The Fed says that the economy will take much longer to turn around than the financial sector that not only reaped huge profits from years of unregulated leverage finance that drove the general economy into the ground, but is also receiving huge money from The People to bail The People out.
A reliable evaluative measure on the effectiveness, and real confidence, of top versus bottom bailout is the equity index.
When the treasury used capital from the bottom up (the stimulus package), the Dow peaked. When treasury used the capital from the top down (the stabilization Action Plan), the Dow index hit the bottom, clearly indicating the empirically proper course of action for a quick and stable recovery for EVERYBODY.
So, how come we are not doing that?
It is because it does not fit the Hamiltonian model of political economy--welfare for the rich in priority that cultivates the practical philosophy of "buy the greed, sell the fear."
Greed and fear are not a healthy basis for buidling a just and equitable society. It is not a philiosophy of freedom. It is a philosophy of dependancy. It is not a philosophy that provides, but deprives.
If the model does not work for The People, The People should throw it out.
Application of the capital from the bottom up not only hastens a recovery of the broader economy but the net worth of The People as well so that the least amount of value is lost from The People to the elite.
Where the top-down application of capital produces stagflation, recession, and devaluation of The People's worth to service the greed of a few that, in turn, instills greed in The People, bottom-up application nourishes growth and adds value to the savings, the net worth, not the net greed, of The People, who then have "nothing to fear but fear itself."
Obama/Biden!
Showing posts with label 2008 economic rescue plan. Show all posts
Showing posts with label 2008 economic rescue plan. Show all posts
Wednesday, October 15, 2008
Tuesday, September 30, 2008
Mathemarics of Leverage Finance
The Mathematics of Misery
If you are manager of a private equity fund loaded with billions of dollars consolidated from the dot-com bubble you inflated and busted with the inequitable bid of your consolidated capital, and you hedge, or leverage, your assets for a 30 percent return, where did the profit, the capital gain, come from.
It would not come from economic growth at 2 percent. You are not investing in economic growth, but pure profit--inflation. Merely deciding to buy futures paper on commoities, for example, leverages, or magnifies, with an inequitable bid, the price of those contracts without risk, and without growth. That magnifies the leverage to a 30 percent gain that, with a favorable tax rate (a subsidy), encourages the practice and magnifies the speculative demand, and the commodity price, even more. The result is stagflation: rising prices and slow-to-no growth.
If a dollar borrowed is returned at a 30 percent added value, somebody eventually ends up having to pay it. The banks don't want to pay it. They want to keep the gain and not pay taxes on it. The game is to keep the gain without the pain, so the "plan" is to nationalize the debt into an economic rescue plan that will be managed and paid through the treasury department.
With money being leveraged, borrowed, for a 30 percent or more return until the capital is so consolidated that there is none left to finance the return--for banks to loan money to each other without the pain of paying the return without growth, the credit market locks up. The result is liquidity crisis.
Our current economic crisis is the risk devolved, trickled down, to The People with only a small gain. Most of the gain, the profit, is retained by the consolidated capital. It is over-surplused and must be borrowed to continue operation of the "real" economy, and because a large part of the economy's available credit was borrowed to entrepreneur, to investment bank--exchanging borrowed funds to profit without growth, the capital available for growth was both crowded out and consolidated so that now the capital, industry and markets are so consolidated that growth is virtually impossible without rewarding the inefficiency of allowing capital and markets to consolidate.
The hedge-fund magnifier effect is falsely argued as the multiplier effect in which consolidated economic entities and its capital multiplies (trickles down) industries and markets in support of it. Consolidation of capital and markets operates to limit economic growth in order to magnify, or multiply, the return on a limited supply provided by a limited number of suppliers with deficient investment. The result is inflation with a deflationary trend, which is what we have now.
For the vast majority of Americans, rendered dependant on the use of the consolidated capital, this is a mathematics of misery.
Leverage finance always results in deflation and rising prices. So why do we continue to allow for it? Why do we continue to reward it, like with a Wall Street bail-out plan sold as a plan to rescue us?
Are we really that stupid? No, just that oppressed by a model for tyranny of the marketplace falsely sold as the self-determination of a free market.
It's time for real freedom, a true legitimacy of self-determination that can only be truly had through ensuring the processes of pluralism in priority.
Deconsolidate the capital and reverse the regressive tax incentive that perversely supports it.
Very best wishes.
If you are manager of a private equity fund loaded with billions of dollars consolidated from the dot-com bubble you inflated and busted with the inequitable bid of your consolidated capital, and you hedge, or leverage, your assets for a 30 percent return, where did the profit, the capital gain, come from.
It would not come from economic growth at 2 percent. You are not investing in economic growth, but pure profit--inflation. Merely deciding to buy futures paper on commoities, for example, leverages, or magnifies, with an inequitable bid, the price of those contracts without risk, and without growth. That magnifies the leverage to a 30 percent gain that, with a favorable tax rate (a subsidy), encourages the practice and magnifies the speculative demand, and the commodity price, even more. The result is stagflation: rising prices and slow-to-no growth.
If a dollar borrowed is returned at a 30 percent added value, somebody eventually ends up having to pay it. The banks don't want to pay it. They want to keep the gain and not pay taxes on it. The game is to keep the gain without the pain, so the "plan" is to nationalize the debt into an economic rescue plan that will be managed and paid through the treasury department.
With money being leveraged, borrowed, for a 30 percent or more return until the capital is so consolidated that there is none left to finance the return--for banks to loan money to each other without the pain of paying the return without growth, the credit market locks up. The result is liquidity crisis.
Our current economic crisis is the risk devolved, trickled down, to The People with only a small gain. Most of the gain, the profit, is retained by the consolidated capital. It is over-surplused and must be borrowed to continue operation of the "real" economy, and because a large part of the economy's available credit was borrowed to entrepreneur, to investment bank--exchanging borrowed funds to profit without growth, the capital available for growth was both crowded out and consolidated so that now the capital, industry and markets are so consolidated that growth is virtually impossible without rewarding the inefficiency of allowing capital and markets to consolidate.
The hedge-fund magnifier effect is falsely argued as the multiplier effect in which consolidated economic entities and its capital multiplies (trickles down) industries and markets in support of it. Consolidation of capital and markets operates to limit economic growth in order to magnify, or multiply, the return on a limited supply provided by a limited number of suppliers with deficient investment. The result is inflation with a deflationary trend, which is what we have now.
For the vast majority of Americans, rendered dependant on the use of the consolidated capital, this is a mathematics of misery.
Leverage finance always results in deflation and rising prices. So why do we continue to allow for it? Why do we continue to reward it, like with a Wall Street bail-out plan sold as a plan to rescue us?
Are we really that stupid? No, just that oppressed by a model for tyranny of the marketplace falsely sold as the self-determination of a free market.
It's time for real freedom, a true legitimacy of self-determination that can only be truly had through ensuring the processes of pluralism in priority.
Deconsolidate the capital and reverse the regressive tax incentive that perversely supports it.
Very best wishes.
The Sanction
The Heritage Foundation, for example, says the consequences for not passing the Wall Street bail-out legislation will be quick and sure.
If you own and operate a small business and experiencing the crunch on cash flow and need to borrow to continue operations, you will be sanctioned quick and sure.
Notice how the risk, the sanction, is a function of a firm's size. The bigger the firm--the more cash (solvency) you have to leverage in a credit economy--the more this Hamiltonian sanction is positive and not negative.
Understanding the mathematics of leverage finance is key to understanding the operation of the Hamiltonian model of political economy, identifying the problem and applying a fitting solution (see the article at griffithlighton.blogspot,com}.
The argument is being made that not passing the bail-out plan is causing negative market sentiment. That is a fraud and is indicative of what is wrong with the analytics.
Market sentiment was negative going into the legislative process with low confidence that the proposed plan could reverse the deflationary trend. The continued negative sentiment is just a confirmed lack of confidence of a legislative measure that is not characteristically Hamiltonian and the model of what does not work!
If you own and operate a small business and experiencing the crunch on cash flow and need to borrow to continue operations, you will be sanctioned quick and sure.
Notice how the risk, the sanction, is a function of a firm's size. The bigger the firm--the more cash (solvency) you have to leverage in a credit economy--the more this Hamiltonian sanction is positive and not negative.
Understanding the mathematics of leverage finance is key to understanding the operation of the Hamiltonian model of political economy, identifying the problem and applying a fitting solution (see the article at griffithlighton.blogspot,com}.
The argument is being made that not passing the bail-out plan is causing negative market sentiment. That is a fraud and is indicative of what is wrong with the analytics.
Market sentiment was negative going into the legislative process with low confidence that the proposed plan could reverse the deflationary trend. The continued negative sentiment is just a confirmed lack of confidence of a legislative measure that is not characteristically Hamiltonian and the model of what does not work!
Re-Capitalizing the Benefit
The no-confidence market sentiment for a top-down (disconfirmed trickle-down theory) bail out plan will quickly go strong positive with its antithesis: a bottom-up bail out that would be a re-capitalization of the benefit.
Recapitalizing the benefit will restore the liquidity not lost, but being withheld from the market waiting to be rewarded for its inefficiencies, and the narrow benefit it incurs to be trickled down if the right incentive is provided.
Lowering the capital-gains tax to lure liquidity back in just exacerbates the problem because, it is the problem. Rewarding the perverse incentive with the means to be perverse, I dare say, is more perverse!
Our economy--the credit economy (needing to borrow to make ends meet)--is being held hostage to a practical solution that causes the problem.
Regressive tax policy and deregulation of the financial markets without ensuring a self-correcting, free-market mechanism has produced an enormous benefit and detriment. The way to quickly and surely reduce the cost, and the risk, of re-capitalizing is to redistribute the benefit to the cost side of the equation. That is, by recapitalizing the benefit.
There is the very clear risk, given the failure of trickle-down economic measures, that top-down measures to fix it will not work, throwing away good money after bad. The sentiments of Republicans for instilling the bail-out bill with free-market "principles" by, for example, reducing the capital gains tax on the consolidated capital is one of those disconfirmed principles they love to validate with legislative authority that does more to cause the problem than effect a solution.
Interesting how bi-partisanship cannot produce an empirical solution to this problem. The only solution available is Hamiltonian, which is the problem.
While Obama and Biden will likely apply a more empirically verifiable, and Jeffersonian, approach to this problem, and McCain/Palin, so full of their conservative "principles" (for change?), most assuredly will not, the choice, both politically and economically, is all too clear if a genuine solution is what you want.
The Hamiltonian tenet that it is a representative's responsibility to give the governed what they need, rather than what they want, in better judgement is not well supported here, if not generally just a whole lot of Hamiltonian hooey designed to redefine and misapply The People's self-interest and the General Welfare.
Confine the principles of conservative economics to the dustbin of miserable failures, empirically verified.
Choose the way of an effectively pro-growth, low risk, investment strategy now!
Recapitalize the benefit from the bottom up.
Vote for Obama/Biden to sustain it.
Recapitalizing the benefit will restore the liquidity not lost, but being withheld from the market waiting to be rewarded for its inefficiencies, and the narrow benefit it incurs to be trickled down if the right incentive is provided.
Lowering the capital-gains tax to lure liquidity back in just exacerbates the problem because, it is the problem. Rewarding the perverse incentive with the means to be perverse, I dare say, is more perverse!
Our economy--the credit economy (needing to borrow to make ends meet)--is being held hostage to a practical solution that causes the problem.
Regressive tax policy and deregulation of the financial markets without ensuring a self-correcting, free-market mechanism has produced an enormous benefit and detriment. The way to quickly and surely reduce the cost, and the risk, of re-capitalizing is to redistribute the benefit to the cost side of the equation. That is, by recapitalizing the benefit.
There is the very clear risk, given the failure of trickle-down economic measures, that top-down measures to fix it will not work, throwing away good money after bad. The sentiments of Republicans for instilling the bail-out bill with free-market "principles" by, for example, reducing the capital gains tax on the consolidated capital is one of those disconfirmed principles they love to validate with legislative authority that does more to cause the problem than effect a solution.
Interesting how bi-partisanship cannot produce an empirical solution to this problem. The only solution available is Hamiltonian, which is the problem.
While Obama and Biden will likely apply a more empirically verifiable, and Jeffersonian, approach to this problem, and McCain/Palin, so full of their conservative "principles" (for change?), most assuredly will not, the choice, both politically and economically, is all too clear if a genuine solution is what you want.
The Hamiltonian tenet that it is a representative's responsibility to give the governed what they need, rather than what they want, in better judgement is not well supported here, if not generally just a whole lot of Hamiltonian hooey designed to redefine and misapply The People's self-interest and the General Welfare.
Confine the principles of conservative economics to the dustbin of miserable failures, empirically verified.
Choose the way of an effectively pro-growth, low risk, investment strategy now!
Recapitalize the benefit from the bottom up.
Vote for Obama/Biden to sustain it.
Sunday, September 28, 2008
Avoiding the Principles of Economics
The year 2000. Neo-conservatives control the legislative and, with the questionably constitutional assistance of the judiciary, the executive branch of the federal government. It was immediately declared that the fundamental principles of classical economics would be applied: a highly regressive tax policy in which the use of capital and the gains would be minimally taxed with the result being economic growth, the General Welfare.
The year 2008. The government announces the need for a massive economic stimulus package. Congress passes the stimulus package. John McCain is campaigning for president to make the tax cuts permanent so that we may enjoy the benefits of the fundamental principles of economics and the government is preparing to legislate an economic rescue plan.
We went from the promise of robust economic growth to a massive stimulus package to the need for an economic rescue. I do believe that neo-conservative economic principles have proven to be a complete failure. Unfortunately, principles are something to be believed in despite the verifiable evidence because they are fundamental, enduring, disprovable ideals. Not believing is just un-American.
While the results of applying the classic conservative principles of economics was easily predictable, critics were deemed socialists and fearmongers, and despite the principles resulting in measures needed described by conservatives as socialism and the need to alleviate the fear of economic collapse, these critics are still deemed wrongheaded disbelievers, implying that the principles have not been disconfirmed, just temporarily out of political favor at worst.
The stimulus package, despite its massive size, was no match for the detriment built into the regressive tax policy being argued as the solution to the problem. Conservatives argue to make the tax cuts, the problem, permanent. Nobody can possibly be that stupid?
The reason the stimulus package did not work is because the lack of consumer demand is an effect of illiquidity caused by a regressive tax burden and its magnified, leveraged, effect--consolidation of the capital. The remedy was a symptomatic treatment that could not overcome a massive consolidation of wealth not seen since just before the Great Depression.
Despite the overwhelming evidence against it, the "principles" of the classic economic model are, by their very rhetorical nature, fundamentally sound. Foremost, conservatives argue, is the principle of welfare for the rich in priority because without it, the economy will collapse (a testable hypothesis).
We have entered a realm of complete absurdity where we are to believe in principles that lead to economic collapse if we do not adhere in theory, and economic collapse if we do in practice.
Are we to "believe" that the impending rescue plan will be the General Welfare because Republicans are being sure it includes the fundamental principles of classical economic theory?
We are going to have a legislative validation of a disconfirmed hypothesis; a complete methodological and practical absurdity!
Disbelief, a complete reversal of the regressive tax code, and deconsolidation of the capital is fully in order toward an economy that is not only fundamentally believable, but verifiably sound.
The year 2008. The government announces the need for a massive economic stimulus package. Congress passes the stimulus package. John McCain is campaigning for president to make the tax cuts permanent so that we may enjoy the benefits of the fundamental principles of economics and the government is preparing to legislate an economic rescue plan.
We went from the promise of robust economic growth to a massive stimulus package to the need for an economic rescue. I do believe that neo-conservative economic principles have proven to be a complete failure. Unfortunately, principles are something to be believed in despite the verifiable evidence because they are fundamental, enduring, disprovable ideals. Not believing is just un-American.
While the results of applying the classic conservative principles of economics was easily predictable, critics were deemed socialists and fearmongers, and despite the principles resulting in measures needed described by conservatives as socialism and the need to alleviate the fear of economic collapse, these critics are still deemed wrongheaded disbelievers, implying that the principles have not been disconfirmed, just temporarily out of political favor at worst.
The stimulus package, despite its massive size, was no match for the detriment built into the regressive tax policy being argued as the solution to the problem. Conservatives argue to make the tax cuts, the problem, permanent. Nobody can possibly be that stupid?
The reason the stimulus package did not work is because the lack of consumer demand is an effect of illiquidity caused by a regressive tax burden and its magnified, leveraged, effect--consolidation of the capital. The remedy was a symptomatic treatment that could not overcome a massive consolidation of wealth not seen since just before the Great Depression.
Despite the overwhelming evidence against it, the "principles" of the classic economic model are, by their very rhetorical nature, fundamentally sound. Foremost, conservatives argue, is the principle of welfare for the rich in priority because without it, the economy will collapse (a testable hypothesis).
We have entered a realm of complete absurdity where we are to believe in principles that lead to economic collapse if we do not adhere in theory, and economic collapse if we do in practice.
Are we to "believe" that the impending rescue plan will be the General Welfare because Republicans are being sure it includes the fundamental principles of classical economic theory?
We are going to have a legislative validation of a disconfirmed hypothesis; a complete methodological and practical absurdity!
Disbelief, a complete reversal of the regressive tax code, and deconsolidation of the capital is fully in order toward an economy that is not only fundamentally believable, but verifiably sound.
Saturday, September 27, 2008
Your Self-Interest and the General Welfare
Pluralistic processes produce a social interaction of legitimate outcomes that is the application of an individual's choice, preference, that is the General Welfare.
If power is allowed to consolidate, to become non-pluralistic, but the legitimacy of the outcome is maintained to be pluralistic, there must be a mechanism in place to achieve this fraud.
The latest application is the current economic rescue plan being deliberated and soon to be legislated as the General Welfare.
Remember that the regressive tax policy of the Bush administration--the tax cuts for the wealthy that McCain says we NEED to make permanent--was argued to be everyone's self-interest, or the General Welfare.
The policy was decidedly not the self-interest of the vast majority of Americans, and management of this inequitable outcome--the rescue plan--is being sold as the General Welfare. Bush has, again with very certain terms, stated that not passing the rescue plan will mean a fate even worse than rewarding the corrupt and incompetent for an inequitable outcome that his administration argued with absolute confidence would not occur.
Yes, a crisis worse than we have now, that we were told would not occur to begin with, is definitely not in the self-interest of the vast majority of Americans. Notice how the self-interest of the vast majority has been sacrificed to preserve the self-interest of the rich all the way and is being called your self-interest.
This is how the Hamiltonian model of political-economy operates: exploitation of your self-interest is in your best interest. Slick, huh?
You should be ever-lov'n, hopp'n mad!
Let's try pluralism for a change!
If power is allowed to consolidate, to become non-pluralistic, but the legitimacy of the outcome is maintained to be pluralistic, there must be a mechanism in place to achieve this fraud.
The latest application is the current economic rescue plan being deliberated and soon to be legislated as the General Welfare.
Remember that the regressive tax policy of the Bush administration--the tax cuts for the wealthy that McCain says we NEED to make permanent--was argued to be everyone's self-interest, or the General Welfare.
The policy was decidedly not the self-interest of the vast majority of Americans, and management of this inequitable outcome--the rescue plan--is being sold as the General Welfare. Bush has, again with very certain terms, stated that not passing the rescue plan will mean a fate even worse than rewarding the corrupt and incompetent for an inequitable outcome that his administration argued with absolute confidence would not occur.
Yes, a crisis worse than we have now, that we were told would not occur to begin with, is definitely not in the self-interest of the vast majority of Americans. Notice how the self-interest of the vast majority has been sacrificed to preserve the self-interest of the rich all the way and is being called your self-interest.
This is how the Hamiltonian model of political-economy operates: exploitation of your self-interest is in your best interest. Slick, huh?
You should be ever-lov'n, hopp'n mad!
Let's try pluralism for a change!
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