the hands of a psychopathic elite drunk with god-like delusions of grandeur. These people, while operating with rhetoric that always suggests the benevolence of making the market more efficient, are interested in causing detriment. Not only does it create value for class consumption, but verifies status and creates a perverted, malevolent, sense of accomplishment referred to as "the American Dream" to which we all aspire--Dante's description of hell!

Understand that creating hell on earth is not irrational, it is a measure of creative competence scaled against probable destruction--the working concept of creative-destruction that Romney understands to be the strength of productive incentive, being dependent on the job creators rather than government. By always knowing evil we are always sure to measure with absolute certainty what is good, or rational.

When undocumented workers are locked into factories, working 80 hours a week to achieve Wal-Mart's price targets, factory owners are not being immoral, they are being rational. They do it because Wal-Mart will find somebody else that will, if they don't, on demand.

(Keep in mind that this problem is easily solved by ensuring the marketplace is deconsolidated in priority, with a bonus being less need for government and more freedom. The more deconsolidated, the more likely workers are able to secure propriety on demand. This deconsolidation of proprietary risk includes reversing the trend of falling incomes that creates the demand for ever-cheaper goods sold at Wal-Mart and feeds back into demand for impropriety. The less demand destruction there is, which forces consumers into Wal-Mart to consume a detriment that appears as an immediate benefit on demand, the harder it is to, in effect, demand slave labor in late order.)

Causing detriment is not the product of a psychopathic intellect. Instead, conservatives contend, it is intelligent management of nature's resources by design, pragmatically freed of moral conventions, maximizing efficiencies empirically measured with an expanding profit margin that clearly indicates the good life--the utility of adding value that would not otherwise exist. Turning natural resources into nature's bounty is not psycho--it is not selfish profiteering--it is utilitarian.

Look at the right-wing, reactionary description of "good" tax policy going forward, for example. It is a technical description that explains how supply-side economics works to maximize the utility of productive incentive, which is both indicated and achieved by driving up profits and driving down costs--the Bain Capital (corporate raider) and Wal-Mart (slave wage) models that, when combined, is more the road to serfdom than the path to prosperity.