Here we are again with capital boxed in at the top in a too-big-to-fail proportion. Big financials are not financing growth because it does not produce a short term profit. The victims are the unemployed, and more broadly anyone that is not upper class. In other words, the profit is at the expense of economic growth, not the result of it (and remember, cutting taxes at the top is supposed to cause economic growth).
The product of this short-term profiteering is risk. Eventually the risk gets so big (as big as the institutions that accumulate it), that the victims end up bailing out the perpetrators. In other words, the risk is shifted (offset) to the public domain and presents as budget deficits and rising debt-to-GDP.
Once again we are testing the legitimacy of the risk proportion, which is what the Tea Party is all about. The Tea Party, you see, is outside the box, but because it is a right-wing, conservative faction, its influence is easily co-opted to conserve the value (the offset) of the risk proportion.
The Tea Party faction unwittingly supports policies and programs that are inimical to the middle-class interests that it is supposed to represent. Instead, what re-presents is the catastrophic, risk proportion.
Instead of being deconsolidated into the middle class, where it will be managed in a highly divisible proportion that is not too big to fail the system, the risk continues to consolidate. What survives the system, by design, are consolidated entities that are too big to fail.
Valuing the deflationary risk (financial compression) of default that consolidation causes appears to be chaos (wild, uncontrolled volatility), but it is really an organized tautology designed to make the profit look pluralistically derived from the chaos (randomly ontological); and in order to command the chaos (reduce the risk ontology), it is necessary to consolidate (which produces the problem to be solved). What trickles down is not prosperity, but detriment--liquidation of middle-class assets into the upper class (the class warfare we are not supposed to talk about because it "kills jobs").
The Tea Party is boxed in. It is co-opted. In order to break out of this box it is necessary to demand deconsolidation of the risk proportion. The more deconsolidated, the higher probability for growth, reducing debt by increasing GDP.
Reducing the deficit and debt does not produce growth. It is, instead, deflationary, and the current volatility we see is the extent of that risk being valued. Producing growth, however, will reduce the deficit and the debt, which has been fully discounted. The discount has downgraded sovereign debt, for example, while the expected value of profit (the volatility) is being measured that accrues to the top-income class with virtually no risk save the gamma (political) risk.
Extending tax-expenditures for the rich keeps the wealth consolidated. It is time, in the name of life, liberty, and the pursuit of happiness, to climb out of the box and deconsolidate the risk into a not-too-big-to-fail proportion.
Showing posts with label debt and deficit reduction. Show all posts
Showing posts with label debt and deficit reduction. Show all posts
Wednesday, August 10, 2011
Thursday, July 14, 2011
Philosophy of Added Supply
President Obama inherited the practical effects (the benefits derived from detriments) of supply-side, economic philosophy.
Although we knew the aggregate effect of supply-side philosophy is recession, we did it anyway because, philosophically, letting the American people keep all the income they earn is, like Adam Smith said, the right thing to do--it maximizes the practical utility of self-interest to build the wealth of the nation. Being sure, then, that the most able to pay taxes pay the least causes maximum employment at the lowest possible prices. It maximizes tax revenues while reducing the need for government spending by adding supply.
Supply-side philosophy, which is currently being offered to cure our economic woes after having caused it, formulates this hypothesis: If we do not adhere to supply-side, economic philosophy we will have low employment and a rising cost of living. Since the Obama administration does not adhere to conservative philosophy, we therefore have both unemployment and rising costs.
Apparently, Moody's doesn't believe in supply-side philosophy either.
Adding supply is a philosophy of risk that is not peculiar to the Reagan administration which, by the way, was plagued with high inflation, unemployment, and record budget deficits. The recessionary trend of the 80's did not abate until his successor, President Bush, raised taxes on the rich to reduce the deficit and record-high interest rates.
Adding supply is a philosophy that defines the legitimate distribution of reward going back to the founding of our nation. It is a philosophy that justifies the expected detriment (the austerity needed to create the wealth of the nation) being borne by "the little people" to produce the benefit--making rich people rich (causing a surplus, or adding supply). This is a very simple philosophy: you cannot be the beneficiary of the detriment if you have to share the detriment--that would be lower class.
You cannot be king (the tax collector) if you have to pay the tax; and you cannot profit from the interest on the debt if you have to pay it.
Remember, your income (your class) is wages, salaries, capital gains, dividends and interest divided by prices, and that includes taxes (the cost of government). If you are benefiting from rising prices (inflation) and interest on the debt (unemployment) at the lowest effective tax rate, you are decidedly, by every measure, upper class with every incentive to increase the cost of government (debt and the taxes to pay the interest on the debt) while reducing the benefit (entitlements).
The realpolitique of power (who bears the cost and who gains the benefit--the risk to reward) depends on a credible, philosophical foundation.
Power cannot be maintained if it is not believed to be legitimate.
Although we knew the aggregate effect of supply-side philosophy is recession, we did it anyway because, philosophically, letting the American people keep all the income they earn is, like Adam Smith said, the right thing to do--it maximizes the practical utility of self-interest to build the wealth of the nation. Being sure, then, that the most able to pay taxes pay the least causes maximum employment at the lowest possible prices. It maximizes tax revenues while reducing the need for government spending by adding supply.
Supply-side philosophy, which is currently being offered to cure our economic woes after having caused it, formulates this hypothesis: If we do not adhere to supply-side, economic philosophy we will have low employment and a rising cost of living. Since the Obama administration does not adhere to conservative philosophy, we therefore have both unemployment and rising costs.
Apparently, Moody's doesn't believe in supply-side philosophy either.
Adding supply is a philosophy of risk that is not peculiar to the Reagan administration which, by the way, was plagued with high inflation, unemployment, and record budget deficits. The recessionary trend of the 80's did not abate until his successor, President Bush, raised taxes on the rich to reduce the deficit and record-high interest rates.
Adding supply is a philosophy that defines the legitimate distribution of reward going back to the founding of our nation. It is a philosophy that justifies the expected detriment (the austerity needed to create the wealth of the nation) being borne by "the little people" to produce the benefit--making rich people rich (causing a surplus, or adding supply). This is a very simple philosophy: you cannot be the beneficiary of the detriment if you have to share the detriment--that would be lower class.
You cannot be king (the tax collector) if you have to pay the tax; and you cannot profit from the interest on the debt if you have to pay it.
Remember, your income (your class) is wages, salaries, capital gains, dividends and interest divided by prices, and that includes taxes (the cost of government). If you are benefiting from rising prices (inflation) and interest on the debt (unemployment) at the lowest effective tax rate, you are decidedly, by every measure, upper class with every incentive to increase the cost of government (debt and the taxes to pay the interest on the debt) while reducing the benefit (entitlements).
The realpolitique of power (who bears the cost and who gains the benefit--the risk to reward) depends on a credible, philosophical foundation.
Power cannot be maintained if it is not believed to be legitimate.
Wednesday, July 13, 2011
Good Sense, Full Faith, and Credit
Today we see attempts to confirm the philosophy that governs the risk.
The U.S. Senate is busy working on a non-binding, Sense of the Senate resolution. It resolves the intention--ensuring us that it has the good sense--to require the rich make a "meaningful contribution" to deficit and debt reduction.
The House, at the same time, is now scrambling to ensure entitlements are at zero risk after a lengthy political campaign to exact austerity by holding our nation hostage to the risk of default. They see the economy tanking and are feeling the gamma-risk proportion (the angst) inflecting toward a full accountability.
Congress is engaged in managing an over-accumulated risk proportion. Accountability is being managed not by reducing the proportion but by psychologically reducing the level of angst associated with it.
The Democratic Senate is acting to ensure a good sense for what is fair and equitable while the Republican House is ensuring, with full faith, that "We the People" (the government) will pay the interest on the debt at no risk. We have clear confirmation, then, of the philosophy that "governs" the risk.
We should all expect, with full faith, that We the People will pay the debt no matter what. Whether by hook or by crook, our credit is good.
Bad credit, we can all be sure, is what our representative form of government is modeled to reduce to zero (which assumes all the risk elsewhere). In order to keep the faith, that risk reduction has to also be fair and equitable--it must be Pareto Optimal (without loss of principal in zero-sum). Since this risk reduction actually accumulates political risk in proportion to the reduction, we are binomially determined (structured) to effectively counter-party the risk politically, which is what we see happening today, tomorrow, and the next.
By structurally modeling for counter-party assumption of the risk, we can faithfully, routinely, expect the detriment (the sacrifice) needed will be exacted to pay the interest on the debt (the principal at political risk of default) in priority.
What the principals need to avoid is the risk of liability associated with a benefit being derived from a deliberate detriment (and the more it is avoided the more unavoidable it becomes).
In order to keep the faith, we need to have a practical, governing philosophy to support it--the good sense that assures the credit "We the People" extend it. As we perpetually determine whether that philosophy should be democratic or republican, the debt (the risk) accumulates to determine our fate in a crisis proportion. It's not that it can't be avoided if "We" have the political will to self-determine, despite the elite philosophy that "The People" are not capable.
With the margin of profit scoring at record levels, the beneficiaries that do not want to share the record debt generated to support it will be forced to account for all the risk in a too-big-to-fail proportion.
The U.S. Senate is busy working on a non-binding, Sense of the Senate resolution. It resolves the intention--ensuring us that it has the good sense--to require the rich make a "meaningful contribution" to deficit and debt reduction.
The House, at the same time, is now scrambling to ensure entitlements are at zero risk after a lengthy political campaign to exact austerity by holding our nation hostage to the risk of default. They see the economy tanking and are feeling the gamma-risk proportion (the angst) inflecting toward a full accountability.
Congress is engaged in managing an over-accumulated risk proportion. Accountability is being managed not by reducing the proportion but by psychologically reducing the level of angst associated with it.
The Democratic Senate is acting to ensure a good sense for what is fair and equitable while the Republican House is ensuring, with full faith, that "We the People" (the government) will pay the interest on the debt at no risk. We have clear confirmation, then, of the philosophy that "governs" the risk.
We should all expect, with full faith, that We the People will pay the debt no matter what. Whether by hook or by crook, our credit is good.
Bad credit, we can all be sure, is what our representative form of government is modeled to reduce to zero (which assumes all the risk elsewhere). In order to keep the faith, that risk reduction has to also be fair and equitable--it must be Pareto Optimal (without loss of principal in zero-sum). Since this risk reduction actually accumulates political risk in proportion to the reduction, we are binomially determined (structured) to effectively counter-party the risk politically, which is what we see happening today, tomorrow, and the next.
By structurally modeling for counter-party assumption of the risk, we can faithfully, routinely, expect the detriment (the sacrifice) needed will be exacted to pay the interest on the debt (the principal at political risk of default) in priority.
What the principals need to avoid is the risk of liability associated with a benefit being derived from a deliberate detriment (and the more it is avoided the more unavoidable it becomes).
In order to keep the faith, we need to have a practical, governing philosophy to support it--the good sense that assures the credit "We the People" extend it. As we perpetually determine whether that philosophy should be democratic or republican, the debt (the risk) accumulates to determine our fate in a crisis proportion. It's not that it can't be avoided if "We" have the political will to self-determine, despite the elite philosophy that "The People" are not capable.
With the margin of profit scoring at record levels, the beneficiaries that do not want to share the record debt generated to support it will be forced to account for all the risk in a too-big-to-fail proportion.
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