Making Money On Demand

According to Romney and Ryan, a lower, more regressive tax burden pays the rent. The budget passed by the House will raise middle-class taxes (what Ryan calls "broadening the base") so that the top income class can have a lower rate and make money.

Hypothetically, policies and programs that support income at the top, like a regressive tax burden, frees capital for investment and increases supply, paving the path to prosperity.

Added supply controls inflation and unemployment. By creating supply, income rises against falling prices (disinflation), which controls the price on demand (governance when you need it) and reduces unemployment by adding the income needed to demand it. Adding the supply of income on demand without having to tax it or print it avoids the crisis of overproduction (deflation). By reducing gamma risk to the alpha dimension, price control is technically achieved with limited government intervention. Government will reduce if there is less demand for it.

(According to Rep. Ryan and the Republican Party delegation, cutting government adds supply. Since the demand for government derives from slow, economic demand, however, which is the result of no added supply--classically referred to as overproduction and a term Ryan and company ideologically ignore--arguing that the effect yields the cause lacks good intellectual value. Specifically, it lacks empirical value that, ironically, is at the very foundation of Enlightenment philosophy that the Tea Party delegation is supposed to represent.

Occupying policy space with ideological rhetoric adds to the problem to be solved. Practical solutions ideologically derived from both parties are exacerbating, which is why Congress is so unpopular.

The binomial solution we have now suggests that we can have big government and rising public debt or small government and rising private debt. In both cases, ideologically derived, the risk-value is conserved, not avoided. Money is "made" by creating debt in a Hamiltonian fashion, which destroys demand and the means for each and every one of us to self-determine.

As long as money is made to ensure "We" can not control our destiny on demand in a too-big-to-fail proportion, we cannot be held personally responsible for it. Instead, we then rely on government to be responsible for our destiny, technically achieving a gamma-risk dimension that renders the "self" in the image of the "job creators" who, both public and private, as we see over and over again, treat us like inventory managed in pursuit of an objective reality that is verifiably not our own.

With the means to self-determine, we verify, rather than ideologically validate, whether the rent paid is good and adequate consideration by controlling the price we are willing to pay on demand, not mandated to pay by means either public or private in an economy-of-scale proportion.)

Price control without destroying the means to demand it (inflation and unemployment) requires adding supply--it requires a distribution from the accumulation of capital to demand it, preventing the need to inflate the money supply (which reduces demand) to make money. Overproduction is then a function of disinflation--rising consumer income against falling prices, providing sufficient income to pay the rent and form the capital necessary to reduce beta-risk volatility and the need to politically manage it in a gamma-risk proportion.

Without an on-demand distribution, a redistribution occurs (taxing and spending) to resist deflation (a declining rate of profit). As income falls against rising prices (and taxes), instead of being distributive on demand, value (the rent to be paid) becomes retributive on command. Prices are not controlled by supply but by destroying the capacity to demand it (the capacity to buy something at a particular price OR NOT).

(Remember, not demanding something controls the price. So, when we don't demand health care and the price keeps rising it means the free market has been defeated. If the price is being supported so that it will not lower to meet demand, the "market" is broken, and if we fix it by mandating we buy health insurance--adding demand without adding supply--we break it even more!

Consumers need to understand what consolidated capitalists want us to ignore: consolidation of industry and markets, health care or anything else, commands the price, creating value by destroying demand. The destruction is what consolidated capitalists refer to as "efficient markets." Unparadoxically, by defeating the means to technically achieve market efficiency, consolidation supports the price and destroys the power of consumers to self-determine on demand.

While we tend to perceive demand destruction as a dead-weight loss in which everybody loses, the destruction creates value. A marginal profit is added without actually adding a marginal product, as in a free market, because consumers do not have the income to demand it. Instead, the power to self-determine and its market value--its power to modify behavior by popular consent--is consolidated on command.

Economy-of-scale does not make markets more efficient. Demand efficiency is swapped for command proficiency. Popular demand, or rule, is reduced--in many ways seduced--to technically achieve a command dimension that poses as popular consent.

Popular rule is a value Hamiltonians famously favored over slavery, for example. By paying labor a wage or salary, big business, which at the time of the Revolution was considered by Republicans to be abusive like the king, reduces retributive value and turns the swap--a subsistence wage--into the personal responsibility of the wage earner. The detriment is transformed into value derived--the creative destruction that haunts us today--without fear of retribution because we are all Constitutionally endowed with self-determination.)

Destroying demand creates the supply, and the value--the prosperity--added. Since creating value by destroying it is a zero-sum game, the accumulated value expected to "trickle down" (which is a concept Alexander Hamilton used to describe the utility of big bankers and big business that Jeffersonians objected to) gains retributive value and is then managed as political, rather than economic risk. Gaining political value, the risk goes gamma to manage a continuous failure of expectations (the hypotheses tested) that with a republican form of government is empirically confirmed, or not, by popular vote.

The popular vote, whether economically with dollar votes in the marketplace or politically by casting votes in an election, is an empirical measure that is supposed to objectively measure reality. Voters are frustrated that reality is being objectively determined to make money in zero-sum more by means of validation than verification.

On the economic side, we are determined by an economy-of-scale efficiency that makes money by commanding the price. On the political side, we have a government that commands we engage in economic activity, or not, to support the price and command the margin of profit without adding a marginal product. Both validate a too-big-to-fail, economy-of-scale proportion, validating the problem as the solution on command rather than verifying the means to self-determine and responsibly solve our problems, and make money, on demand.

Organizational Size and Pluralistic Tendencies

As the drama unfolds over preventing an improbable default of our sovereign debt, we can plainly see binomialism at work.

The drama is just that--political theater. Since the probable, binomially determined alternatives are obviously limited to the "dummy" variables, observing the determination of our fate is but a form of entertainment--an art form to make consolidation of power appear pluralistically legitimate in the republican form.

As we discussed in previous articles, binomialism is a large, consolidated, organized means of conserving the stakes over time by toggling between two variables. It is an organized tautology--a large, pre-determined, bureaucratic organization that delivers stable, routine results.

The result of consolidation--crises--is fully expected, and since the risk of loss is fully assumed, the risk is modeled in the republican form to safely vary within the limits of the routine (pre-determined) probability. The risk, you see, does not reduce, it is managed (consolidated) to yield a stable distribution of power (and wealth) over time at a highly predictable frequency, which is what we can clearly see happening now.

Although the risk is politically organized to be reduced by keeping it consolidated, it is actually being accumulated. Eventually, the value is so accumulated that a distribution occurs beyond the normally expected value. We have then, for example, the Tea-Party movement moving the realpolitique toward a more pluralistic distribution.

Our founders intended for power to never get so big and powerful that "We the People" have no authority to self-determine. We are assured a system of checks and balances (pluralism) by Constitutional authority. The natural tendency for power to collapse into crisis when it becomes so-called "too big to fail" is modeled as a fully assumed risk of loss in priority.

Since the pluralistic tendency is 100 percent, it is foolish to think you can be so powerful you cannot fail. It is practical, then, to systematically model the risk for cyclical consolidation and deconsolidation over time without loss of principal. Risk is proportioned to never be so diffused that the principal amount of power can be permanently lost. The proportion is effectively structured to conserve over time, conceived to ensure the general welfare (i.e., to legally, Constitutionally, ensure Pareto Optimality without instability). Federalists have been doing this for 235 years. It is the two-party system, and the Pareto-Optimal jurisprudence, we see in operation today.

Interjection of a third-party element destabilizes the binomial system of governance, and it is important not to characterize it as a duopoly. It is not a duopoly, it is a monopoly. The two variables operate together to monopolize power. The duality aspect is a psychological trick--it is a false pluralism that the Tea Party, for example, is Constitutionally empowered to check and balance.

To avoid more accountability, the third element must be co-opted--it must be organized, absorbed, into what is otherwise too-big to fail. As the organization gets bigger, more consolidated and more unaccountable, it is more likely to fail, collapse, under the weight of an accumulated, retributive value.

Yes, the bigger it is, the harder it falls. It is important to keep the system as deconsolidated as possible, but doing that is antithetical to the working model we have now. Conventional wisdom dictates: the bigger the better to control the risk.

Organizations that are are so big they can control the risk are largely unaccountable. They are intended to be unaccountable, by virtue of size, because accountability, or the lack of it, measures power--it measures who is in control and who is not.

The bigger, the more unaccountable, and the more unaccountable, the more risk accumulates unaccounted for. It gains a gamma-risk proportion with the benefit (and detriment) of being too big to fail. However, it really isn't too big to fail because the legitimate risk (pluralistic accountability) is falsely valued.

Legitimate value is missing and largely unaccounted for in the gamma, too-big-to-fail dimension. Legitimate risk is avoided (structured to accumulate, or transfer, to the future both politically and economically), which systemically, as we come to find out over and over again, is highly detrimental. It is detrimental even for a power elite who mistakenly assume they can completely self-determine without accountability (without risk) through ever-larger economies of scale.

An organization like the Tea Party is to prevent the risk from transferring to the future. It is demanding an immediate accounting of the risk, bringing us to the point of possible sovereign-debt default, improbable as that really is because the system is politically modeled (it is designed) for continuous debt accumulation, not default. The risk is always transferred to the future, by default, with the "full faith and credit" of the sovereign state (with the force and legitimacy of public authority).

Government is the ultimate entity of a truly too-big-to-fail proportion. It is the repository for all the accumulated risk, expressed as public debt. It is a place in which to dump our toxic assets and refinance the debt without fear of deconsolidation (default and political reorganization of the risk proportion). Risk can safely accumulate and reside there indefinitely...until, of course, its retributive value is demanded for redemption, which requires deconsolidation (a full, legitimate accounting) of the risk proportion, and is essentially what the Tea Party is doing.

Default on the national debt is exactly what we are politically organized to prevent on an ever-larger scale of too-big-to-fail. Deregulation, for example, demands a more deconsolidated marketplace by removing barriers, which means it will not happen; and sovereign default will demand a full accounting of the risk buried in that huge, infinitesimally larger number we call the national debt, which means it will not happen. It is political theater designed to make it look like government is the problem, and if you remove that appearance (that false valuation), a real, empirically verifiable accountability appears. If government is not the problem, then what is?

Neither party really wants to deregulate, and both parties want to raise the debt limit because that is where all the risk is stored to be managed without real, easily verifiable accountability (without deconsolidation). In the same way, we don't have a balanced budget amendment because it increases accountability. A clear accounting of the risk would gain current, present, empirical value. If government spending does not cause slow growth and recessionary trending, then what does?

Requiring a balanced budget is much more likely to require a more progressive tax code to balance it. The hypothesis that budget deficits cause inflation and unemployment rather than being the effect will be empirically tested (which is what "The Revolution," and The Enlightenment, was, and still is, all about...this is what the foundation of our political heritage really is).

To conserve the consolidation of power, an empirical test is a political risk to be avoided like the plague, and so we have a third-party element emerging to interpolate the missing value of risk unaccounted for because it is always being avoided and accumulated into an oversized, too-big-to-fail (gamma-risk) proportion. That proportion of unaccountability, hidden within the oversized dimensions of power to command and control the distribution of risk and the accumulation of reward without liability, is being tested by the natural emergence of a pluralistic, third-party element. It is a nascent occurrence of deconsolidated risk, currently being expressed as an otherwise improbable default on our sovereign debt.

The Tea Party is a precursor. It begins a larger movement--a natural tendency--toward a more empirically verifiable accountability. While risk is deliberately structured to accumulate, or transfer, to the future, both politically and economically, in a too-big-to-fail proportion, it is, at the same time, accouchering its antithetical form.

All is not lost. There is still a natural tendency to a more pluralistic proportion in which our problems will more easily resolve in the future.

Where the Buck Stops

According to the Federal Reserve's Open Market Committee, the best way to regulate too-big-to-fail is for "too-big" financial firms to be even bigger.

The theory is that the economy-of-scale reduces the risk of lending--it will circulate capital--so that markets will be free and open. By ensuring the low risk (what is too big to fail), the marketplace is fully liquid. However, what happens is that big financial firms use the capital to deflate the economy by causing headline inflation. Instead of ensuring the marketplace is fully liquid, too-big-to-fail firms act to ensure the marketplace is fully liquidated.

The easiest way to make a profit without risk is to NOT invest the capital, like we have now with cash balances on corporate balance sheets at record levels. As long as the capital is not being invested in growth (employment and added supply) in an economy-of-scale proportion, the risk is too high and the reward too low to invest for growth. It is much more profitable to not invest in growth unless, of course, the profit is taxed away--but that is a moral hazard (i.e., it does not fit the Hamiltonian model).

As consumer confidence declines, the higher risk of investing growth accumulates into a crisis proportion. The risk (the crisis) is a self-fulfilled prophecy of an economy-of-scale proportion that liquidates the marketplace. Equity is deliberately (knowing and willingly) turned into debt with the highest degree of efficiency (which entails an inherent liability that manifests as growing budget deficits and the need to tax). Instead of economic growth, what grows is the public debt.

Too-big-to-fail is an empirical failure. Look at the numbers--as the capital has moved into commodities to produce massive, economy-of-scale profits without risk, the public debt has increased to a gamma-risk proportion (with the political threat of sovereign default, which does not, by the way, fit the Hamiltonian model and where the risk fully converges with the reward).

The buck stops here. Instead of circulating, providing liquidity as the Fed postulates, the buck stops producing GDP. Equity becomes negative, efficiently produced in a too-big-to-fail proportion.

According to Dodd-Frank, the buck stops with the Fed. It is the Fed's charge to command and control the too-big-to-fail, economy-of-scale proportion through a committee that ensures open markets (i.e, so that the market system fits the Hamiltonian model of rigging it to ensure the wealth always consolidates into the upper class in a crisis, command-and-control proportion).

Reversing a political-economic model that is 200 hundred years old appears to be dauntingly complex and administratively impossible. All we need to do, however, is to recognize too-big-to-fail being the empirical failure it is, but according to the Fed, our economic woes are not due to the size of firms.

According to the Fed, the persistent risk of SIFI's can be attributed to specific risk-management practices. It is not generally a function of size.

This piece of fundamental attribution error--declared to be "empirical truth" from the highest level of administrative, state authority--means that Systemically Influential Financial Institutions will continue to be systemically influential...and the buck stops there.

Where value consolidates is where the buck stops. It stops circulating (it causes a liquidity crisis). It is where the error of fundamental attribution accumulates into a political, crisis proportion as value accumulates, and churns, at the top. It is the Fed's job to manage the churning, inflated, crisis proportion and conserve the value of the accumulative error, which is why we often hear high-level technocrats remind us that crises will occur no matter what we do, formulating a hypothesis that needs to be empirically tested by deconsolidating the risk proportion.

Gaining empirical value, rather than validation, from the administrative state is entirely possible and, given the high proportion of gamma risk, likely.

The buck stops with the upper class, and risk consolidates into a persistent crisis proportion, until we decide it is better to ensure a more consensual, pluralistic, free-market model.

Until we decide to ensure a working, free-market model from the bottom up, instead of command and control trickled from the top down, value will persistently accumulate into a crisis, too-big-to-fail proportion. Risk, as we have seen again and again, that grows outside of its legitimate proportion to the reward (remember that being "too big" yields high reward at virtually no risk of failure) requires an ever-larger economy of scale to manage it, but with less and less direct accountability. If we want a true, free-market legitimacy, it is then the legitimate charge of the administrative state to ensure a free-and-unconsolidated marketplace, not firms so consolidated they are too big to fail in priority.

Being even more too-big-to-fail is not the cure for being too-big-to-fail.

Firms that are "too big" to fail are, simply, too big! Not admitting it is to knowingly harbor the tyranny we are told we so exceptionally abhor.

Firms allowed to get too big are firms that are not empirically verified by a popular consent of the governed. They become firms you have to do business with, not because you want to. Too-big-to-fail then tyrannically governs the marketplace by virtue (the strength) of size alone; and when rulers are not empirically ruled (verified) by the governed, but validated by default, there is a crisis of legitimacy that the rulers can no longer avoid. The risk reaches its fullest, political proportion and inexorably moves toward a more practical, consensual, pluralistic model, a' priori (with the risk of loss always having been fully assumed, which will inexorably verify).

We are free...free to choose at any time, a' priori, whether we allow the risk to verify, by consensus, or not, catastrophic.

Tracking Risk at the Core

The Fed tracks core and headline inflation risks to pick a tool that shapes the trendline. Headline inflation is marginal risk--the kind of risk that has a hedged, or leveraged objective, affecting the core values and the probable direction (the line) of the trend. Monetary policy is used to direct the line (the probability) of the trend, managing the distribution of consolidated risk in the gamma (political) proportion.

One lesson Hamiltonians learned from the American Revolution, and subsequent crises, is that the extent of the risk must be carefully tracked and managed at the core. King George undervalued the extension of the risk, being too alienated to detect the signals at the core. By divine right, he considered the risk to always be of an economically alpha proportion, and at times beta, but the risk went fully gamma (it became politically unavoidable and economically irreversible).

Maximizing the profit margin (tracking costs and limiting liabilities) emerged with market mechanics to provide capitalists with empirical tools to measure risk. The modeling used by liberal, free-marketeers was much more precise than the crown's whose legitimate interest was assumed secure by divine right and tradition.

The interest of the crown was assumed endowed by the creator and enforced by the accumulated power of the sovereign (increasing the rate of its interest by mere extension of the rents). Its naturally endowed interest became the collective power of The People with a model of risk that always assumes the risk of loss (thus, for example, insisting a bill of rights be written into a constitutional from of government--core values that delimit the political extent of the risk).

The post-Revolutionary model is more precisely designed to prevent risk of loss to the sovereign which, after the Revolution, became The People. The power elite is beyond and above the sovereign. It is supra-sovereign. Its power is demonstrated by a consolidated management of the risk so that, for example, when the dollar and the price of oil suddenly tracks directly instead of inversely, value is derived from the signals that serve to indicate the direction of the risk. While The People (the non-elite) are at a loss to explain the seemingly random signals, the extent of the risk has been determined by fiat, like the crown did, through consolidation of wealth and power. That consolidation includes all the risk that comes with the reward, the extent of which eventually demonstrates at the political core with the risk of loss fully assumed.

The risk of loss fully assumed is at the core of social contract theory that is the dominant feature of revolutionary philosophy. Rousseau's fantasy of the "noble savage" is merely an ideal expression that measures the natural extent of the risk (the freedom to choose). Of course, there are perennial attempts to renegotiate the contract (novation of the risk), giving renewed legitimate value to the fully assumed risk of loss in the form of popular consent. We had "The Contract With America" that, when fully applied, gave us the Great Recession, and that agenda has been subsequently renewed in the form of "The Pledge" following "Change We Can Believe In." These elite-negotiated political settlements are a means of extending the value of the risk which can never be reduced, only avoided, accumulated, and inevitably redistributed.

The wealth of the English crown, for example, continues to decline to this day; and instead of economic catastrophe, the Revolution produced wealth of unprecedented proportion without the divine direction of the crown. We have more people now with a royal-size sense of self-proportion than Hamilton himself could have ever imagined or, perhaps, would care for, suggesting that wealth tends to be progressively pluralistic when the risk becomes progressively more extensive (overleveraged) from multiple sources. Thus, in order to conserve the concentration of wealth and protect it from political risk, it is necessary to keep the extent of the risk in close account. It is necessary to keep the risk consolidated and centrally controlled, like with a central banking system.

The tendency to pluralistically avoid accumulated risk is demonstrated, for example, when investors diversify portfolios. Ironically, while the more pluralistic the economy is the less risk accumulated, there is still a tendency to organize for consolidation (too big to fail). To accommodate this contradiction of values, the extent of the risk is closely accounted for at the margin to measure the effect at the core, formulating the working hypothesis that the number of jobs, for example, directly correlates with the marginal profit which if reduced (i.e., taxed or in any way disinflated or deconsolidated) causes unemployment or deflation. This is a false hypothesis that must be maintained with a centralized authority that keeps the risk from naturally deconsolidating.

The Federal Reserve's accounts are now brimming with both qualitative and quantitative easing. Its current account reflects an extent of liability (overleveraging) not seen since the Great Depression. In order to prevent the liability extending into an unmanageable, inevitable distribution that pluralizes (deconsolidates) the system with political authority, the central bank must act to reduce the liability. The bank takes action so the risk is politically manageable, resisting the pluralistic tendency of power over time and political space.

Following the Great Depression it was decided market stability is best accomplished by closely controlling and accounting for the distribution of risk from a centralized authority. Since risk is a conserved quantity, however, having a constant value of coefficiency, a philosophical risk occurs with the distributive value. The legitimacy of the coefficiency must also be interpretatively managed.

Monetizing market stability from a central authority means it is not a free market unless, of course, the authority intends monetizing to pluralize and expand a competitive marketplace with disinflationary tendencies at full employment. Since that would be detrimental to the accumulation and consolidation of wealth, markets are monetized to "ease" the risk of consolidated capital and markets so that when crises occur there is not a punctuated political leap into a more pluralistic marketplace (a more free and unconsolidated marketplace) to add supply, increase employment and avoid crises.

Instead of pluralism, the marketplace is monetized to allow for economy-of-scale efficiencies (maximum margin with minimum employment, like we have now). Monetizing accommodates the crises that result without economic collapse, creating what is "too big to fail." These large-scale firms can horde cash and deflate the economy, and the more the economy deflates, the more valuable their cash reserves become. If the cash is put in commodity futures, for example, prices rise and extends the risk (raises the economic rent). The risk becomes so consolidated that it is unstable. To prevent the beta volatility going gamma, it is monetized to lower the rent (QE), but not without increasing the debt, which overextends the risk. Overextension of consolidated risk re-distributes wealth by credit default, reducing the net worth of average payers as the value of cash reserves increases.

Consolidation of risk is evident in sudden trend reversals (implied uncertainty that tends to panic the marketplace). These trends (impulsive and corrective waves) are postulated to track the extent of the risk. Saying, for example, that a weak dollar causes oil to rise is a hypothesis that, oops, is sometimes expostulated to demonstrate a highly consolidated extension (a demonstration of power) that is of questionable, legitimate value. (Keep in mind that trying to rig the market is, in fact, a criminal activity. It can hardly be considered, as one Goldman Sachs employee put it, "doing God's work" if The People are expected to lose by means of credit defaults swapped in free-and-open exchange by entities with the power to manage its fullest extent with an economy-of-scale efficiency.)

At this point, the free-market legitimacy of accumulated wealth and power is so far gone that expressing the need for a more pluralistic legitimacy is reduced to a perfidious left-wing ideology that endeavors to destroy the productive efficiency (the economy of scale) that is the "natural" course of capitalism (the trendline to be managed).

Rather than being applied to confirm a free-market legitimacy, monetarism is being applied to confirm the efficiency of large, economies of scale (firms that survive the business cycles that consolidation causes). Essentially, monetarism is used to resist the effects of a disconfirmed hypothesis, easing the burden of risk that is cyclically overextended into a crisis (gamma-risk) proportion.

The time, effort, and resources spent easing the effects of accommodating consolidation would be better spent deconsolidating the risk. Instead of monetizing deflationary debt, we should be accommodating disinflationary growth and let free-market economics manage the risk without a centralized authority.

Risk that is deconsolidated and pluralistically managed in priority ensures that no one component is too big to fail the system, or even cause a large spike in unemployment with a deflationary effect.

Ensuring free-market economics ontologically provides in priority (with a naturally occuring empirical, consensual legitimacy) what central banking badly approximates in posteriori--market stability.

Forcing the trendline is more like a vector analysis that tracks the velocity of opposing forces. While the Fed, for example, is being accommodative, it is also trying to encourage (vector) capital into employment, but without disinflation (growth). We see then that the central bank is serving two agendums--to achieve employment without growth.

If, for example, capital seeks employment, less capital is being applied to bid-up commodity futures, signaling a core recovery and the risk of core inflation. With capital consolidated in oversupply (the consolidation of the risk), supply is not being added relative to prices, and commodity prices are again pressured with headline risk. As that risk consolidates, the trendline retraces the deflationary track, resulting in a stall (a double dip). The risk of core inflation is then forestalled with an economy-of-scale-efficiency accommodated by the central bank.

The frequency of expansion and contraction renders QE policy an ex nihilo addition to the public debt. It becomes a component of a perpetual debt machine that perfectly fits the Hamiltonian model. If we want balanced budgets (no budget deficits and less need for government spending), this model must be thrown out.

The copious amounts of added liquidity required to maintain a deflationary, debt model rather than a disinflationary, equity model supports clever invention and use of capital that makes "taking risk" not a function of growth, but creating risk and shifting it to the uninitiated. Options markets, for example, are a mechanism for "making the market."

Making markets means creating and transferring risk. It is a means of controlling risk, but creating something does not mean it is in control (thus the need for the central bank's authority to headline the risk). Pressuring commodity prices without adding supply, for example, arbitrages the risk and sets up trades (call-put options) that indicate, or headline, the extent of the risk.

(Keep in mind that risk is not created from nothing. Risk, like capital, is a coefficient constant with accumulative and distributive value. Leverage schemes "create" the opportunity for capital gain by manipulating the coefficiency. For example, a 30-1 leverage ratio does not increase the amount of risk, it extends it, pushing it into a gamma--political risk--proportion. The extensive ratio induces a philosophical risk of legitimacy--the kind of risk that manifests the accumulation of revolutionary attributes demanding a corrective wave that distributes value. The choice, then, is nature or nurture. We can peacefully nurture the value--continuously monetizing the debt into a pluralistic extent, for example--or let nature take its ontological course and realize the dystopian ideal of the "noble savage." Pluralism is the ontology to be opted for here. A free and unconsolidated marketplace ensured in priority prevents the impulse to savage the meek in the name of nobility.)

Otherwise known as hedging schemes, "making markets" (rather than adding supply and the employment--the demand--it requires) magnifies the margin with an over-extension of the risk (risk without growth resulting in a net loss, or deflation caused by an overaccumulation at the margin). If that margin is not distributed to add supply, the risk tracks an inflationary trend at the core which, according to the Fed, signals a recovery. Unfortunately, if that false signal is used to indicate less need for government spending (deficit reduction), we will be tracking a depressionary trend and a political, gamma-risk proportion that will not be monetized (hedged) into the future with any credibility.

The time will have arrived for the Hamiltonian model to be abandoned, but that is not going to happen. The deficit will never be reduced enough because the demand (the gamma risk accumulated at the core value) will be too high.

The political will to shape the trendline (to shape the probability of the future), and the tools to shape it are well in hand. It is time, however, to switch to a more pluarlistic model that ensures (accommodates) growth rather than arbitraging the risk in priority. It does not mean that arbitrageurs are put out of business. It means the risk is arbitraged into deconsolidation instead of consolidation.
Growth (added supply rather than an inflated rate of interest in a declining supply) is a reward that distributes with the risk rather than consolidated into a crisis proportion.

Representing the Commonwealth

The concept of the commonwealth is not new, but it is revolutionary. The concept of the commonwealth was a deliberate novation of the risk (see the article, "Novation of the Risk") that pluralistically diffused the risk to facilitate the greatest expansion of economic wealth (and power) the world has ever known.

The Revolution continues, testing the practical concept of the commonwealth (deconsolidating the risk). Currently, the risk is so consolidated there is virtually none available unless extended from large, consolidated, too-big-to-fail, economy-of-scale, organizational entities, including government. Taking the risk (economic growth) is virtually not available except by extension of consolidated authority both public and private. Our current status fails the test of deconsolidating the risk that represents (confirms) the commonwealth.

The Obama administration, for example, is looking to pass a "jobs bill." Since the risk is being extended from the top down (hence the lack of credit extended to support it and thus the recurrent need for a bill), it does not represent the commonwealth (although it is being sold as making the wealth more common).

Nor do Republicans represent the commonwealth.
Republicans represent common expansion of the wealth as a zero-sum redistribution (a moral hazard). Making the wealth more common is identified (just like the king did) with a punitive retribution of the value accumulated that results in disfunctional, non-productive, class warfare. The etiology of what ails us is then reduced to an endless, ideological debate--a game, a polemic--to be won or lost in the political arena without risk the reward will be identified as a zero-sum detriment that prevents the commonwealth.

So, who represents the commonwealth?

After the American Revolution to deconsolidate the authoritative extension of the risk from the crown (from the top class down), the risk was to be "authored" (taken) from the bottom up, producing the state of the commonwealth.

Many states defined themselves as being a "commonwealth" following The Revolution. The Commonwealth of Kentucky, for example, represents freedom from tyranny and the risk it imposes (extends)--or does it?

Governor Beshear's administration has done nothing but extend the risk.

Following a Republican administration that engaged highly regressive tax increases to support the state's bond rating (its credit score), Beshear was elected on a no-tax-increase platform. He then proceeded to administer the biggest regressive tax increase in the history of the Commonwealth. In the private sector, such a sudden reversal is tantamount to a corruption of trust worthy of swift and decisive prosecution with punitive and compensatory damages--and the damage, heading into the Great Recession, was extensive.

Although Beshear, and the Legislative Research Commission, was advised well in advance of the recession that such a massive, regressive tax increase was extremely detrimental to the Commonwealth, they passed the measure anyway, magnifying the detriment extending from the recent financial crisis (which resists a good credit score, by the way).

Beshear has since engaged in massive tax expenditures with a budget that is every bit in dire financial crisis due to a huge regressive tax burden. That burden robbed consumers of much-needed "discretionary spending" and gave it to wealthy businesses to relieve their tax burden (putting pressure on both taxes and the rate of interest). The "discretion" was, rather, "taken" (usurped) and redistributed by a government authority representing anything but the commonwealth.

Massive, tax-incentive expenditures pressure taxes up. The larger return on this so-called investment is higher taxes to satisfy the demand--the expectation of the reward against the extended risk of unemployment. In a commonwealth, however, employment is not supposed to be a function of tax incentives that regresses the tax burden, keeping the wealthy rich at the expense of the common wealth.

No. Taking the risk does not extend from the upper class in a commonwealth. Managing the risk is not a function of a consolidated authority either public or private, but is freely consumed and labored into wealth with a reward (the profit) commensurate with the risk determined by discretionary income that must be commonplace to reward (verify) best practices, best prices, and best behaviors.

The commonwealth delimits the need for an intrusive governing authority. It governs what limits our freedom to an authoritative extension of the risk that always exceeds the reward in a crisis proportion.

Yes. The commonwealth is a place where a person can still get rich, but without having to plunge everyone else into the depths of depression. Raiding the treasury to prevent crises (budget deficits and tax expenditures) is a thing of the past. It would no longer be necessary to tolerate tax and fiscal policy that supports the probability of recurrent crises in the name of resisting it.

Beshear's open-wallet method for economic development, for example, is raiding an already depleted treasury, and shifts the burden to the least able to pay the accumulative debt. It is a classic over-extension of the risk that is completely antithetical to the practical concept of a commonwealth.

Hard to believe that after such a dizzying sudden and detrimental reversal of policy, and hooking-up with an even more notorious open-wallet spendthrift like Jerry Abramson, Beshear is actually going to run for re-election. Incredible!

While common sense can at times be as uncommon as the wealth, let's hope The People of The Commonwealth will have sense enough not to re-elect Beshear and the entire complicit cohort of complete incompetence.