Philosophy of Self-Governance

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

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

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

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

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

Shorting the Long Bond

The probability the price of the long bond would be lower at this point of the cycle has been nearly zero. Discounting the risk, the rate is at a new low, and if you had been following the risk-modeling presented on this site, the discount has indicated being long on the bond.

Throughout the articles I have presented on risk analyses and assessments, I have identified an unwillingness to accept models among the mainstream that present non-pluralistic assumptions. This is largely because it presents a dissonance. The political rhetoric analysts use to justify policies and practices have clearly diverged from the touted benefit. Not only does this present a significant lack of analytical credibility, but an increased risk of liability for the mainstream's clientele.

As I pointed out in the previous article, for example, continued QE is not an inflationary risk. The deflationary trend is so strong (the gamma risk is so high), the probability of inflationary risk is nearly zero.

Paradoxically, the only reason inflationary risk is not fully discounted to zero is because of the high risk for commodity price inflation. The high gamma risk is driving this trend, but remember it is the nature of the gamma dimension to stop and reverse this trend by political fiat.

In an over-accumulated condition, commodities are overbought, and the effect is deflationary. The inflation accumulates counter-cyclical, stimulus measures, leaving consumers with less discretionary income like tax increases on the middle class.

Since commodity inflation occurs by the pressure of an over-accumulated and organizationally consolidated capital that reduces consumer demand and the risk of disinflation at the same time, the result is cheap money and the high long-bond price (which is a non-pluralistic economic modeling). Money is cheap to buy commodities and make a profit, but money will not be cheap if there is a demand distribution and higher employment. The value yielded is non-distributional, presenting a persistent deflationary (high gamma) risk.

Eventually the non-distributional bubble will burst with the gamma risk becoming so overweight--the burden of debt so overwhelming--that a distribution must occur to reduce the level of dissonance. That is when you short the long bond, indicated by non-pluralistic modeling which also serves to indicate what ails us.

The Keynesian alternative allows the risk a seemingly infinite extension, but we are beginning to measure its practical limits in the form of an accumulated and organizationally consolidated gamma-risk proportion.

Investors should keep in mind that although the high probability of middle-class tax cuts will reduce the gamma risk and support equities, QE will then lose support. However, as the distribution is quickly accumulated and consolidated (absorbing the counter-cyclical benefit), QE could regain support in "short order."