In the previous article, two technical errors were identified that accumulate to give a spurious and confounding appearance to the metrics. These errors create what technically appear to be an ontological, random volatility, which is arbitraged into an accumulated zero-sum valuation of the risk/reward.
The trage appears to be subsequentially derived, which gives the appearance of an exculpatory (undirected) accumulation of value. Although the value is produced with a seemingly unintentional extension of the risk, the outcome is a predictable eventuality, and thus preventably culpable, nevertheless.
Technical features dominating the current debate over deficit spending and debt reduction are: the anchoring effect and causal attribution. These two technical aspects will determine the extent and valuation of the risk proportion going forward.
It is important to recognize that the risk proportion operates with a detriment that is deliberately directed to derive the value and is fully culpable. While it may appear, for example, the two parties are locked in conflict, the resulting political settlement (the compromise) only gives the appearance of a pluralistic ontology. It results in a deliberate, binomially derived detriment that is cryptically cooperative by systematic design, offsetting the risk into a white-space of inculpability and virtual, bi-partisan unaccountability.
It is important to understand that the deliberate, binomially derived detriment will benefit the upper class in fully expected Hamiltonian fashion if a third-party element is not present to deliberatively limit the value of the risk proportion. Refusing to increase the debt ceiling, for example, will immediately, deliberately, limit the inflationary erosion of middle-class wages, salaries and savings which systematically deposits into upper-class accounts hedged to cause the risk that derives and accumulates the proportional benefit.
While not raising the debt ceiling is technically risky because the working, Hamiltonian model fundamentally assumes the Federal government will never default, the Tea Party delegation fully expects the budget to be technically derived within that assumed value. Without raising the debt ceiling, the value of the risk changes the nominally arbitrary value of the dollar denomination--inflation becomes a more definitive measure of austerity anchored to the limit.
With a less arbitrary, more stable, nominal value of the currency, the causal relationship between risk and reward is politically less alienated and not as technically ambiguous. Thus, it is more difficult to manage, and manipulatively arbitrage, the risk with rhetorical devices which, combined with inscrutable, technical jargon and analyses, easily misattributes the source and apparent culpability of a detriment (the austerity) that is deliberately derived on the inside, in the dark, by an exclusive, financial, elite authority that operates to literally command market performance. (The Republican sentiment for not raising the debt limit was reversed to accommodate the forex arbitrage. It would have blown the forex stop/limit algorithms with a more direct and unambiguous accounting of inflationary expectations. Not being able to manipulate expected values day to day, if not minute to minute, blows the certainty principle of the hedge. Limiting the debt proportion reduces the hedged product to more of a gamble, destabilizing the means to derive exclusive value from an extensive risk proportion--including commodity-futures price inflation--alien to common understanding, including members of Congress, and the commonwealth.)
Determining the causal factors for inflation risk, for example, is largely focused on the energy-risk premium and the strength of the dollar. While both risk dimensions are being fundamentally determined by an over-accumulation of capital, it is not technically considered to be a causal determinant for political purposes (i.e., because it infers a technical liability of creating reward by causing the associated risk proportion).
The result is fundamental attribution error, which accumulates econometric errors much as Schumpeter described it. These cumulative errors create so-called unexpected volatility and the value to be arbitraged. Capital then continues to accumulate instead of being distributed. The risk proportion increases instead of being reduced although the extended, economy-of-scale capital formation is supposed to legitimately create jobs and sustainable economic growth through market innovation.
Instead of providing for general economic health and welfare, we are committed to a so-called efficiency provided by organized economies of scale that are too big to fail. Corpulant corporates are not, as we have seen, the picture of health and welfare. Instead of the American dream, they prove to produce debt in proportion to the wealth accumulated. (Determining who owns the debt and who owns the wealth--the debt-to-equity proportion--is the political game played to distribute the risk and accumulate its value. The distribution of risk and reward defines class distinction, inversely correlated with the ability to pay the debt and avoid the risk: the less able to pay the debt, the more likely to incur the risk.) Instead of innovating industry and markets to reduce risk and leverage a general benefit, the innovative capacity of big corporates largely operates to innovate the means of deriving a risk-detriment that accumulates value in zero-sum with limited liability.
Within the political, debt-reduction debate, the increased risk proportion (reducing the deficit spending needed to effect a distribution and prevent a crisis proportion) is being described by Republicans as "spending reduction necessary to prevent our children from inhereting an oppressive burden of debt." This rhetorical device represents a significant technical error associated with economic recovery and, as politicians are apt to describe it, the common acquisition of the "American dream." (The wealth is what is largely inherited, which causes debt that is politically assigned.)
Intersecting the budget process with a third-party presence has forced a close examination of the Hamiltonian model toward securing the American dream. Refusing an unlimited debt ceiling, for example, has forced us to clearly account for the risk the model assumes in an ever-larger proportion. Both Democrats and Republicans resist the call for a more Jeffersonian model because it destabilizes over 200 years of accumulated wealth and power that, as Jefferson predicted, has systematically evolved into keeping the American dream within the exclusive domain of the rich and powerful in the name of public service and the general welfare.
Technically defining economic problems as errors implies they are unintentional. It is a significant error to assume these problems are not intended because with that assumption the errors are allowed to accumulate into a crisis proportion that appears to be ontologically derived and undeliberate. Thus, the dirty deeds derived from these so-called "errors" tend to be unaccountably accomplished with a limited liability.
Arguing, for example, that the current budget deficit, and its unprecedented proportion, is the product of left-wing policies and programs is a deliberate error intended to support the benefit derived from the detriment (the accumulated value that resulted in the Great Recession). It is an error of fundamental attribution that anchors the debate, and corrective accountability, to a political parsing of rhetorical artifice. To wit: by means of fundamental attribution error, solutions are anchored to policies and programs that support the problem, accumulating errors into a crisis proportion.
The available policy options are reactionary at best by deliberate design. They are anchored firmly to the right, well beyond the reach of any proactive sentiment which is ideologically branded as socialist or communist. Any attempt to be free of this tyranny of deliberately accumulated errors is characterized as a call to "end the right to private property and its individual pursuit" when, quite the contrary, it is to ensure it.
Since probable policy solutions are anchored to conserving a practical, working model that causes the problem to be solved (i.e., deliberately operating in error), the current recessionary trend will persist if not get worse.
A depressionary trend will decisively move practical politics to the center. Since policy tends to be more pragmatic and non-partisan at the center, all policy options will be maintained to prevent another Great Depression (in which the risk of loss is fully assumed). Notice, for example, that policies adopted following the Great Recession are to control the risk, mostly by increasing margin requirements and a resolution authority that could reduce the number of firms, rather than deconsolidate its proportion. Instead, policy was negotiated and compromised into increasing the risk proportion through consolidation in a classic, Hamiltonian fashion (with the risk of loss fully assumed).
Policy options are designed to conserve the ideological basis for policy formation and evaluation (by negotiated political settlement, which yields a compromise that conserves the problem in the form of a solution).
A non-partisan move to the center is ideologically resisted because it diminishes the reward accumulated from an ongoing detriment deliberately derived to enslave The People. Pragmatism tends to diminish a progressively autocratic consolidation of elite power and authority (whether Democrat or Republican) shammed with the cause of liberty and the path to prosperity. A non-partisan, non-loyalist, unideological sentiment tends to correct for this error that Jefferson warned would surely accumulate into a proportion of crisis and revolution, just like monarchy did, when the Hamiltonian model of political-economy was adopted at the inception of our nation.
Both Republicans and Democrats realize that a third-party element--like the Tea Party--tends to force the technical inflexion point at which the risk of loss is fully assumed. Refusing to raise the debt ceiling, for example, would collapse the accumulation of errors and anchor policy options to fundamentally causal attributions.
"American exceptionalism" may unwittingly be a revolution that technically emerges from the right rather than the left. It will become abundantly clear that limiting the accumulative burden of debt (not raising the debt ceiling) technically requires the elite pay more and everyone else pay less.
It will become abundantly clear, the argument that "we cannot continue to run up debt we don't have the money to pay" is a fallacy of composition. Debt is by definition composed of people that don't have the money to pay it, but owe it to people who don't need it, which is why demanding payment will always cause a crisis if the ceiling is not rising with the "demand" for money (i.e., if it is not monetized).
The "we don't have it" argument is an error of attribution that attributes debt being the problem to be solved rather than what causes the debt. Not using the money accumulated to pay the debt it causes accumulates the need to increase its proportion to equity--it increases the need (the demand) for debt. It is an error that accumulates into a crisis proportion--increasing debt-to-GDP--as long as we fundamentally misattribute the problem to be solved (i.e., misattribute the cause of the problem).
The argument "we cannot continue to run up debt we don't have the money to pay" is a deliberate deceit that accumulates a benefit by causing detriment (the problem to be solved). It is a deliberate zero-sum that does not advance the cause of liberty but enslaves the ambition to power and self-determination to the consolidation of a power elite.
We cannot continue to run up debt the non-elite don't have the money to pay.
Yes, we have a spending problem: the majority of Americans do not have enough income to spend us out of recession, much less pay down the debt and reduce the deficit. That money has been consolidated into the upper class by assigning the debt (the sacrifice) to everyone else, which knowingly increases the demand for debt--it knowingly derives a narrow, distributive benefit by willingly causing a broad economic detriment for "common" consumption.
Half of American household incomes do not pay any taxes because they do not have it to pay. The metric, rather than indicating the top income class is being overtaxed, indicates an over-accumulation of income at the top. Requiring the lower half pay more on the deprivation in zero-sum will over-extend the detriment that accumulates the benefit at the top--it is the point of inflexion to be avoided, especially if the tax code is rendered less progressive.
Both parties know that such an overextension of the risk proportion would be a catastrophic accumulation of errors. Thus, they tend to resist spending cuts and debt limits through a process that appears to be engulfed in conflict but is really conflated to conserve the value of the risk proportion without causing "change we really need." The deliberate conflict achieves a convincing dialogue of political-economic concinnity, never allowing the story to progress beyond the perennial struggle between good and evil. Opposing values never fully converge (the risk of loss is fully assumed but never fully consumed); and with each side claiming that "the good" is technically on its side, the story never ends (and the debt ceiling keeps rising).
Accommodating the technical errors that continue to econometrically accumulate requires raising the debt ceiling, which has led Standard and Poors, for example, to downgrade the dollar. A weaker dollar will raise interest rates and increase the debt (i.e., the impending crisis proportion we are trying to avoid as we exact austerity to achieve prosperity). Already beleaguered middle and lower-class incomes will be exacted a triple-dose of austerity--their incomes will buy less as prices continue to rise, pressured by an over-accumulated capital that has stagnated if not reduced their incomes. If this is the "Path to Prosperity," it is a narrowly defined path littered with jagged technical errors the middle and lower classes will have to travel in their bare feet.
Downgrading U.S. government debt is one way to indicate the accumulation of errors, recognizing the sum of technical errors that are accumulating while anticipating economic recovery. If everything has to be on the table, both austerity and prosperity are critically infused with the risk of loss. Their value is fully assumed, both separately and together, as a zero-sum detriment. Both austerity (accumulation) and prosperity (distribution) present as value of an equally bad proportion, representing a retributive risk that technically, try as we may, cannot be avoided, only re-presented in the future, as it has in the past, in the form of unlimited debt, war, and welfare.
Raising the debt ceiling finances war and welfare--the two aspects of political-economy that are being kept off the table and the two aspects historically associated with the technical accumulation of capital (austerity) and its effective distribution (prosperity).
The technical indicators are showing an extreme gamma-risk proportion that correlates with an over-accumulation of econometric errors. Gamma risk is an accumulation that cannot be avoided without its organized deconsolidation. If it is not, and the risk is organized to continuously accumulate, the classic forms of distribution will manifest. It is a choice between war and welfare (deficit spending and the risk of loss fully assumed). If we do not use our naturally endowed freedom to choose a deconsolidated valuation of the risk proportion (with less need for debt and the risk of loss fully reduced), Nature will.
Nature attributes value without error. Its judgment is perfect, absolute, untranscendable; and its retributive value is undeniable--it is fully valued in priority. It is an unavoidable risk, fully assumed whether we believe it or not...whether we freely choose it or not, presenting us with the paradox of our self-determination and the source of existential angst in a civil society that suffers the conceit of existing beyond the dictates of God.
Showing posts with label practical modeling. Show all posts
Showing posts with label practical modeling. Show all posts
Thursday, April 21, 2011
Wednesday, May 26, 2010
Externalizing the Risk
The formula for maximizing margin is to minimize the risk to that margin.
As an economy consolidates into economies of scale to reduce the alpha risk, the risk accumulates into beta and gamma risk. Since the risk has been detached from the alpha fundament, and it has to go somewhere, the formula for maximizing margin then becomes: internalize the profit and externalize the risk. The result is the economic condition we are in now with large, consolidated corporates accumulating profit and distributing the risk.
Profit is detached from the risk, increasing the marginal profit. The risk is transformed, not reduced, and redistributed without the profit. The risk is transformed into crises that cyclically occur at a depth and frequency of the distribution. Currently, the risk has become so external to the profit we now see the prospect of a lengthy recession and a possible double dip with the threat of deflation.
When the profit does not distribute with the risk, gamma risk accumulates and crisis will occur.
In the form of alpha risk, profit distributes with the risk, providing a disinflationary, distributive, pluralistic benefit to the market.
Accumulation of value, on the other hand, like we see with an economy-of-scale efficiency, provides a non-distributive, non-pluralistic, inflationary benefit (the marginal profit). The accumulated benefit harbors the risk of deflation--negative growth, unemployment and declining prices (general economic crisis that causes the need for authoritarian management of the risk, or The Iron Law of Oligarchy and emergence of The Iron Triangle form of government).
By ensuring an alpha-risk distribution, pursuit of profit not only externalizes as reciprocal value, providing goods and services with good and adequate consideration, but also imparts a distributive value that stabilizes prices with adequate, disinflationary liquidity. The result is positive growth with declining unemployment, debt reduction, and reduction of systemic risk at the unaccumulated fundament.
Alpha management of accumulated (externalized) gamma risk is a strategy that could have been easily employed by the Obama Administration and a Democratic congress.
Instead, the government (The Iron Triangle) engaged an inflationary risk-management program (described as "Keynesian") that has kept the risk external to the profit (thus, the bull market up to now, and the false signal of being descriptively pro-growth).
A top-down, trickle-down Hamiltonian model is to command and control systemic-risk (business cycle volatility), not reduce it.
Employed by the Obama administration and Congress, the Hamiltonian model of finance has supported a recessionary trend and increases the probability of a deflationary dip (lack of demand to support growth). Instead of alpha-risk stability, they achieved beta-risk volatility--exactly what we do not need.
In the alpha form, risk to the profit margin inherently distributes with the benefit. The margin is then at verifiable risk, accountable, to the free choice of market participants. When that choice is minimized by organized consolidation, internalizing the profit by externalizing the risk, the risk goes gamma.
With organized consolidation of the risk, managed in the aggregate (externalized) independant of the profit margin, the present value of the risk goes beta. Its marginal value becomes more dependant on political sentiment. It is more difficult to measure and, with a more uncertain future value, more volatile.
A speculative market (regulatory arbitrage) then emerges to command and control the gamma risk, and the beta volatility, in the guise of reducing it.
The bureaucratic model of power and political economy emerges (The Iron Triangle) to conserve the distributive value of the Hamiltonian model. This neo-conservative, post-industrial innovation of the model, especially after the Great Depression, provides "the risk" with a predictable presence of value.
The purpose of the neo-conservative model is to phenomenologize a legitimacy of internalized risk. It is a false legitimacy with power literally being a top-down "derivative."
The risk to gaining power and keeping it is not a pluralistic ontology, like a free-market legitimacy, derived from the bottom up. It is being imposed from the top down.
Alpha-risk modeling that ensures a free-market mechanism is what genuinely internalizes "the risk" so we are not slaves to the Iron Law.
As an economy consolidates into economies of scale to reduce the alpha risk, the risk accumulates into beta and gamma risk. Since the risk has been detached from the alpha fundament, and it has to go somewhere, the formula for maximizing margin then becomes: internalize the profit and externalize the risk. The result is the economic condition we are in now with large, consolidated corporates accumulating profit and distributing the risk.
Profit is detached from the risk, increasing the marginal profit. The risk is transformed, not reduced, and redistributed without the profit. The risk is transformed into crises that cyclically occur at a depth and frequency of the distribution. Currently, the risk has become so external to the profit we now see the prospect of a lengthy recession and a possible double dip with the threat of deflation.
When the profit does not distribute with the risk, gamma risk accumulates and crisis will occur.
In the form of alpha risk, profit distributes with the risk, providing a disinflationary, distributive, pluralistic benefit to the market.
Accumulation of value, on the other hand, like we see with an economy-of-scale efficiency, provides a non-distributive, non-pluralistic, inflationary benefit (the marginal profit). The accumulated benefit harbors the risk of deflation--negative growth, unemployment and declining prices (general economic crisis that causes the need for authoritarian management of the risk, or The Iron Law of Oligarchy and emergence of The Iron Triangle form of government).
By ensuring an alpha-risk distribution, pursuit of profit not only externalizes as reciprocal value, providing goods and services with good and adequate consideration, but also imparts a distributive value that stabilizes prices with adequate, disinflationary liquidity. The result is positive growth with declining unemployment, debt reduction, and reduction of systemic risk at the unaccumulated fundament.
Alpha management of accumulated (externalized) gamma risk is a strategy that could have been easily employed by the Obama Administration and a Democratic congress.
Instead, the government (The Iron Triangle) engaged an inflationary risk-management program (described as "Keynesian") that has kept the risk external to the profit (thus, the bull market up to now, and the false signal of being descriptively pro-growth).
A top-down, trickle-down Hamiltonian model is to command and control systemic-risk (business cycle volatility), not reduce it.
Employed by the Obama administration and Congress, the Hamiltonian model of finance has supported a recessionary trend and increases the probability of a deflationary dip (lack of demand to support growth). Instead of alpha-risk stability, they achieved beta-risk volatility--exactly what we do not need.
In the alpha form, risk to the profit margin inherently distributes with the benefit. The margin is then at verifiable risk, accountable, to the free choice of market participants. When that choice is minimized by organized consolidation, internalizing the profit by externalizing the risk, the risk goes gamma.
With organized consolidation of the risk, managed in the aggregate (externalized) independant of the profit margin, the present value of the risk goes beta. Its marginal value becomes more dependant on political sentiment. It is more difficult to measure and, with a more uncertain future value, more volatile.
A speculative market (regulatory arbitrage) then emerges to command and control the gamma risk, and the beta volatility, in the guise of reducing it.
The bureaucratic model of power and political economy emerges (The Iron Triangle) to conserve the distributive value of the Hamiltonian model. This neo-conservative, post-industrial innovation of the model, especially after the Great Depression, provides "the risk" with a predictable presence of value.
The purpose of the neo-conservative model is to phenomenologize a legitimacy of internalized risk. It is a false legitimacy with power literally being a top-down "derivative."
The risk to gaining power and keeping it is not a pluralistic ontology, like a free-market legitimacy, derived from the bottom up. It is being imposed from the top down.
Alpha-risk modeling that ensures a free-market mechanism is what genuinely internalizes "the risk" so we are not slaves to the Iron Law.
Thursday, May 13, 2010
The Profit Margin as Empirical Measure of Risk
As economies of scale accumulate systemic risk, there is a demand for government authority.
Instead of less government, there is more need for government if we allow industry and markets to consolidate. The call for reform is a call to deconsolidate the risk.
As we have seen, consolidation of industry and markets allows loss (the risk) to aggregate in the form of public debt while the reward (the profit) is retained in the form of private property. It is the Hamiltonian model in the modern world of Keynesian inflation.
Expansionist monetary policy overleverages the private sector, resulting in liquidity crises with a private accumulation of profit and a public accumulation of loss.
Curious that providing large amounts of liquidity results in liquidity crises.
Borrowing at the Fed's discount window to buy the public debt conserves the Hamiltonian model with Keynesian measures.
Liquidity is used to build an economy of scale, producing a budget deficit. Liquidity is then needed to finance the public debt bought by the liquidity. The liquidity is trapped in a perpetual accumulation of debt in which the rich (the elite) buy the debt and the non-elite pay it.
Since the non-elite do not have the means to pay the debt, the result is a default on the debt if it is not monetized.
A sovereign debt crisis is very unlikely to occur, however, unless the sovereign decides not to sell new debt to cover the old debt. If that happened, the gamma-risk accumulation would catastrophically disaggregate. It would be a disorderly resolution of risk that would make The Great Depression look like a good time.
The non-elite cannot pay the debt. Income is, by definition, deficient even when the non-elite are employed (the burden of debt must be regressive in order to maintain the elite). Thus the need for more liquidity, which is leveraged into buying a dwindling supply. Prices and profits inflate financed with private debt and public transfer payments.
Despite the inflation, the result is a crisis of deficiency--a liquidity crisis. Public debt is a measure of that deficiency which conservatives argue, post hoc, is the result of too much government spending.
The accumulated deficiency is an accumulated efficiency of the profit margin organized into an economy-of-scale consolidation of industry and markets that aggregates risk in the public domain. It is the Hamiltonian model in which the rich get richer and everybody else gets poorer, like we have now.
Not only are non-elits expected to pay the public debt (the aggregated risk), but pay elits to cause crises and take the value (the liquidity needed to prevent crises) in zero-sum. It is completely unreasonable to expect this to result in anything but a populist sentiment (reduction of the gamma risk).
Resisting the populist sentiment is an entrenched Hamiltonian model in which the elite buy the public debt (the liquidity) and the public pays it. The difference in value between elite and non-elite is what classical economists call the economic rent--the margin of profit accumulated that is the categorical measure of elite status and the cost of non-elite participation in the benefit the profit produces. Its conservation is necessary for economic growth and, according to Alexander Hamilton and the Federalists, the general welfare.
Measures taken to conserve the power elite (resist populist sentiment) is, then, a moral imperative. It is why, for example, taxes should be paid by the least able to pay (and the reason government spending should be minimal), and why liquidity (and the economic rent for liquidity) costs more for those that need it the most...because, according to conservatives, they are a bad risk.
We see then how the operational model defines the risk. The Hamiltonian model defines risk as a measure of the ability to accumulate value so that instead of paying the rent, you are collecting it (instead of paying the debt, you are buying it). The difference is the profit margin, the category of elite status, and the defined level of risk.
From the start, the model of capitalism is organized to eliminate alpha risk. The risk that holds the elite directly accountable to the renter is, as was described previously, inimical to the general welfare.
Alpha risk, according to the Hamiltonian, should be limited to the masses. It is inappropriate for the elite to be held accountable to non-elits. Thus, the concept of limited liability and the corporate, economy-of-scale model of efficiency that transforms alpha risk into an unavoidable, gamma-risk ontology. Risk aggregates in the public sector where government distributes that risk with the force and legitimacy of ultimate, sovereign (legal) authority.
According to Hamiltonians, it is in the best interest of the masses to accept the legal authority of property being the privilege of the ruling class. The difference between ruler and ruled is defined by income (the profit margin). It is a clearly empirical measure of power, and who should have it, as long as government does not act to redistribute it.
Redistribution of wealth distorts the natural hierarchy of economic incentives (class mobility) that causes innovation, productivity, and economic growth. As long as everyone is free to maximize the profit (to move up the hierarchy), conservatives posit, the risk is proportionally reduced.
The profit margin (maximizing the economic rent) is for the Hamiltonian, however, entirely a measure of negative risk. The more risk you have to take (the more rent you have to pay to participate) the more non-elite you are. Being without risk means being unaccountable, which means more risk for everyone else, not less.
The Hamiltonian model deliberately resists plurality with a higher risk assessment, and where plurality is resisted in nature, risk of failure is increased, not reduced.
As the Hamiltonian model has matured, with the alpha risk ever more minimal, the margin of profit becomes focused on the risk premium. The profit becomes a measure of pure financial arbitrage.
Generating profit with as little growth as possible is a measure of sophistication, and growth is a measure of how big an economy of scale can be built to limit the risk of liability in the corporate form (how much you can get away with operating in zero-sum, avoiding the gamma risk).
The risk ontology becomes a function of avoiding the gamma risk (politics) rather than minimizing the alpha-risk accountability. Rather than the profit being an empirical measure of accountability, it becomes a measure of unaccountability.
Instead of success determining the profit, the profit determines success. The profit margin, then, is a measure of risk accumulated rather than reduced, and its management is a function of an arbitraged transference.
Risk becomes a fractile probability that takes the form of beta risk. It requires evermore liquidity as the risk is hedged against the probable risk that is hedged against the risk...into a crisis (gamma) proportion.
The risk propagates with higher frequency as capital is used to finance its propagation rather than growth. It cannot be considered gambling because the level of risk is determined by the amount of capital invested in its propagation, including building economies of scale with mergers and acquisitions.
Fractile risk management is rationalized with use value. It harbors the utilitarian-value hypothesis posited by the Hamiltonian model: conserving the value of capital, making markets, efficiently allocating capital to maximize growth with minimal risk, securing the general welfare.
Confirming whether the welfare is generally secured by the model is, well, complicated, of course.
Economically securing the general welfare free of government intervention (allowing for organized economies of scale to manage the aggregation of the alpha risk in a gamma proportion) is a function of risk-transfer product marketing--the derivatives market that is the target of regulatory reform. It is a market that no one, of course, properly understands but the elite insiders.
Risk transfer (transformation of risk) is an esoteric domain of the market that requires, of course, the special, secret knowledge of the power elite. It cannot be empirically evaluated or, therefore, controlled by crude, unsophisticated, non-elite measures, like an alpha-risk ontology that is confirmed by the margin of profit...not without putting the general welfare at risk, of course.
When crisis does occur, as financial reformers say it surely will, the reform will be to blame. It will be important to then identify the insufficiency of reform, which will be not having disaggregated the risk into an alpha dimension.
Effective financial reform will allow the profit margin to be an accurate measure of reduced systemic risk rather than a crisis (gamma-risk) indicator.
Instead of less government, there is more need for government if we allow industry and markets to consolidate. The call for reform is a call to deconsolidate the risk.
As we have seen, consolidation of industry and markets allows loss (the risk) to aggregate in the form of public debt while the reward (the profit) is retained in the form of private property. It is the Hamiltonian model in the modern world of Keynesian inflation.
Expansionist monetary policy overleverages the private sector, resulting in liquidity crises with a private accumulation of profit and a public accumulation of loss.
Curious that providing large amounts of liquidity results in liquidity crises.
Borrowing at the Fed's discount window to buy the public debt conserves the Hamiltonian model with Keynesian measures.
Liquidity is used to build an economy of scale, producing a budget deficit. Liquidity is then needed to finance the public debt bought by the liquidity. The liquidity is trapped in a perpetual accumulation of debt in which the rich (the elite) buy the debt and the non-elite pay it.
Since the non-elite do not have the means to pay the debt, the result is a default on the debt if it is not monetized.
A sovereign debt crisis is very unlikely to occur, however, unless the sovereign decides not to sell new debt to cover the old debt. If that happened, the gamma-risk accumulation would catastrophically disaggregate. It would be a disorderly resolution of risk that would make The Great Depression look like a good time.
The non-elite cannot pay the debt. Income is, by definition, deficient even when the non-elite are employed (the burden of debt must be regressive in order to maintain the elite). Thus the need for more liquidity, which is leveraged into buying a dwindling supply. Prices and profits inflate financed with private debt and public transfer payments.
Despite the inflation, the result is a crisis of deficiency--a liquidity crisis. Public debt is a measure of that deficiency which conservatives argue, post hoc, is the result of too much government spending.
The accumulated deficiency is an accumulated efficiency of the profit margin organized into an economy-of-scale consolidation of industry and markets that aggregates risk in the public domain. It is the Hamiltonian model in which the rich get richer and everybody else gets poorer, like we have now.
Not only are non-elits expected to pay the public debt (the aggregated risk), but pay elits to cause crises and take the value (the liquidity needed to prevent crises) in zero-sum. It is completely unreasonable to expect this to result in anything but a populist sentiment (reduction of the gamma risk).
Resisting the populist sentiment is an entrenched Hamiltonian model in which the elite buy the public debt (the liquidity) and the public pays it. The difference in value between elite and non-elite is what classical economists call the economic rent--the margin of profit accumulated that is the categorical measure of elite status and the cost of non-elite participation in the benefit the profit produces. Its conservation is necessary for economic growth and, according to Alexander Hamilton and the Federalists, the general welfare.
Measures taken to conserve the power elite (resist populist sentiment) is, then, a moral imperative. It is why, for example, taxes should be paid by the least able to pay (and the reason government spending should be minimal), and why liquidity (and the economic rent for liquidity) costs more for those that need it the most...because, according to conservatives, they are a bad risk.
We see then how the operational model defines the risk. The Hamiltonian model defines risk as a measure of the ability to accumulate value so that instead of paying the rent, you are collecting it (instead of paying the debt, you are buying it). The difference is the profit margin, the category of elite status, and the defined level of risk.
From the start, the model of capitalism is organized to eliminate alpha risk. The risk that holds the elite directly accountable to the renter is, as was described previously, inimical to the general welfare.
Alpha risk, according to the Hamiltonian, should be limited to the masses. It is inappropriate for the elite to be held accountable to non-elits. Thus, the concept of limited liability and the corporate, economy-of-scale model of efficiency that transforms alpha risk into an unavoidable, gamma-risk ontology. Risk aggregates in the public sector where government distributes that risk with the force and legitimacy of ultimate, sovereign (legal) authority.
According to Hamiltonians, it is in the best interest of the masses to accept the legal authority of property being the privilege of the ruling class. The difference between ruler and ruled is defined by income (the profit margin). It is a clearly empirical measure of power, and who should have it, as long as government does not act to redistribute it.
Redistribution of wealth distorts the natural hierarchy of economic incentives (class mobility) that causes innovation, productivity, and economic growth. As long as everyone is free to maximize the profit (to move up the hierarchy), conservatives posit, the risk is proportionally reduced.
The profit margin (maximizing the economic rent) is for the Hamiltonian, however, entirely a measure of negative risk. The more risk you have to take (the more rent you have to pay to participate) the more non-elite you are. Being without risk means being unaccountable, which means more risk for everyone else, not less.
The Hamiltonian model deliberately resists plurality with a higher risk assessment, and where plurality is resisted in nature, risk of failure is increased, not reduced.
As the Hamiltonian model has matured, with the alpha risk ever more minimal, the margin of profit becomes focused on the risk premium. The profit becomes a measure of pure financial arbitrage.
Generating profit with as little growth as possible is a measure of sophistication, and growth is a measure of how big an economy of scale can be built to limit the risk of liability in the corporate form (how much you can get away with operating in zero-sum, avoiding the gamma risk).
The risk ontology becomes a function of avoiding the gamma risk (politics) rather than minimizing the alpha-risk accountability. Rather than the profit being an empirical measure of accountability, it becomes a measure of unaccountability.
Instead of success determining the profit, the profit determines success. The profit margin, then, is a measure of risk accumulated rather than reduced, and its management is a function of an arbitraged transference.
Risk becomes a fractile probability that takes the form of beta risk. It requires evermore liquidity as the risk is hedged against the probable risk that is hedged against the risk...into a crisis (gamma) proportion.
The risk propagates with higher frequency as capital is used to finance its propagation rather than growth. It cannot be considered gambling because the level of risk is determined by the amount of capital invested in its propagation, including building economies of scale with mergers and acquisitions.
Fractile risk management is rationalized with use value. It harbors the utilitarian-value hypothesis posited by the Hamiltonian model: conserving the value of capital, making markets, efficiently allocating capital to maximize growth with minimal risk, securing the general welfare.
Confirming whether the welfare is generally secured by the model is, well, complicated, of course.
Economically securing the general welfare free of government intervention (allowing for organized economies of scale to manage the aggregation of the alpha risk in a gamma proportion) is a function of risk-transfer product marketing--the derivatives market that is the target of regulatory reform. It is a market that no one, of course, properly understands but the elite insiders.
Risk transfer (transformation of risk) is an esoteric domain of the market that requires, of course, the special, secret knowledge of the power elite. It cannot be empirically evaluated or, therefore, controlled by crude, unsophisticated, non-elite measures, like an alpha-risk ontology that is confirmed by the margin of profit...not without putting the general welfare at risk, of course.
When crisis does occur, as financial reformers say it surely will, the reform will be to blame. It will be important to then identify the insufficiency of reform, which will be not having disaggregated the risk into an alpha dimension.
Effective financial reform will allow the profit margin to be an accurate measure of reduced systemic risk rather than a crisis (gamma-risk) indicator.
Tuesday, March 23, 2010
Health Care Goes Critical
Now that health care legislation has become the law of the land, now it is time for an evaluative technique called, "the critical method."
The debate up to the bill's passage has been a differential between practical models: pluralist and elitist; public and private.
Democrats clearly favor a public-sector elitist model with reliance on authoritative influence and large economies of scale to control both costs and incentives. Republicans favor a private-sector model with reliance on large economies of scale that control costs and incentives with authoritative influence.
What's the difference?
Supposedly, Republicans favor a free-market pluralism, but their sentiments are with economic growth into economies of scale that control costs and incentives not by empowering free-market consumers, but empowering a consolidated corporate body. The model is decidedly elitist. It is not a pluralistic decisional model that favors a democratic decisional process. Just because it abides in the private sector does not make it a free market.
We see, then, how the differential is driven into a false, bivariate critique. It is a bivariation that, instead of simplifying the critique, renders it more complex.
If the new health care bill is modified or repealed, what is the simple and easily verifiable alternative?
The best critique going forward is both a simple and effective, bivariate differential with an easily verifiable coefficient like income (the ability to spend with discretion).
Instead of agonizing over complex evaluative measures of always debatable verifiability, the critique can be effectively reduced to whether the practical, operational modeling is pluralist or elitist in either the general or particular case with a simple and easily verifiable coefficiency right down to the individual.
The question (the problem to be solved) then becomes: are you deciding, or is someone else deciding for you?
The debate up to the bill's passage has been a differential between practical models: pluralist and elitist; public and private.
Democrats clearly favor a public-sector elitist model with reliance on authoritative influence and large economies of scale to control both costs and incentives. Republicans favor a private-sector model with reliance on large economies of scale that control costs and incentives with authoritative influence.
What's the difference?
Supposedly, Republicans favor a free-market pluralism, but their sentiments are with economic growth into economies of scale that control costs and incentives not by empowering free-market consumers, but empowering a consolidated corporate body. The model is decidedly elitist. It is not a pluralistic decisional model that favors a democratic decisional process. Just because it abides in the private sector does not make it a free market.
We see, then, how the differential is driven into a false, bivariate critique. It is a bivariation that, instead of simplifying the critique, renders it more complex.
If the new health care bill is modified or repealed, what is the simple and easily verifiable alternative?
The best critique going forward is both a simple and effective, bivariate differential with an easily verifiable coefficient like income (the ability to spend with discretion).
Instead of agonizing over complex evaluative measures of always debatable verifiability, the critique can be effectively reduced to whether the practical, operational modeling is pluralist or elitist in either the general or particular case with a simple and easily verifiable coefficiency right down to the individual.
The question (the problem to be solved) then becomes: are you deciding, or is someone else deciding for you?
Tuesday, March 16, 2010
Authenticating Risk
In the depths of our current crisis of liquidity it is necessary to identify a culpability--the cause that leads to the effect.
Identifying the cause and effect is to define the problem and the solution. It is presumed the regulatory regime will reflect the culpability as we plod forward with financial reform. Critical to reform is the ability to identify the source and target of risk--who makes it, and who takes it--which would then define the remedy if not the cure for what ails us.
Who authors the risk determines its authenticity: who makes the risk takes the risk.
So, who is authoring the risk?
Former Treasury Secretary, Paulson says we need to have a "systemic-risk regulator" with "broad authority," and a strong, well-rehearsed resolution authority to bail out banks in the future (in other words, people like him). All of his proposals confirm the too-big-to-fail model of finance. It is a bureaucratic model of public/private finance (political economy).
The bureaucracy will have the authority over the risk. That is, risk will be bureaucratically authored by an independent civil service. The results (the assignment, and presumed assumption, of risk to a class or party) will then appear genuinely unbiased, legitimate and binding (what a free market will authentically do through legitimate, ontological process, a priori).
Liquidity crisis reliably consolidates the capital and avoids the alpha risk. The effective "gravitas" is conceptualized to ontologically "pull" the elements into an organized efficiency rather than teleologically "pushed" into a deliberate structure of power.
Through cyclical trend, capital is gained without being exposed to the rigors, the virtue, of free markets which is the plurality that occurs with expansion of the pie.
In a free market, the risk is authored by the plural expansion and authenticated by the strength, the virtue, of taking the alpha risk, not avoiding it. The profit replicates the success, the virtue, through distribution of the capital gained and accumulated (through capital formation and investment). If the system is pluralistically maintained in priority, the virtue of success remains vested, the risk ontologically authored and legitimately authentic.
The authenticated risk is inalienable and ontologically fractile, ensured by a competitive multiplicity of the marketplace. The authenticity authors success and continuously innovates into the provision of life, liberty, and the pursuit of happiness rather than the continuously demonstrated deprivation of a consolidating capital in cyclical trends of crises.
It is time to re-author the too-big-to-fail doctrine of consolidated risk into the doctrine of authentic self-determination.
Identifying the cause and effect is to define the problem and the solution. It is presumed the regulatory regime will reflect the culpability as we plod forward with financial reform. Critical to reform is the ability to identify the source and target of risk--who makes it, and who takes it--which would then define the remedy if not the cure for what ails us.
Who authors the risk determines its authenticity: who makes the risk takes the risk.
So, who is authoring the risk?
Former Treasury Secretary, Paulson says we need to have a "systemic-risk regulator" with "broad authority," and a strong, well-rehearsed resolution authority to bail out banks in the future (in other words, people like him). All of his proposals confirm the too-big-to-fail model of finance. It is a bureaucratic model of public/private finance (political economy).
The bureaucracy will have the authority over the risk. That is, risk will be bureaucratically authored by an independent civil service. The results (the assignment, and presumed assumption, of risk to a class or party) will then appear genuinely unbiased, legitimate and binding (what a free market will authentically do through legitimate, ontological process, a priori).
Liquidity crisis reliably consolidates the capital and avoids the alpha risk. The effective "gravitas" is conceptualized to ontologically "pull" the elements into an organized efficiency rather than teleologically "pushed" into a deliberate structure of power.
Through cyclical trend, capital is gained without being exposed to the rigors, the virtue, of free markets which is the plurality that occurs with expansion of the pie.
In a free market, the risk is authored by the plural expansion and authenticated by the strength, the virtue, of taking the alpha risk, not avoiding it. The profit replicates the success, the virtue, through distribution of the capital gained and accumulated (through capital formation and investment). If the system is pluralistically maintained in priority, the virtue of success remains vested, the risk ontologically authored and legitimately authentic.
The authenticated risk is inalienable and ontologically fractile, ensured by a competitive multiplicity of the marketplace. The authenticity authors success and continuously innovates into the provision of life, liberty, and the pursuit of happiness rather than the continuously demonstrated deprivation of a consolidating capital in cyclical trends of crises.
It is time to re-author the too-big-to-fail doctrine of consolidated risk into the doctrine of authentic self-determination.
Thursday, March 19, 2009
Punitive Taxation
The tax policy discussion surrounding the use of tax money and assessing the value of executive compensation schedules of TARP recipients is a micro case study in the theory of retributive value described in several articles at griffithlighton.blogspot.com.
The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).
Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.
Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.
A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.
The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.
It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.
It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).
The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).
The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.
Yes, we are smarter than that.
The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!
Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.
The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).
Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.
Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.
A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.
The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.
It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.
It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).
The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).
The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.
Yes, we are smarter than that.
The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!
Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.
Tuesday, March 17, 2009
Assessing Value
AIG Retention Bonuses
The MBA executives that devised and administered the hedge fund division of AIG without fear of government regulation did their job with superior expertise. They executed what they were hired to do with superior performance.
They are being compensated for a job well done. So, what's wrong with that?
If we think that the AIG, MBA hedge fund executives were not hired to wreck the economy, we would be wrong. They produced huge value put away into the private property--the personal wealth--of the upper class, creating the largest accumulation of income in the upper class since before The Great Depression; deflated and consolidated the economic expansion--the more pluralistic expansion and equitable distribution of the wealth--that occured in the 90's when we had a more progressive tax code; created a huge budget deficit to be paid with a regressive tax burden while increasing the demand (the need) for government (including the TARP); and a convergence of what is public and what is private into a practical, organizational technology that ensures private ownership of the benefit, and public ownership of the detriment. This is a macro-economic model of economic entities too large to fail, antithetical to a free-market economics, that operationalizes neo-classical, Keynesian, capitalism into a low-risk, high-return business model, designed and executed by the best and brightest our educational institutions can produce and that money can buy.
The model is an elitist model called, state capitalism in which financing the cost is a function of the public sector, and financing compensation (the reward of success) is a function of the private sector. It is a bifurcation of the power structure retained by evolution of the model in order for it to survive and maintain an obviously inequitable outcome with a democratic legitimacy (see the article "Public Finance and Community Power Structure" and "Evolution of the Political Economy" at griffithlighton.blogspot.com).
Notice how the controversial AIG compensation cannot be changed. It is compensation for value received, which includes the value lost--like small businesses that will be allowed to fail (less competition) with the value of unemployment (lower compensation costs) and the loss of asset values (net worth) consolidated due to illiquidity (a lack of available credit and income) that will be resold with the lost value re-"gained," or realized in the recovery (distribution) phase of the business cycle. The value is not lost, it is consolidated, which is the goal, the intended consequence, the effect, the outcome of the classical model of capitalism in which the measure of success is defined by class distinction (unequal compensation and net worth). According to the power elite, it is the moral imperative, the "natural" outcome, that should not be, and as we see, cannot be, changed.
So we see, the economic value (the compensation, or what "We" are "willing" to pay) is a "moral" value to be conserved. Changing the inequity (the assessment of value) would rip the very moral fabric of civilized society and would condemn us to a conflicted process of chaos to be forged into order by a power elite. Nature is inescapable. It is inexorable. It is futile--immoral--to resist what is natural and, therefore, righteous in both the means and ends of power.
With a necessary talent for masterfully arguing the fallacy of composition, the inequity of what "We" are "willing" to pay, conservatives argue, is the equilibrium, the stability, of a civil society. The will to power is, therefore, the will to a peaceful prosperity and, therefore, the natural will of The People and the function of "the republic." Denying the ministers of the power elite full value is, therefore, neither legal or proper. The inequitable compensation is really the will of The People, the public good that, if you recall, Palin described during the last presidential campaign as the secret knowlege, the inscrutably difficult wisdom, conservatives have about what is really moral and righteous.
Controlling The Bid
It is, therefore, by the conservative argument, righteous to ensure the means of the power elite to control the bid (economic inequity), or what is "willing" to be paid and cannot be changed with the force and legitimacy of law (public authority, or the Hamiltonian model of government, "...the Republic for which it stands, under God, with liberty and justice for all").
Organizing to ensure the consolidation of wealth and power--organizing to be too big to fail--is the means to control the bid and, thus, the obviously inequitable compensation that, according to the force and legitimacy of public authority, is an assessment of value that is freely contracted and to be justly paid as compensation we are all entitled to (political equity) for services rendered of comparable quality (the effect, or the value rendered and received--the inequity). It is our natural right to be fully compensated for value freely contracted, performed and received. The value assessed and the compensation to be received is, then, legal and proper?
No!
The ability to control the bid is illegal! It is the effect of organizing to defeat the mechanism of free-market economics. That is entirely illegal and improper.
The conservative argument presented above is 18th Century utilitarianism in which the bourgeosie needed a legitimacy of power that was beyond the inherited and divine right of royalty. While the legal philosophy of the want-to-be kings expanded the right to rule (collect taxes and generally decide the fate of others) to the "natural rights of man," the divine right to rule is retained as a vestige of an evolving structure of power (see the article "Evolution of the Political Economy" at griffithlighton.blogspot.com).
For the government (what was previously the king, or the sovereign) to abrogate the contractual obligation for AIG's retention bonuses would be an illegal usurpation of public power; a dictatorial act strictly forbidden by the Constitution.
For the new power elite, power has to be gained, or won, by a pluralistic economic process freely pursued without government (the king's) interference (laissez-faire capitalism). God, or nature, acts to determine, or providentially endows, the legitimacy of power by class distinction of economic measure, and the "natural right" to that economic value (the private sector) is enforced with the constitutional legitimacy of public authority (the public sector). Where we see the right to private property becoming evermore a function of public policy and finance, assessing the value is no longer the exclusive domain of private want-to-be kings. Evolution of the power structure has been reduced to a choice between the fundamental elements of power. Should we choose an elitist or pluralist model of power and political economy?
Where the reward of gaining wealth, and power, is the ability to dictate the marketplace without government interference, the legitimacy of power is lost; and where government has evolved with a convergence of what is public and private to operate for administering private profit through public process (the political economy), what has evolved is the means and not the ends of power (see the article "Restructuring the Elements of Power" at griffithlighton.blogspot.com).
In order for the ends to converge with the legitimate means of power, we must choose the practical model to accomplish it. The elitist model is a confirmed failure--a nulled hypothesis (see the article "Science and Life" at griffithlighton.blogspot.com).
If we choose a pluralist model, the public and private dimensions of power will be fused by government ensuring a free and unconsolidated marketplace in priority. Choosing an elitist model will evolve the legitimacy of power from state capitalism (private gains with public losses) to state socialism. The probability of democracy diminishes significantly when it will be possible to operate as a fascist or a socialist state depending on the ability of the power elite to argue the value, if not the reality, of one or the other by means of public process, much like what we have now.
Does not Chavez argue his concept of the good life is what The People really want just like the conservative argument above, with what The People want always to be announced? Will exploitation of value assessed be an evolutionary vestige from state capitalism to state socialism? Accepting the pluralist model renders the question moot. Rather than uncertainty, we will have the practical application of continuous improvement through empirical process of close accountability--Democracy with a big "D." What is good and practically righteous--the value assessed--becomes the full value of choice, the full measure of what We The People decide in the full realization of what it means to be free.
Instead of ensuring the means to control the bid (the value assessed), ensure the means to prevent it with the clear and up close verifiable legitimacy that a free-market economics (pluralism) provides.
The MBA executives that devised and administered the hedge fund division of AIG without fear of government regulation did their job with superior expertise. They executed what they were hired to do with superior performance.
They are being compensated for a job well done. So, what's wrong with that?
If we think that the AIG, MBA hedge fund executives were not hired to wreck the economy, we would be wrong. They produced huge value put away into the private property--the personal wealth--of the upper class, creating the largest accumulation of income in the upper class since before The Great Depression; deflated and consolidated the economic expansion--the more pluralistic expansion and equitable distribution of the wealth--that occured in the 90's when we had a more progressive tax code; created a huge budget deficit to be paid with a regressive tax burden while increasing the demand (the need) for government (including the TARP); and a convergence of what is public and what is private into a practical, organizational technology that ensures private ownership of the benefit, and public ownership of the detriment. This is a macro-economic model of economic entities too large to fail, antithetical to a free-market economics, that operationalizes neo-classical, Keynesian, capitalism into a low-risk, high-return business model, designed and executed by the best and brightest our educational institutions can produce and that money can buy.
The model is an elitist model called, state capitalism in which financing the cost is a function of the public sector, and financing compensation (the reward of success) is a function of the private sector. It is a bifurcation of the power structure retained by evolution of the model in order for it to survive and maintain an obviously inequitable outcome with a democratic legitimacy (see the article "Public Finance and Community Power Structure" and "Evolution of the Political Economy" at griffithlighton.blogspot.com).
Notice how the controversial AIG compensation cannot be changed. It is compensation for value received, which includes the value lost--like small businesses that will be allowed to fail (less competition) with the value of unemployment (lower compensation costs) and the loss of asset values (net worth) consolidated due to illiquidity (a lack of available credit and income) that will be resold with the lost value re-"gained," or realized in the recovery (distribution) phase of the business cycle. The value is not lost, it is consolidated, which is the goal, the intended consequence, the effect, the outcome of the classical model of capitalism in which the measure of success is defined by class distinction (unequal compensation and net worth). According to the power elite, it is the moral imperative, the "natural" outcome, that should not be, and as we see, cannot be, changed.
So we see, the economic value (the compensation, or what "We" are "willing" to pay) is a "moral" value to be conserved. Changing the inequity (the assessment of value) would rip the very moral fabric of civilized society and would condemn us to a conflicted process of chaos to be forged into order by a power elite. Nature is inescapable. It is inexorable. It is futile--immoral--to resist what is natural and, therefore, righteous in both the means and ends of power.
With a necessary talent for masterfully arguing the fallacy of composition, the inequity of what "We" are "willing" to pay, conservatives argue, is the equilibrium, the stability, of a civil society. The will to power is, therefore, the will to a peaceful prosperity and, therefore, the natural will of The People and the function of "the republic." Denying the ministers of the power elite full value is, therefore, neither legal or proper. The inequitable compensation is really the will of The People, the public good that, if you recall, Palin described during the last presidential campaign as the secret knowlege, the inscrutably difficult wisdom, conservatives have about what is really moral and righteous.
Controlling The Bid
It is, therefore, by the conservative argument, righteous to ensure the means of the power elite to control the bid (economic inequity), or what is "willing" to be paid and cannot be changed with the force and legitimacy of law (public authority, or the Hamiltonian model of government, "...the Republic for which it stands, under God, with liberty and justice for all").
Organizing to ensure the consolidation of wealth and power--organizing to be too big to fail--is the means to control the bid and, thus, the obviously inequitable compensation that, according to the force and legitimacy of public authority, is an assessment of value that is freely contracted and to be justly paid as compensation we are all entitled to (political equity) for services rendered of comparable quality (the effect, or the value rendered and received--the inequity). It is our natural right to be fully compensated for value freely contracted, performed and received. The value assessed and the compensation to be received is, then, legal and proper?
No!
The ability to control the bid is illegal! It is the effect of organizing to defeat the mechanism of free-market economics. That is entirely illegal and improper.
The conservative argument presented above is 18th Century utilitarianism in which the bourgeosie needed a legitimacy of power that was beyond the inherited and divine right of royalty. While the legal philosophy of the want-to-be kings expanded the right to rule (collect taxes and generally decide the fate of others) to the "natural rights of man," the divine right to rule is retained as a vestige of an evolving structure of power (see the article "Evolution of the Political Economy" at griffithlighton.blogspot.com).
For the government (what was previously the king, or the sovereign) to abrogate the contractual obligation for AIG's retention bonuses would be an illegal usurpation of public power; a dictatorial act strictly forbidden by the Constitution.
For the new power elite, power has to be gained, or won, by a pluralistic economic process freely pursued without government (the king's) interference (laissez-faire capitalism). God, or nature, acts to determine, or providentially endows, the legitimacy of power by class distinction of economic measure, and the "natural right" to that economic value (the private sector) is enforced with the constitutional legitimacy of public authority (the public sector). Where we see the right to private property becoming evermore a function of public policy and finance, assessing the value is no longer the exclusive domain of private want-to-be kings. Evolution of the power structure has been reduced to a choice between the fundamental elements of power. Should we choose an elitist or pluralist model of power and political economy?
Where the reward of gaining wealth, and power, is the ability to dictate the marketplace without government interference, the legitimacy of power is lost; and where government has evolved with a convergence of what is public and private to operate for administering private profit through public process (the political economy), what has evolved is the means and not the ends of power (see the article "Restructuring the Elements of Power" at griffithlighton.blogspot.com).
In order for the ends to converge with the legitimate means of power, we must choose the practical model to accomplish it. The elitist model is a confirmed failure--a nulled hypothesis (see the article "Science and Life" at griffithlighton.blogspot.com).
If we choose a pluralist model, the public and private dimensions of power will be fused by government ensuring a free and unconsolidated marketplace in priority. Choosing an elitist model will evolve the legitimacy of power from state capitalism (private gains with public losses) to state socialism. The probability of democracy diminishes significantly when it will be possible to operate as a fascist or a socialist state depending on the ability of the power elite to argue the value, if not the reality, of one or the other by means of public process, much like what we have now.
Does not Chavez argue his concept of the good life is what The People really want just like the conservative argument above, with what The People want always to be announced? Will exploitation of value assessed be an evolutionary vestige from state capitalism to state socialism? Accepting the pluralist model renders the question moot. Rather than uncertainty, we will have the practical application of continuous improvement through empirical process of close accountability--Democracy with a big "D." What is good and practically righteous--the value assessed--becomes the full value of choice, the full measure of what We The People decide in the full realization of what it means to be free.
Instead of ensuring the means to control the bid (the value assessed), ensure the means to prevent it with the clear and up close verifiable legitimacy that a free-market economics (pluralism) provides.
Friday, March 6, 2009
Healthcare and Public Policy
Providing healthcare, along with many other sectors of our economy, is increasingly being considered a public good, like a public utility. If, for example, the financial system is so critical to the public welfare, why should it be subjected to a cycle of boom and bust that is inimical to that welfare generally as long as it remains in the private domain of the power structure where it has demonstrated the model of inefficiency and corruption, providing the lowest quality at the highest possible cost.
Bifurcation of the power strucutre into the domains of public and private is supposed to allow for a pluralistic efficacy. In some cases, goods and services are to be determined best provided in the private sector, some in the public. Failure in the private sector tends to force an enterprise into the public domain, if not in whole, in part by regulation of public enterprise--government. So we see that the conservative argument that "government does not produce anything...it is the model of inefficiency" is merely a "belief" proffered as an absolute truth (a guiding principle) that is nothing but sophistry that identifies their self-interest with the general welfare. It is the rhetorical stock-in-trade of the conservative element and is completely, empirically, disconfirmed by the evidence.
So it is with the healthcare system residing in the private sector. It is a model of inefficiency, and where it intersects with the public sector, it is a model of racketeering, fraud and corruption, just like the financial system. While medical doctors, for example, gain the public's confidence as the keepers of the public health, they at the same time bilk the public coffers (the tax base) with fraudulent and abusive pricing practices that only Enron could rival. This, of course, explains the byzantine regulatory scheme of Tom Daschle, for example. Complex schemes provide the opportunity for the abuse it is supposed to prevent, like the tax code, and that would explain how Daschle, and many others like him, can be both industry-friendly and keeper of the public trust (see the article, "Restructuring the Elements of Power" at griffithlighton.blogspot.com).
The remedy for the tendency to engineer complex schemes and organizational public/private technologies is a free market system, falsely discredited by the partisan, duopolistic, politics of the power structure that allows industries and markets to consolidate, defeating its operational utility.
A doctor should become wealthy because the public prefers that doctor over others, not because there are not enough doctors as per the entrance requirements of the AMA, its medical procedures, or its billing practices. The AMA is operating with the classic model of early 20th Century capitalism in which unscrupulous businessmen monopolized industries and markets in the name of free enterprise and free-market economics only to render its operation null and void. Only the most unscrupulous were the fittest to survive, or rewarded with a profitable measure of success.
The Standard Oil Trust Corporation became the model of uncivil behavior and economic inefficiency because it defeated the utility of free-market economics. Practitioners of organizing economic trusts became the criminal element of a civil society, and medical doctors should be no exception because they swear a hippocratic oath of doing no harm.
Anti-trust laws were enacted to control the tendency of organizing capital so that producers could tyrannize consumers by dictating the marketplace, consolidate the capital, and power. A significant part of that legal remedy was allowed to be dismissed by the Clinton Administration with the result of letting the financial sector both horizontally and vertically integrate. The result of this false two-party system of practical governance was catastrophic! Liberals and conservatives, by the evidence to date, work against each other in a bivariate--binary--system of false opposition and cooperation to produce the status quo of power. Allowing this realpolitique to continue--allowing bipartisanship to masquerade as nonpartisanship--should be at the very top of our list of things NOT to do!
The advocates of organizing to consolidate power either public or private should exist at the fringe of the power structure. Consolidation of power will be abusive! A government that acts to ensure a free and unconsolidated marketplace in priority is a government that governs least because the free market takes care of keeping everybody accountable by direct participation (Democracy with a BIG "D") and controls prices with a plurality of easily accessible capital and markets.
Doctors claim their incomes are high because they have the special knowlege to keep the public health. The free market dictates that a high income will draw enough practitioners into the profession to equilibriate the cost of healthcare so that everyone can afford it--so that it is in adequate supply. The only reason it will not be in adequate supply would be a barrier-to-entry into the profession and, consequently, a cost-barrier to "acquiring" healthcare (what is reasonably to be considered a "requirement"). The final result of "rigging the market" (defeating the economics of a free market) is the lowest quality at the highest possible cost. It is the model of inefficiency, and organizing it into the public sector, so-called "socializing" it, without trust-busting the AMA just jumps it from the frying pan to the fire. The organized utility of bifurcating the power structure to preserve the status quo, the class distinction of have and have not (Hamiltonianism), will be very elegantly applied and accomplished.
The formula for providing healthcare is the formula for economic health: adequate income and controlling costs. It is what a free-market economy provides through pluralistic means.
The way the healthcare sector is organized now, we have the high cost rendering incomes inadequate--it is deflationary. The SCHIP legislation is just a reinvention of the status quo, financing extension of coverage through a regressive tax burden, a deflationary tax policy. It does not fit the formula for economic health: it despoils income and, rather than controlling costs, it provides public funding for price increases. The public/private mix is a false pluralism of power. It provides less an efficiency for public welfare than for a consolidation of power for private profit (a consolidation of private property--Hamiltonianism).
Pluralism provides. Consolidation deprives. Despite all the rhetoric and promise, consolidation of power always proves corrupt and inefficient. Pluralism always proves an efficiency of costs and effectiveness with the highest degree of accountability, which is why the most unscrupulous among us will always try to organize to defeat it without prohibition. The healthcare sector is no exception.
In terms of economic health, the medical profession is overfed and its patients are undernourished.
Bifurcation of the power strucutre into the domains of public and private is supposed to allow for a pluralistic efficacy. In some cases, goods and services are to be determined best provided in the private sector, some in the public. Failure in the private sector tends to force an enterprise into the public domain, if not in whole, in part by regulation of public enterprise--government. So we see that the conservative argument that "government does not produce anything...it is the model of inefficiency" is merely a "belief" proffered as an absolute truth (a guiding principle) that is nothing but sophistry that identifies their self-interest with the general welfare. It is the rhetorical stock-in-trade of the conservative element and is completely, empirically, disconfirmed by the evidence.
So it is with the healthcare system residing in the private sector. It is a model of inefficiency, and where it intersects with the public sector, it is a model of racketeering, fraud and corruption, just like the financial system. While medical doctors, for example, gain the public's confidence as the keepers of the public health, they at the same time bilk the public coffers (the tax base) with fraudulent and abusive pricing practices that only Enron could rival. This, of course, explains the byzantine regulatory scheme of Tom Daschle, for example. Complex schemes provide the opportunity for the abuse it is supposed to prevent, like the tax code, and that would explain how Daschle, and many others like him, can be both industry-friendly and keeper of the public trust (see the article, "Restructuring the Elements of Power" at griffithlighton.blogspot.com).
The remedy for the tendency to engineer complex schemes and organizational public/private technologies is a free market system, falsely discredited by the partisan, duopolistic, politics of the power structure that allows industries and markets to consolidate, defeating its operational utility.
A doctor should become wealthy because the public prefers that doctor over others, not because there are not enough doctors as per the entrance requirements of the AMA, its medical procedures, or its billing practices. The AMA is operating with the classic model of early 20th Century capitalism in which unscrupulous businessmen monopolized industries and markets in the name of free enterprise and free-market economics only to render its operation null and void. Only the most unscrupulous were the fittest to survive, or rewarded with a profitable measure of success.
The Standard Oil Trust Corporation became the model of uncivil behavior and economic inefficiency because it defeated the utility of free-market economics. Practitioners of organizing economic trusts became the criminal element of a civil society, and medical doctors should be no exception because they swear a hippocratic oath of doing no harm.
Anti-trust laws were enacted to control the tendency of organizing capital so that producers could tyrannize consumers by dictating the marketplace, consolidate the capital, and power. A significant part of that legal remedy was allowed to be dismissed by the Clinton Administration with the result of letting the financial sector both horizontally and vertically integrate. The result of this false two-party system of practical governance was catastrophic! Liberals and conservatives, by the evidence to date, work against each other in a bivariate--binary--system of false opposition and cooperation to produce the status quo of power. Allowing this realpolitique to continue--allowing bipartisanship to masquerade as nonpartisanship--should be at the very top of our list of things NOT to do!
The advocates of organizing to consolidate power either public or private should exist at the fringe of the power structure. Consolidation of power will be abusive! A government that acts to ensure a free and unconsolidated marketplace in priority is a government that governs least because the free market takes care of keeping everybody accountable by direct participation (Democracy with a BIG "D") and controls prices with a plurality of easily accessible capital and markets.
Doctors claim their incomes are high because they have the special knowlege to keep the public health. The free market dictates that a high income will draw enough practitioners into the profession to equilibriate the cost of healthcare so that everyone can afford it--so that it is in adequate supply. The only reason it will not be in adequate supply would be a barrier-to-entry into the profession and, consequently, a cost-barrier to "acquiring" healthcare (what is reasonably to be considered a "requirement"). The final result of "rigging the market" (defeating the economics of a free market) is the lowest quality at the highest possible cost. It is the model of inefficiency, and organizing it into the public sector, so-called "socializing" it, without trust-busting the AMA just jumps it from the frying pan to the fire. The organized utility of bifurcating the power structure to preserve the status quo, the class distinction of have and have not (Hamiltonianism), will be very elegantly applied and accomplished.
The formula for providing healthcare is the formula for economic health: adequate income and controlling costs. It is what a free-market economy provides through pluralistic means.
The way the healthcare sector is organized now, we have the high cost rendering incomes inadequate--it is deflationary. The SCHIP legislation is just a reinvention of the status quo, financing extension of coverage through a regressive tax burden, a deflationary tax policy. It does not fit the formula for economic health: it despoils income and, rather than controlling costs, it provides public funding for price increases. The public/private mix is a false pluralism of power. It provides less an efficiency for public welfare than for a consolidation of power for private profit (a consolidation of private property--Hamiltonianism).
Pluralism provides. Consolidation deprives. Despite all the rhetoric and promise, consolidation of power always proves corrupt and inefficient. Pluralism always proves an efficiency of costs and effectiveness with the highest degree of accountability, which is why the most unscrupulous among us will always try to organize to defeat it without prohibition. The healthcare sector is no exception.
In terms of economic health, the medical profession is overfed and its patients are undernourished.
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