Crisis Indicators and Risk Reduction

As financial reform proceeds, the most prominent argument against the Transparency and Accountability Act of 2010 will be that regulation to reduce risk will reduce growth.

Since economic growth requires taking risk, reducing the probable risk through regulatory reform will, by force of the argument, reduce probable growth.

Post hoc as the argument may be, growth will be deliberately slow because deconsolidation is not the object of reform. Failure of firms that are "too big" is the proposed objective which, if allowed, results in deflationary crisis (negative growth).

The proposed reform seems to forget that large, economy-of-scale firms cannot objectively fail "because" they are too big. (We should note here the reason this issue is so complex is because every effort is made to ignore and avoid the obvious.)

The purpose of being "too big" is, of course, to prevent catastrophic failure of these firms in the midst of systemic crises they cause in a too-big-to-fail, economy-of-scale proportion. Since the economy is generally dependant on the survival of these large firms (the objective), not allowing them to fail is considered to be the general welfare.

Senator McConnell's criticsim of the proposed reform is, then, correct: it institutionalizes bailouts which, whether publicly or privately financed, uses an accumulation of capital to support the bad behavior to be discouraged and the detrimental reliance to be avoided. The Senator then correctly challenges proof for what is essentially an illogical argument--solving the problem by supporting it.

The result will be further consolidation, which supports the problem of the economy being at systemic risk to firms organized too big to fail. The proposed reform will conserve the risk-to-growth coefficiency argument that high growth only comes with the ability to take high risk provided by an economy-of-scale efficiency. It will conserve the means of consolidating capital, wealth and power into a self-supporting crisis proportion with the exculpatory appearance of promoting growth with an unavoidable cyclical ontology.

While financial reform as proposed will conserve a false economy-of-scale efficiency, being too big to fail and the unacceptable amount of risk a failure indicates can nevertheless be deconsolidated.

Democrats, however, support the economy-of-scale efficiency hypothesis. It is the primary cost-control measure of the health care reform bill and will be the primary model of efficiency shaping financial reform. The bigger the better; it is an organizational evolution that cannot be stopped and reversed. Instead of fighting it, use it to the public good. Being "too big" is good if it can be controlled to not fail the system (the "institutionalizing" Senator McConnell objects to).

The result then, of course, is a political-economy in a steady-state of gamma risk and an inelastic demand for elits that manage the risk, keeping it from reaching a crtitical, crisis proportion. It is a system always on the brink of disaster--not exactly the model of reform.

The organizational model that accumulates risk will still be fully operational, and the product of that model is, predictably, slow growth. The argument will then follow, post hoc, that government intervention in free markets impedes growth and causes crises. Thus, the reform indicates crisis.

(Regardless, the proposed reform will be pro-cyclical. With the reform, as Senator Dodd points out, or without the reform, recurrent crises will not be prevented.

Whether cyclical crises is preventable is a hypothesis that needs to be positively tested rather than left to the contortions of rhetorical analysis.)

Right-wing conservatives (as opposed to left-wing conservatives who are offering reform) will then argue, post hoc, markets "must be free" to determine (to consolidate) the level of risk (and the indicator of probable crisis) into an economy-of-scale model of efficiency (the coefficiency argument that high risk causes growth, and the distribution that occurs is therefore not a zero-sum liability).

The regulatory "scrutiny" the president refers to that will fail firms that deserve (but are too big) to fail (conserving what is too big to fail and the crises it will cause) is otherwise the alpha risk. It is the kind of risk that, if we want to ontologically indicate what is at risk of failure, should be unfettered.

Alpha risk is to be supported, encouraged, through regulatory reform, not resisted! It is the inherent risk of an unfettered free market that operates without the need for government regulation. It comes with deconsolidation of economy-of-scale modeling.

The best way to ensure transparency and accountability is to ensure the functional efficiency of unfettered alpha risk.

Encouraging alpha risk maximizes transparency by failing firms that are not transparent. The most trustworthy and accountable firms remain.
Accountability (the alpha risk) is then the risk that both does and should survive the marketplace.

At the same time, alpha risk maximizes economic growth. Success replicates itself and that success is the accountability that ensuring a pluralistic organizational model affords. Replicaton of that success (conservation of risk in the alpha form) is dependant on practical modeling.

It is a mistake, if not a malfeasance, to resist proliferation of the alpha risk in the name of eliminating all risk. By its proliferation, the "risk of liability" is reduced to success or failure in the marketplace rather than success or failure in a court of law or any other form of government intervention.

Instead of eliminating risk, whether public or private, alpha risk should be maximized.

Maximizing alpha risk minimizes the need for government--it minimizes an accumulation of gamma risk into a crisis proportion. It not only allows for the freedom to succeed by removing barriers to entry, but the freedom to fail by eliminating what is "too big" to fail, not "the risk" of failure.

True that a multiplicity of small firms will not take the big risk of a big firm because they literally cannot afford it--they cannot afford to fail (a coefficient that demands an efficiency far in excess of the bigger firm which is likely to be much more costly and abusive because it can afford it). The smaller risk of multiple firms is equivalent to the big risk of fewer firms except the small firms cannot afford to over-leverage into a crisis proportion (the crisis indicator) because the risk, and the crisis, is limited to that one particular firm--it is limited to non-systemic alpha risk.

So, which kind of risk do we want...the big risk or the small risk? Just like health care reform, we will be stuck with the false efficiency of an economy-of-scale for financial reform too. (The needle on the crisis-indicator meter just broke!)

Maximizing alpha risk through deconsolidation is the prudential oversight needed to achieve a form of government that governs least, minimizing the probability that risk will accumulate into the form of absolute power and corruptibility (the gamma risk) whether public or private. (The alpha risk distribution is essentially the ability to say "no" in the marketplace. It is the freedom to fail.)

An economy-of-scale model beneficially reduces alpha risk for firms, but the benefit of "taking" the big risk reduces economic growth. Reduction of both alpha risk and growth (expansion of the marginal benefit to firms) increases the gamma risk in proportion to the accumulation of the benefit. The need for government regulation and intervention (a distribution by command rather than market demand, or the risk "taken") increases, like we see now with the unpopular bailout of large, financial institutions and the call for a re-established regulatory authority that was dis-established to reduce the need for government.

(Note that the risk "taken" in the latest crisis has cleverly kept the benefit accumulated, rather than distributed, on command. The result will be a longer recessionary trend with a "jobless" recovery, keeping markets sufficiently inefficient to sustain the full marginal benefit. The inefficiency is the lack of alpha risk distribution that requires a distribution occur on the accumulated benefit in command form--the need for government. If the distribution does not come from the accumulated benefit, the result is a large budget deficit and stagflation, like we have now. The argument will then be falsely made that the deficit is caused by too much government which, in turn, results in slow growth.)

Again, the conservative argument for less government is post hoc.

According to conservatives, the absence of government in the marketplace causes less need for government (the argument is fallaciously "after this, therefore because of this"). It falsely argues a temporal sequence to indicate a causal relationship.

In the current case, for example, less government in the private sector caused the need for government in a measurably large, multi-trillion dollar proportion (the TARP plus the budget deficit). The variable in which "the need for government" depends (the dependant variable) is the degree of economy-of-scale. How consolidated the marketplace is (the gamma risk accumulation) determines the degree of (the need for) government presence (the gamma risk distribution).

Reducing government is dependant, therefore, on the gamma risk distribution (financial reform) being limited to largely ensuring maximum distribution of the alpha risk, or deconsolidation of the marketplace (what too-big-to-fail, economy-of-scale organizations do not want).

Starting with an unconsolidated financial sector, a model for maximizing investment in a disinflationary, pluralistic model of growth (full employment with low inflation and a high level of direct, alpha-risk accountability that renders less need for government) is entirely possible. It is what the ground-swell sentiment for change is calling for. Not a revanch of post-depression regulations, but a modality shift.

Instead of accepting the inflationary pressure of a highly restricted supply coefficient with a slow growth pattern that proliferates the economy-of-scale model of efficiency, events have transpired to support confirmation of an alternative hypothesis to the conservative model. It is a tired model being stubbornly applied despite miserable, overwhelming failure to promote the general welfare.

For example, mark-up on the current reform legislation entails derivative markets. It is a realm of finance that few people, including legislators and regulators, fully understand. This, then, is where the conservative model will be most fully supported and stubbornly applied--through swaps and futures. It is an area of the financial market that has a high capital requirement, defining an exclusive domain for large firms to apply an economy-of-scale efficiency inimical to the interests of Main Street.

Acting with minimal alpha risk and maximum gamma risk, accumulation of capital in the futures domain, with a variety of innovatively obscure investment vehicles and a regulatory arbitrage to hide the micro motive toward a macro effect, indicates low growth and impending crisis.

Innovative proliferation of "risk-transfer products" instead of investment in alpha risk distribution will surely trend into crisis. Accumulation of capital into derivatives will not support the value of its previous repository of toxic waste. This will be very damaging to the economy and must be hidden in some way despite the effort to make it all more transparent and accountable.

Even though derivative markets may be rendered more visible, it will be a means of influence that is more visibly not understood. The effect--manipulation of markets and trends with a highly limited risk of liability (accountability) to the consequences--will be the same even after the reform.

(All the means of risk transfer may be more visible, but we won't know what we're looking at until it's too late and the deed is done, just like last time. There will, of course, be those who can read the signs without being on the inside of the trade (the risk transfer), but they will be dismissed as paranoid crackpots obsessed with conspiracy theories...just like last time.)

Popular sentiment for a practical deconsolidation of power is highly salient because the benefit of the economy-of-scale model is highly exclusive. It is equally clear that accountability proportionally diminishes with the accumulation of wealth in the form of power.

It is clear that power does not trickle-down. It consolidates. It achieves an economy of scale. The risk of liability to the reward is so diminished (so consolidated) that bad behavior is reinforced and good behavior is not fit to survive, trading the alpha risk for gamma risk ("risk-transfer" being the "product").

Advocates of too-big-to-fail, economy-of-scale efficiencies argue that the bigger the firm, the more risk can be taken. Contrary to these advocates, and proponents of reform, however, the accumulation of risk that results is not the problem to be managed, it is the size of the firms.

Supposedly, unfettered consolidation of industry and markets (falsely refered to as free-market economics) allows for a level of risk to effect a level of economic innovation and growth (achieving a greater coefficiency) than the model of pluralism (free-market economics) will allow.

It turns out, however, that economy-of-scale efficiencies accrue massive systemic risk and unemployment (slow-to-no growth). The touted coefficiency is apparently to be found elsewhere.

It is no coincidence that equities are getting support as we proceed with a jobless recovery. This is not a function of capital formation, but a zero-sum coefficiency that was very clearly indicated well before the current crisis.

When capital was being overleveraged in the name of capital formation to achieve a high level of growth and employment, but resulted in negative growth and unemployment, crisis was being indicated by the level of risk. The gamma risk (the need for government intervention and the lack of free market economics), for example, finally reached a critical, crisis proportion. Bankers and government officials met on a weekend in the middle of the night to devise an ad hoc plan to allay what was, by mainstream, Ivy-League analyses, a high level of risk that did not exist.

Even though the risk was being hidden in dark-market investment vehicles and schemes does not mean it was not detectable.

Deniable but not undetectable, the perpetrators of this enormous fraud knew about the high level of accumulated risk because they were executing it, and the victims lost value in zero-sum.

Unemployment has added value to equities that were sold off in a panic to institutional investors. That value will be retailed back to small investors at a profit looking to recoup their losses on these and other assests lost (sold off) in the recessionary trend. When added to the value of borrowing at near zero rates to buy treasuries to be retailed at three-times the rate, banks continue to gain value at the expense of smaller victims who remain to pay the public debt being bought and sold by the banks to "finance" it. The zero-sum detriment side to the "trade" of "risk-transfer products" entails a gamma risk and a lack of public trust at a level of unsustainably monumental proportion.

Despite the inherent, unavoidable accumulation of gamma risk, the Hamiltonian model is well conserved and fully operational as long as the accumulated benefit is not the source of the distribution. The means of accomplishing this undergoes innovation culminating, along with the over-accumulation of gamma risk, in regulatory reform.

The risk to conserving the current practical model is to ensure maximum alpha-risk distribution financed through a progressive tax code (reorganizing the model for pluralism financed from the accumulated benefit in a disinflationary, rather than a deflationary or inflationary, manner).

The progressive code we have now, with a public debt progressing exponentially beyond revenues, serves to conserve the problem toward application of a solution. The risk of inflation is extremely high because the distribution is coming from a budget deficit funded from money borrowed from the accumulated benefit.

It's the dog chasing its tail. The public expenditure, with interest, overruns the ability to pay the debt without either inflating or deflating the economy.
(Inflation will be the policy preference because it has a distributive quality while still accumulating gamma risk.)

The gamma risk, instead of being reduced, just keeps accumulating to a crisis proportion. That proportion, of course, anchors the mission of reform to limiting the gamma risk to a non-crisis proportion.

If the choice is adversely inflation or deflation, the risk of crisis is very clearly indicated for the near and long term, especially if we reform the financial system by conserving accumulation of risk organized into economy-of-scale efficiencies, or too big to fail, which is what the $50 billion emergency fund is for.

The False Efficiency-of-Scale Argument: The Particular Case of Health Care Reform

The President proposes a "health care exchange" that will create an economy-of-scale efficiency. It will simulate, he argues, the effect of a free-market economics through collective bargaining power.

Why is it necessary to simulate a free-market price through non-free-market means?

The President's exchange plan keeps the decisional process a product of consolidation which affirms the belief that centralized control is the model of efficiency despite having produced the Great Recession.

According to the President, the exchange is a proven, too-big-to-fail model of success that will benefit "The People" instead of insurance company profits.

By organizing massive bargaining power "like Wal Mart," the President says (which is organized to be "too big to fail" despite the Great Recession), We (The People) will have all the benefit of a proven organizational technology on our side to effect the change we need.

While the President argues the benefit of a too-big-to-fail organizational technology to a fare-the-well, he does not consider the detriments.

The Wal Mart Model, for example, has for many years consolidated the marketplace. While it affords a competitive price, its has meant the demise of small businesses that are our best source of employment. It is no coincidence that the demand now is for "jobs jobs jobs!"

Since Wal Mart is too big to fail, the detriment (the organizational error and distortion that is inimical to a free-market economics like lower prices but with a diminishig demand that causes delfation) is turned into a success that accumulates along with the benefit. Organizing for this kind of success, whether it is consumer retail or health care, is to also organize for massive failure that the marginal beneficiaries (like shareholders, and in the case of health care, its providers) are immune and, even worse, have a stake in conserving.

In a marketplace that is allowed to consolidate, the error (the detriment, the failure) proliferates and the benefit accumulates. In a free-market system, the benefit proliferates and the risk dissipates. Instead of our MBA graduates organizing a highly innovative, pluralistic economy, they are paid huge bonuses from the accumulated profits of organizing a consolidation of industry and markets in the name of efficient economies of scale. The result is the Great Recession, very expertly accomplished with the value of The People's debt being worth more than the value of their assets.

Is this where the organizational plan for health care is headed? The probability, based on experience of using this model, is very high. It is a risk we do not have to take.

In the case of health care, consolidation of the market will benefit all those health care professionals sitting around applauding the President's initiative when he announced putting the plan to a vote. It will conserve an accumulative benefit with an accumulative cost that deflates the economy and causes Great Recessions through consolidation of industry and markets.

Whatever cost savings can be had from an organized bid-exchange will be easily countered by the organized consolidation of the providers. The cost of health care will be perpetually parked on the ask, never on the bid.

The market will be organizationally rigged with an economy-of-scale efficiency.

When the revenue stream on potato chips runs out to support ever-increasing costs in the authoritarian name of public health and welfare, it will be something else ad infinitum. Freedom is crushed under the weight of holier-than-thou elits interested more in accumulating wealth and demonstrating power than administering the general welfare.

The benefit will be consolidated by health care providers at the expense of insurers. Costs will not be reduced, they will be a consolidated benefit--an accumulation of wealth and power that causes crises with the highest dergree of predictive utility.

The People should not allow elite authorities to persist in error.

Did Sub-Prime Lending Cause the Liquidity Crisis?

Reviewing last year's events toward the precipitous liquidity crisis there is a tendency to identify the sub-prime lending market as the primary cause.

Sub-prime debt was securitized so that it all looked triple A in the aggregate, but that did not cause the crisis. The crisis was caused at the fundament: a lack of income to support the value of the debt instruments, thus called "sub prime."

Buying and selling the sub-prime debt was predicated on a theory of economic investment and growth that fails, or nulls, its hypothesis in every case.

Trickle-down economics always nulls its hypothesis. It accumulates and consolidates the value, the income, needed to cause the growth and distribution of income to pay the debt. Pretty simple!

Rejection of making permanent a public policy plagued with a continuously nulled hypothesis was definitely worth voting for in the last election cycle.

In retrospect it is time to confirm what the truth is by very simply rejecting what it clearly is not. This is a function of critique: testing the hypotheses of theoretical models, and this particular model of trickle-down economics has been thoroughly tested negative for the results it promises. It caused the sub-prime liquidity crisis because it does not work.

The solution is very easily, very simply, induced from the evidence: if you want to prevent liquidity crises, do not use trickle-down economics.

Making sub-prime loans did not cause the crisis. The accumulation of wealth to trickle down to pay the debt caused the crisis because "accumulation" and "trickle down" (distribution) are antithetical. Remove the contradiction--what conservatives say requires a secret knowledge to understand why it really works--and the problem is actually solved rather than continuously reinvented in the guise of empirical improvement.

It is no secret that the trickle-down hypothesis is continuously nulled.

Slow growth plagued the Bush administration despite record budget deficits that will continue well beyond its eight years. During that time, growth was most robust when tax policy favored the middle class. When those middle-class tax cuts expired, so did the more robust growth.

Growth--expanding the pie--supports the dollar and a "fundamentally" low interest rate. Instead, the rate was "technically" low to support the trickle-down theory with positive confirmation.

Of course, truth kicked out the front door just comes in the back.

The funds provided by the "technical" rate, instead of adding liquidity to be trickled down, were retained at the top. The funds remain there, in a steady state of accumulation, which is why the economy is on a slow slope to recovery.

The funds to support the trickle-down hypothesis (an extra-large buget deficit AND a low interest rate) were technically provided but used to finance the over-leveraging, and consolidation of the wealth, to a larger-than-usual crisis proportion.

(Hedge fund managers called the over-leveraging "the magnifier effect" which technically indicated the deviation from the normal distribution would not be a random event.)

All the indicators were technically there to prevent the magnitude and precipitousness of the crisis, but that does not allow for the gratitude the little people should have for the technical elits that saved us from the folly of their own devices.

The wealth, even with a record budget deficit, did not trickle down to cause growth. Instead, it accumulated and caused the most severe deflationary trend since The Great Depression.

More disturbing is that the crisis was so easily predictable, indicating how entrenched a lack of empirical methodology is for the development of public policy. It is like living in the Middle Ages when the earth was flat and at the center of the universe.

Even after the crisis and an election cycle with a clear mandate to make application of the truth permanent instead of the Bush tax cuts, we persist with a failed model of political economy that is methodologically no less akin to what Galileo faced with his observations.

Secular economic reality is the remaining legacy of the empirical heresy.

The "New Normal"

Treasury secretary, Geithner describes the "new normal" of the business environment after last year's liquidity crisis to indicate where we go from here. The implication is that the well-trodden path is to somehow be different.

With unemployment continuing to rise, more foreclosures in the offing, and continued consolidation of net worth, the "new normal" is the old Keynesian reinvention of the old classical model and dynamics of capitalism. Nor is the global economy anything all that new.

The type of modeling predicts future trends.

Capital, industries and markets will continue to consolidate into the business model of "too big to fail" which bodes well for earnings and explains the steep rise in equities despite the prospect for economic recovery being very bleak by the same measure.

It used to be, classically, that earnings will not improve unless there is a distribution on the accumulation, causing employment. The gamma risk was virtually non-existent. Now, however, neo-classically, the money supply is maintained to allow for profits to lead employment (refered to as "capital formation") in a stagflationary trend. It is largely the result of managing a burgeoning gamma risk that is the "demand" for government action, substituting for the lack of demand (a deflationary accumulation) in the marketplace.

Geithner is indicating that, despite the rhetoric for a high gamma risk, the classic macro model will be the predictor for micro trends.

Since the classic model calls for continued accumulation, a double dip is highly probable. The gain in equities will retrace by at least half.

A macro distribution will not occur and pull the economy out of recession until commodities reflect the fundamentals with another sharp dip that will sustain a disinflationary trend and bring the consumer's dollar back in to support a secular, macro recovery instead of supporting the accumulation phase of a classic cycle.

What is new, or neo-classical, is the size of the money supply. It is so large that its consolidation allows just a few large entities (too big to fail) to manipulate, if not command, critical global markets, like energy, and cause the length and breadth of trends (and if you can cause it, you can certainly predict it).

M&A activity will increase in the second dip, indicating the end of the accumulation phase of the business cycle and a secular bull market to give the mergers and acquisitions value.

When the retributive value on so much value accumulated gets so high that the gamma risk becomes critical to profitability, commodities will lose support and a macro distribution will occur. Maintenance of the organizational model, and the big earnings, of being too big to fail gets support. The support will be the "ethic" of the marketplace despite Geithner's call for a "new business ethic" to guide us forward.

Ethics is mere rhetorical legitimacy if the economy is organized for command manipulation. The ethical reality, the legitimacy, is just whatever the outcome is (a false ontological legitimacy of the ends justifies the means as opposed to a true free-market ontology in which the means justifies the ends). The outcome is mitigated by rhetorical artifice and lengthy political processes resulting in apathy and anomie, reducing the gamma risk without reducing the retributive, economic value, which would defeat the value--the purpose--of the practical (predictive) dynamic model.

A distribution phase that reduces the gamma without retributing the value puts tension in the system to be managed. The result will be stagflation into the next crisis as the Fed and Treasury manipulate the neo-classical, Keynesian money supply to accommodate (resolve) low inflation and high employment within a deflationary (accumulative) organizational model of too big to fail.

What ultimately fails, and is resolved, is employment, accumulating the retributive value, strengthening support for the gamma risk, bringing the preferred organizational model into question. The risk is not likely for at least the next four years, and the market trends will be very similar to the last four. Hardly a "new" normal, just new gamma-risk rhetoric to support the norm.

An Organizational Hypothesis

Articles published to griffithlighton.blogspot.com argue that the probability for an increasing depth and frequency of economic instability worldwide is an organizational problem that is naturally dependant on an organizational solution.

If the hypothesis is that a more equitable distribution of the benefit produced by organizing to be "too big to fail" through public-private consolidation will result in pluralizing the marketplace and achieving economic recovery and sustainable growth, the evidence extant suggests a low probability of success.

Efficiencies are dependant on organizational size. Maintaining that "bigger is better" is to validate, not verify, a nulled hypothesis.

Again, here we are, needlessly making the same mistakes over and over again, clinging to political-economic models designed to maximize monetary valuations into difficult to verify, abstract, evaluative absurdities at the expense of other measures of practical efficiency that minimize costs and maximize benefits.

If we think that consolidating into the public sector is going to deoperationalize class consciousness into a more equitable collective consciousness, that is not going to happen with a "bigger is better" organizational model.

Organized to be "too big to fail" with a collective, public-private legitimacy and authority does not ensure individuals will not act selfishly within the public trust. We will very probably learn to encourage small enterprises that operationalizes self-interest, and class consciousness, from the bottom up with a highly verifiable and close accountability, or a free-market economics in priority.

Where the market is allowed to act with full measure, without barrier and consolidaton, the distribution of costs and benefits achieves an efficiency that can be measured with a diminishing value of class consciousness which is otherwise a significant measure of a consolidated wealth and power, or what is the verifiable inefficiency of "too big to fail."

Economy of Innovation

President Bush says that regulatory reform of the financial sector should allow for innovation. The general suggestion is that regulation of industry and markets stifles innovation, including financials.

That is incorrect.

First, innovation is likely to occur where the capital is, and if the capital is allowed to concentrate as much as it is (not spreading the wealth around), then innovative ways to produce profit without growth are assured, has occured, and has resulted in general crisis.

Innovative ways to prevent crisis (optimal investment), instead of causing crisis, requires spreading the wealth around, or deconsolidating the capital.

Regulation can also produce innovation to control externalities, like pollution. Unfortunately, the capital is so consolidated, the innovation is resisted, considered a cost, not a benefit, so it suffers deficient investment (economic growth) and tends to be exported along with the jobs associated with it.

Neo-conservatives opt to keep the regulatory authority proactively cooperative, acquiescent, and a sycophantic satrapy organized to give the abuses of consolidated power the legitimacy of public authority, and to reactively manage the risk, the cost, to a minimum.

For the financial sector, the lack of regulatory authority produced negative innovations that are now being dealt with as negative externalities to be crisis-managed by the regulatory authority.

The negative externalities are the product of extreme misfeasance if not malfeasance of a public/private power structure called "The Iron Triangle." It is the bureaucratic model of power and political economy and it yielded a competence for corruption because its power is so huge and concentrated (non-pluralistic). The result is a systematic, structural, failure not seen since the Great Depression.

There is no reason to believe switching this bureaucratic form of power to a socialist legitimacy will be any less corrupt, and here is where the conservative rhetoric is focused to instill fear, loathing, and logical fallacy.

What needs to be innovative about the financial sector?

Innovative ways to lure consolidated capital out of its horded haunts yields crisis. We have incontrovertible empirical proof of that by living it now, but McCain still wants us to "believe" that innovation of leverage finance, encouraging it with a highly regressive tax code, will "create wealth." No, it creates crisis!

According to McCain, and what has proven to be a greedy, malfeasant, neo-conservative cohort, ensuring a very clear means of verifying class distinction drives productivity, innovation, and wealth. The argument is that if we do not subsidize the rich to stay rich, by not spreading the wealth around, we will suffer the effects of socialism--low productivity.

Policies and programs that encourage innovation of financial instruments yields low productivity and economic growth with the empirical proof of the current crisis. The employment we have had has been mostly to confirm ensuring class society of rich and poor so that we will be productive by exporting our good paying non-service jobs. A service economy, that is, an economy of servitude was created. Being assured A 2.50 an hour job serving food is not the model of innovative financing that assures creating the wealth. What it does assure is consolidation of the wealth and a workforce structurally enslaved to serve it up.

Mr. McCain and Mrs. Palin... NO THANKS!

We need our financial sector to very simply finance innovation of productivity in the marketplace. If the talent we have now--greedy, self-involved, incapable of seeing past their self-interest and the consciousness of their class--cannot identify the entrepreneurial talent that will pluralize the marketplace and cause productive capacity, full employment and low inflation, then let's get those that will, and we know all too well that will not be the party of McCain and neo-conservatives.