Nothing's Easy

As we come to realize that QE is one huge leveraging scheme, we have to question the rationality of such a huge accumulation of risk in addition to the 30-1 ratios that privately enterprised our economy into an abysmal crisis proportion.

Money from nothing is easy, right? Just create an account and start trading. It's pretty easy till we get to the austerity part of it. Nothing's easy then.

Enterprising at 30-1 effectively increases the money supply 30-1. Thirty times the risk proportionally accumulates somewhere. The trick is not to let it reside in your account. The best place to dump it is at the Fed who will print the money to accommodate the wealth over-accumulated from the over-leveraged risk and quantitatively ease the liquidity crisis you have caused.

Since the economy will grind to a halt without easy money for everybody else, the risk will eventually accrue to your account. It is necessary to extend the risk (debt) to keep the economy from a depressionary level. If that happens, there is no one left to pay the debt but you. The risk to your low tax rate that was supposed to ensure growth accumulates exponentially. If you are stuck with a higher tax rate (a strict liability of causing the accumulation), you are prepared to punish voters with even less liquidity, claiming it was stolen by the government and liberally spent on bridges to nowhere.

Although the goal is to exact austerity from the lower classes (your margin of profit without growth), the data indicates you have reached the limit. You can no longer exact the detriment with any measure of stealth, risking the margin by exposing its accumulation as a deliberate zero-sum (representing a causal relationship between the detriment and the benefit rather than a correlation that can be plausibly explained by spurious and confounding variables like government spending and regulatory interventions). The risk would then re-present as a detriment to you (increased probability that you will have to pay the debt--the liability).

A government commission to study reduction of debt is in order. That reduction, of course, is to reduce your risk in the public interest, shifting the risk to the lower classes with spending cut three times the rate of taxation.

The disparity will keep us solvent, you contend, with the force and legitimacy of government authority. We will be able to continue borrowing from exporters to buy their cheap-labor imports, supporting the price of commodities (our exports, providing a hedge against inflation--QE, for example--and the declining rate of profit) while resisting a strong dollar.

Now you can claim, with stealth, that the weak dollar causes headline inflation which strengthens the deflationary trend. This creates a whipsaw effect (a stealthy profit margin exacted from austerity), increasing the demand for debt (income reduction) while debt is being cut to reduce it. Now, however, the contradiction (the so-called paradox of thrift) is so overwhelming, stealth is not easily accomplished with everyone looking for the cause of the problem (what is reducing lower and middle-class incomes, and why, which increases the demand for debt, now being stealthily disguised as QE).

There needs to be a technical distraction--a stealthy means of indirectly exacting austerity from the lower classes, allowing you to alienate yourself from any risk of liability (the risk of being the technical cause of the detriment exacted).

QE fits the bill.

Nothing is easy, right? The quantity zero is just whatever you make it. It's easy to create your own reality, just start from zero and fill it up with whatever you want. It's the hallmark of freedom--liberty--to do whatever you want without risk of liability but, of course, you are just kidding yourself. Nothing's easy, right? You have to work for it.

Exacting austerity is hard work, and I hear it pays well.

Creating Risk Exposure

Creating risk exposure relates to accumulation of wealth, consolidation of risk for distribution, and limiting the risk of liability.

Let's say you are an investment bank, Soldem Craps. You are looking to benefit by causing a detriment without liability. You want to avoid the risk that will retribute the value back to the risk taker--the party that unassumingly assumed the risk by your risk-transfer devices, creating a zero-sum, high-yield gain without risk to you, defying the high-risk/high-return hypothesis. It is your job to turn private property (like savings) into capital for gain, and so you "make the market" to create the risk that causes the reward.

Pleased with your record profits, having sold 'em plenty of crap, everybody gets a bonus, having turned capital into your gain (private property). While you built a lot of houses, the accumulation of capital into private property (your savings account) has reduced demand and left millions of Americans with all the risk in the form of a deflationary trend. You now look to gain favorable tax policy in order to turn your private property back into capital, but it is really so the accumulated value will not be "confiscated" and retributed to the risk "takers" which will reverse the deflationary trend that gives the risk the current value you want to conserve.

You pollute popular media with supply-side propaganda, vehemently arguing tax cuts for the rich or the economy will get worse. There is no incentive to turn private property into working capital for economic growth (adding supply to disinflate rather than deflate prices) if government (the sovereign power) is going to tax away most of the return (the property) to be gained.

There is plenty of supply, however, just no demand. There are plenty of empty houses for sale, and homeless people to occupy them, but they are unaffordable at any price (because potential buyers were given all the risk, and thus they are considered "high risk" and not creditworthy).

The supply-side argument is absurd to even the most casual observer, but it is not clear why. If the "risk takers" know why (and keep in mind that "taking" implies consent if not intent), the risk goes dangerously gamma, and according to your elitist hypothesis, mob rule is to be avoided at all cost. So, it is necessary to consolidate the risk for redistribution, which is your "market-making" specialty, leaving the means of power (accumulation of value) intact for elite rule.

Considering your capital-marketing practices are a public menace (increasing "the risk" for mob rule and a possible Reign of Terror), you fully anticipate being regulated, but that's alright, you have plenty of lobbyists on retainer and only two parties to contend with full of politicians that aspire to be wealthy members of the ruling class, if they are not already. No problem!

Since you "made" the market, the only risk exposure left to you is gamma--the risk that cannot be avoided, only recycled and transformed into beta risk, which you use to magnify your profit (your private property) back into capital to arbitrage (recycle) the value of the risk you have created. Where does that added value come from?

While you have accumulated wealth, you have not created it in proportion to the profit that you "made." The disproportion causes a demand crisis--there is plenty of money, but not adequately distributed. As the economy cycles into a deflationary spiral, the capital you have recycled is being evermore exposed to the gamma-risk proportion. It becomes apparent that the profit (wealth) has been accumulated in a zero-sum proportion. Now you have to testify to the social benefit of your accumulated wealth in a public forum.

Since the accumulation of wealth is an honored profession, being called to justify the accumulation is a symbol of status, a mark of achievement to be entrepreneurially aspired. You do not fear the gamma exposure because you are protected by moral imperative--the accumulation of wealth. It is confirmation of an honorable achievement as much as it is a public scourge.

As long as the inquiry is focused on the accumulation and not the creation of wealth, the issue is debated in a safe mode--your private property is constitutionally protected and public policy is focused on turning your private property into capital. The value of the accumulated risk is conserved in a gamma proportion to be recycled, exposing everyone else to the gamma risk.

As long as the political apparatus is organized to protect your right to your private property--a redistribution being next to criminal, you are protected from the gamma risk. It is essential to correlate the accumulation of wealth with the creation of wealth in order to conserve the value of the risk you have "made" and will continue to make and consolidate in market form.

As long a you are the source of the risk (made possible by the accumulation of value and reduction of demand), your exposure (the risk of liability) is limited to anything and everything but a deconsolidation of the risk. You may pay huge civil and criminal penalties for all manner of abuse, but you can afford it. You are shielded from the risk of liability to the reward because you can and will be held accountable for damages on a divisible basis in a court of law. The systemic risk you create for an indivisible public consumption is a political, not a legal, matter to be sanctioned by popular vote, which is binomially determined and bureaucratically managed by highly technical means well beyond the understanding of the non-elite.

Good job!

Everybody is exposed to "the risk" but you!

You deserve a raise!

Anyone that has not achieved elite status is exposed to the liability of the risk. Non-elite investors, for example, must have a way to turn their savings into capital without being exposed to the risk created by consolidated capital.

The only way to do that is to deconsolidate the capital, accumulating wealth for the nation created by a more divisible distribution of the risk.

It is time to create and accumulate wealth, not risk!