Popular media outlets report that the experts agree the recession is over.
Both the Federal Reserve and the Treasury refer to their role in facilitating the recovery and preventing the double dip as "resolving" the causal determinants of the crisis.
To ensure the recovery is "V" shaped, the Fed and Treasury are assuring investors that the gamma risk will be surely applied. The organizational model of "too big to fail" will be resolved (deconsolidated) to prevent a "W" shaped recovery.
Acknowledging that a deconsolidation must occur to prevent stagflating into the next crisis (the "W" shape of the regression) is a significant reversal of policy (gamma risk) sentiment. The reversal will regain the confidence lost in financial markets that precipitated a perilous liquidity crisis, but will it prevent the same organized consolidation of capital that caused it?
A deconsolidation is a necessary condition for ensuring a free-market plurality of the system in which the consumer has sufficient income to demand the market over the ability of producers to command it.
A system that ensures more demand or more command is where the organized practical model is actually macro "resolved."
In the 1990's when employment was high enough for many employees to have enough control in the marketplace to make demands, neo-conservatives were motivated to revenge the classical model and re-establish a command and control. The revanche was validated by judicial review and ironically declared public policy by popular consent in the 2000 election.
The Clinton administration's more progressive tax burden allowed for a more substantial distribution on the accumulation than conservatives cared for, but his administration also allowed for the consolidation of financial entities that led to the worst liquidity crisis since the Great Depression.
On a macro scale, the political-economy is organized neo-conservatively, and this "jobless recovery" indicates just exactly what is actually being "resolved."
Allowing financials to consolidate increased the gamma risk, and political economists that identified the risk were told by both parties they were fringe-radical ideologues that did not know what they were talking about. That neo-conservative critique persists despite the acknowledgment that "too big to fail" may need to be "resolved."
The ambivalence suggests a probability: enough deconsolidation to pluralize the system into more of a demand economy is highly improbable, and resolving the system to maintain the classical model (reducing demand through unemployment) by neo-conservative means (Keynesian economics) is being ensured in priority.
The up-tick in net worth as assets appreciate with the gaining confidence in the stability of markets is more than offset by gaining unemployment. It is a deliberate and measured "resolution." It is the empiric that spites the revanchist rhetoric.
We should fully acknowledge the empirical resolve that transforms ideology from the subordination of belief into the freedom to gain the truth in which to truly profit.
Showing posts with label macro economic theory. Show all posts
Showing posts with label macro economic theory. Show all posts
Friday, September 18, 2009
Sunday, October 26, 2008
Moralizing the Hazard
According to the McCain campaign, spreading the wealth is a moral hazard.
Mainstream economists, and the McCain campaign, argue that without the consolidation of wealth and power, capitalism will not operate to make the necessary sacrifice to produce capital and investment needed to produce economic growth and the wealth for The People. Spreading the wealth nullifies the sacrifice necessary to produce capital and wealth. It is, therefore, a "moral hazard."
Redistribution of the wealth is to be avoided because, as Sarah Palin proclaims, with her professed deeper understanding of what is right and good for The People, giving the wealth away to the people that labor to create it will ultimately make them unproductive. To suffer deprivation of the wealth is the sacrifice necessary to accumulate capital so that The People will be willing to suffer for its creation.
The deeper understanding neo-conservatives have, accordingly, is that the sacrifice of The People--the crisis we are now experiencing--is a necessary condition for the creation of the wealth. Not allowing for it to occur will result in crisis, so the solution to our crisis is to be sure that it happens. Avoiding the crisis is a hazard to be avoided, so we should be sure to continue the Bush tax cuts for the rich, and realizing that is the product of a higher moral intelligence.
In order to have all the things a wealthy person buys but does not need that trickles the wealth down to The People, must be suffered by The People not being able to buy what they need. The result is a debtor economy. Not to allow for the sacrifice is, by the deeper understanding, immoral because it deprives consolidation of the wealth, falsely argued as the formation of capital.
The capital does not have to be consolidated. Consolidating the capital, the sacrifice, causes debt, economic crisis. It always has and always will.
Instead of avoiding a moral hazard, the conservative, Hamiltonian argument moralizes the hazard.
The Good Lord Says: "...forgive us our debts as We forgive those that have debts against us." The McCain campaign has a deeper understanding of this: forgiving the debt, not allowing the debt to be suffered, is a moral hazard. It will ultimately make us all unproductive.
The Lord's Prayer is not just sanctified sentiment for soothing the soul. It is a call to action!
Obama/Biden 2008!
Mainstream economists, and the McCain campaign, argue that without the consolidation of wealth and power, capitalism will not operate to make the necessary sacrifice to produce capital and investment needed to produce economic growth and the wealth for The People. Spreading the wealth nullifies the sacrifice necessary to produce capital and wealth. It is, therefore, a "moral hazard."
Redistribution of the wealth is to be avoided because, as Sarah Palin proclaims, with her professed deeper understanding of what is right and good for The People, giving the wealth away to the people that labor to create it will ultimately make them unproductive. To suffer deprivation of the wealth is the sacrifice necessary to accumulate capital so that The People will be willing to suffer for its creation.
The deeper understanding neo-conservatives have, accordingly, is that the sacrifice of The People--the crisis we are now experiencing--is a necessary condition for the creation of the wealth. Not allowing for it to occur will result in crisis, so the solution to our crisis is to be sure that it happens. Avoiding the crisis is a hazard to be avoided, so we should be sure to continue the Bush tax cuts for the rich, and realizing that is the product of a higher moral intelligence.
In order to have all the things a wealthy person buys but does not need that trickles the wealth down to The People, must be suffered by The People not being able to buy what they need. The result is a debtor economy. Not to allow for the sacrifice is, by the deeper understanding, immoral because it deprives consolidation of the wealth, falsely argued as the formation of capital.
The capital does not have to be consolidated. Consolidating the capital, the sacrifice, causes debt, economic crisis. It always has and always will.
Instead of avoiding a moral hazard, the conservative, Hamiltonian argument moralizes the hazard.
The Good Lord Says: "...forgive us our debts as We forgive those that have debts against us." The McCain campaign has a deeper understanding of this: forgiving the debt, not allowing the debt to be suffered, is a moral hazard. It will ultimately make us all unproductive.
The Lord's Prayer is not just sanctified sentiment for soothing the soul. It is a call to action!
Obama/Biden 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.
Friday, September 26, 2008
Profit Before Growth
The economic theory in operation that has led to this current fiancial crisis, just like during the Reaganomics era and the savings and loan crisis, is that ensuring profits through welfare for the rich produces economic growth. Of course, it does not. It results in stagflation and general economic crisis.
Just like the savings and loan crisis in which loans were made to develop commercial real estate before the economic growth was there to support it (the trickle-down theory of economics), the current credit crisis was caused exactly in the same way, through real estate development, and has solicited exactly the same remedial measures.
Are we so stupid that we MUST make the same mistake over and over again?
The recovery plan offered by the treasury secretary for the financial system was predictably Hamiltonian, and opposition to it goes back to the inception of our nation and the modeling of our political-economic system.
The recovery plan is unpopular with The People, favorable to those who do not consider themselves to be a part of "the mob" described as The People. Accordingly, Alexander Hamilton's model of political economy calls for the privilege of profit in priority, assured without risk and financed by taxing The People regressively to secure the welfare of the privileged few first.
The Hamiltonian model was problematic with the popular consent of The People from the start. Not long after Independence, we had the Jacksonian era in which democracy was being reasserted as the legitimacy of power. Much of that revolved around the organization, control and practical administration of the financial system by private ownership of a small elite who considered themselves beyond the legal status of The People. Exactly the same scenario we have today.
The Hamiltonian model of political economy is what is wrong with our financial system. The model needs to be abandoned for a more pluralistic model of power and political economy. The elitist model clearly does not work for The People. The evidence is absolutely overwhelming and is decidedly confirmed by the empirics of a popular non-consent of The People. Ignoring the consent of the governed is fundamentally unconstitutional. It is illegal. Disallowing for the wisdom of popular consent, for the efficiency of pluralistic process and determination, is not just a political liability, it is a crime against civil society.
Deconsolidation of political and economic power, replacing the elitist model with the pluralist model, is fully in order.
We do not have to keep making the same mistake over and over again. We should allow the collective wisdom and righteousness of pluralistic processes, like democracy and a free and unconsolidated marketplace, to be assured in priority over a conceited, self-righteous socio-political-economic elit of an overwhelmingly verifiable incompetence!
We must abandon the profit-before-growth model of political economy (the elitist, Hamiltonian model).
The recovery plan offered by the treasury secretary is to provide the liquidity to the banking system (buy the bad debt that could not be paid due to insufficient income due to overconsolidation) and that will trickle-down to The People and stabilize the economy.
The trickle-down theory has been thoroughly tested and it verifiably fails The People with 100 percent reliability. Offering a trickle-down economic solution is an insult to human intelligence! It is nothing but the selfish conceit of a bunch of economic animals incapable of the intelligence required to admimister power toward the General Welfare. These elits do whatever they can to defeat the pluralistic processes of power because it renders their selfish incompetence obsolete.
The defining, and critically operational, characteristic of the Hamiltonian model is the regressive tax code. The first step to a more pluralistic model is a more progressive tax code.
The liquidity necessary to grow the economy before profit must be accessed where it has been consolidated into the wealth of upper incomes whether it be a business or an individual's income. If this measure is not taken, the probability of financial crisis is 100 percent, proven over and over again. It does not mean that a person or their business cannot grow and prosper. It means wealth and power cannot be consolidated into crisis proportion.
Ensuring a free and unconsolidated marketplace in priority and a progressive tax code organizes the process of ensuring growth before profit that maximizes efficiencies and innovation, ensures an easily verifiable legitimacy and productive equity, and a peaceful prosperity that, instead of always being the means of impending crisis, is not a struggle to maintain.
Very best wishes.
Just like the savings and loan crisis in which loans were made to develop commercial real estate before the economic growth was there to support it (the trickle-down theory of economics), the current credit crisis was caused exactly in the same way, through real estate development, and has solicited exactly the same remedial measures.
Are we so stupid that we MUST make the same mistake over and over again?
The recovery plan offered by the treasury secretary for the financial system was predictably Hamiltonian, and opposition to it goes back to the inception of our nation and the modeling of our political-economic system.
The recovery plan is unpopular with The People, favorable to those who do not consider themselves to be a part of "the mob" described as The People. Accordingly, Alexander Hamilton's model of political economy calls for the privilege of profit in priority, assured without risk and financed by taxing The People regressively to secure the welfare of the privileged few first.
The Hamiltonian model was problematic with the popular consent of The People from the start. Not long after Independence, we had the Jacksonian era in which democracy was being reasserted as the legitimacy of power. Much of that revolved around the organization, control and practical administration of the financial system by private ownership of a small elite who considered themselves beyond the legal status of The People. Exactly the same scenario we have today.
The Hamiltonian model of political economy is what is wrong with our financial system. The model needs to be abandoned for a more pluralistic model of power and political economy. The elitist model clearly does not work for The People. The evidence is absolutely overwhelming and is decidedly confirmed by the empirics of a popular non-consent of The People. Ignoring the consent of the governed is fundamentally unconstitutional. It is illegal. Disallowing for the wisdom of popular consent, for the efficiency of pluralistic process and determination, is not just a political liability, it is a crime against civil society.
Deconsolidation of political and economic power, replacing the elitist model with the pluralist model, is fully in order.
We do not have to keep making the same mistake over and over again. We should allow the collective wisdom and righteousness of pluralistic processes, like democracy and a free and unconsolidated marketplace, to be assured in priority over a conceited, self-righteous socio-political-economic elit of an overwhelmingly verifiable incompetence!
We must abandon the profit-before-growth model of political economy (the elitist, Hamiltonian model).
The recovery plan offered by the treasury secretary is to provide the liquidity to the banking system (buy the bad debt that could not be paid due to insufficient income due to overconsolidation) and that will trickle-down to The People and stabilize the economy.
The trickle-down theory has been thoroughly tested and it verifiably fails The People with 100 percent reliability. Offering a trickle-down economic solution is an insult to human intelligence! It is nothing but the selfish conceit of a bunch of economic animals incapable of the intelligence required to admimister power toward the General Welfare. These elits do whatever they can to defeat the pluralistic processes of power because it renders their selfish incompetence obsolete.
The defining, and critically operational, characteristic of the Hamiltonian model is the regressive tax code. The first step to a more pluralistic model is a more progressive tax code.
The liquidity necessary to grow the economy before profit must be accessed where it has been consolidated into the wealth of upper incomes whether it be a business or an individual's income. If this measure is not taken, the probability of financial crisis is 100 percent, proven over and over again. It does not mean that a person or their business cannot grow and prosper. It means wealth and power cannot be consolidated into crisis proportion.
Ensuring a free and unconsolidated marketplace in priority and a progressive tax code organizes the process of ensuring growth before profit that maximizes efficiencies and innovation, ensures an easily verifiable legitimacy and productive equity, and a peaceful prosperity that, instead of always being the means of impending crisis, is not a struggle to maintain.
Very best wishes.
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