When Risk Converges with Reward

When GM's UAW workers took a wage cut to keep the company solvent, the risk of loss (their jobs) converged with the reward (profitability). Workers sacrificed to render the company capable of repaying its publicly financed bailout.

In the same way, when energy prices "unexpectedly" reverse on the fundamentals, the risk (the liability of causing detriment) converges with the reward (capital gains). Keep in mind that the reward is taxed at an extraordinary low rate for hedge funds and their managers. The low rate is supposed to keep workers employed with low inflation by keeping as much capital as possible available for economic expansion. By this measure--keeping the tax rate low--the risk is assumed converged with the reward, and the interest of the workers does not diverge from the interest of the unencumbered capital.

Workers subsequently sacrificed their income to bail out GM. Prices, however, continued to rise and the risk continued to diverge from the reward. The divergence creates investor value that eventually accumulates into a crisis proportion, indicated by the "unexpected" reversal that converges the risk with the reward.

Convergence occurs when the value accumulated is distributed in the form of capital and converted into accumulated wealth. The converged accumulation not omly measures the marginal value of the risk proportion but also represents an accumulated liability that is exculpated with an "unexpected" valuation.

The workers took the risk, and the capital took the reward. The risk was diverged from the reward, invested in commodity futures to extend the value of the risk into a crisis proportion (reduction of the workers' incomes). Eventually, the accumulated risk converges with the accumulated reward, technically indicating the crisis proportion.

Technical analysts use convergence and divergence indicators to suggest the probable direction of risk and reward. While risk is supposed to directly correlate with reward (high margins justified by the amount of inherent risk assumed), risk can be organized to diverge from the reward and achieve an inverse correlation (low risk yielding high reward).

Organized consolidation of industry and markets diverges risk from the reward. When, for example, big energy companies score record profits, pay no taxes, and receive huge subsidies, the risk of loss is minimized to maximize the margin, which is increasingly required to economically participate as either a producer or a consumer. (Remember that despite the minimized loss, the risk of loss is still, nevertheless, fully assumed. Avoided economic risk accumulates into a gamma-risk dimension in which its consumption is politically determined. The avoided risk assumes the dimension of political theater, like we have now with oil company executives, for example, appearing before Congress. The actors, in their assumed roles, rationally argue a political settlement in their self-interest that is considered Pareto Optimal--producing a settlement that does not render any one party less well off.) The more consolidated (horizontally and vertically integrated) these companies become (which includes the effective operation of government), the more the risk diverges from the reward.

As the risk diverges, the more efficiently the externalities can be networked to control costs (cut labor) and command prices (cut income). Since controlling the externalities is the business of government, a successful divergence also reduces the risk of legislative and judicial liability fully assumed with expanding the margin by causing detriment (unemployment with rising prices, for example, which is the result of more consolidation and less competition, like we have now). We see, then, government policies and programs that allow for consolidation of the capital and strong deflationary tendencies that produce large budget deficits (welfare) we cannot afford without raising taxes (and the debt ceiling since the income needed to pay the debt is being deflated with higher prices commanded by the consolidated capital).

For big business, government is an externality to be organized--to be consolidated into the corporate body--in order to fully hedge the risk. The risk of loss is fully assumed (it is fully converged in priority)--that is, consolidation knowingly creates value by causing detriment (by making someone less well off), and to prevent retribution of that value, the risk must not be allowed to converge with the reward.

Deriving benefit by causing detriment is a civil if not a criminal offense. A sudden 5% correction for the price oil, and an imposed CME limit on the downside, for example, is described by Wall Street analysts as "unexpected" because the reward (billions of dollars in capital gains) is assumed to be fully converged with the risk.

Until it manifests, the unexpected is by definition a risk of unknown proportion. Although the huge profits naturally present a huge risk, their so-called "unexpected" value suggests the billions rewarded are equally unexpected and the liability (the billions not spent to increase supply but, instead, reduce the incomes needed to buy it) is an unintended, but naturally occurring detriment. An unregulated market, it is argued, naturally yields this detriment to efficiently capitalize the supply needed to keep inflation low and resist the recessionary trend it causes. These defensive arguments are, of course, nonsense. Both the benefit and detriment are fully intended, and the risk is diverged from the reward to be politically settled within the current debt-reduction debate.

We need to remember what Wall Street tends to forget--the reason the price for a barrel of oil moved down was because the supply, including gasoline inventories, moved up. When the price keeps rising, like it has been for gasoline, the supply expectedly accumulates. Conservatives call this "adding supply" and falsely refer to it as "supply-side" economics when it is really demand-side command and control (you know, like communists do, rationing goods through price controls). Since we do not believe in price controls on command, valuations cannot be credibly based on it; and so, maybe that would explain the unexpected, empirical value of the inventory--it is based on false assumptions.

The Commodity Futures Modernization Act does not add supply. It reduces demand. Profits continue to accumulate along with the supply until the risk converges with the reward--that is, until the risk of liability reaches a probable proportion.

Manipulating prices to produce profits by causing detriment, rather than adding supply like investing is supposed to, accumulates a gamma-risk proportion, politically settling what would otherwise be a natural disaster. The power elite would not be a Pareto-Optimal beneficiary of such a disaster, and so, for example, the debt ceiling will be raised to accommodate the gamma-risk proportion.

When the risk is fully gamma and the reward is retributively valued, the risk converges with the reward. Currently, for example, we see interests representing consolidated capital engaged in all manner of rhetorical device to prove positive what is an empirical failure. It indicates the risk in a gamma proportion (what Wall Street analysts call a late-cycle adjustment), and if allowed to continue will result in disaster.

A late-cycle adjustment, like we have now, indicates profits have supported equity values in a zero-sum proportion, meaning that they are really negatively valued (what analysts call a late-cycle compression, which indicates negative equity). All the risk was not accounted for--it is not modeled to admit the liability of the divergence. Trillions of dollars are being applied to short the economy--that is, investment is being made not to expand the economy, but to "compress" it (deflate it), turning equity into debt, yielding negative equity. What is being in-vested is austerity, not prosperity.

Empirically tested, supply-side equity throughout the Bush administration was not positively valued. The empirical result was The Great Recession; and since 2008, equity valuations--stocks, for example--are not just overvalued (irrational), the equity is actually negative (deliberately "derivative" and divergently detrimental in zero-sum).

Since analysts tend not to model the liability of the divergence, each unit positively scored actually represents more than a unit of negative equity (which represents the entropic value discussed in the previous article). This accumulated, negative value provides risk-value to be arbitraged, technically indicated by convergent signals (a "death cross," for example). Each unit accumulated, contrary to supply-side modeling, for example, yields more than a unit of losses. Instead of economic expansion and a balanced budget with less need for government spending, we have "compression." The result is stagflation and huge budget deficits like we had in the Reagan years, and later during the Bush administration that, combined with the Commodity Futures Modernization Act, led to the Great Recession.

A late-cycle compression accumulates risk value. It does not avoid risk and increase shareholder value in the public interest as CEO's of big oil companies contend, for example, when arguing to protect their low taxes and high subsidies. These so-called "supply-side" measures, instead, imperil shareholder value with false modeling (the value does not "trickle down" in the assumed measure), which eventually presents as "unexpected" risk. That so-called unexpected value accumulates into upper-class incomes through exclusive, innovatively inscrutable, risk-transfer instruments, deliberately deriving that value from the crisis proportion it causes. This is where the risk converges with the reward--the risk cannot be avoided with continuous accumulation of its value (with continuous consolidation of capital, industry, and markets).

So, you see, while equity appeared to be gaining for the middle class during the last fifty years or so, systematically it was actually being lost. Although the Hamiltonian model assumes the loss, this model is not discussed as a practical, operational model. It is an historical artifact to be studied for academic edulcoration, avoiding the real value consumed that Hamilton's nemesis, Thomas Jefferson, warned would result in a counter-revolutionary consolidation of power with an anti-republican effect.

The risk historically, accumulatively, converges with the reward, as Jefferson knew it would; and while Republicans avidly argue to conserve the foundation of our exceptional, American heritage, Democrats, meanwhile, are busily arguing the public interest to keep consolidated capital from being hoisted on its own petard. It is, of course, the Republican role to resist, but there is a third party currently present to genuinely resist Democrats. While both parties know real resistance will consume risk rather than politically avoid it (Bernanke, for example, warning that not raising the debt ceiling will incur catastrophic risk), keeping it fully assumed in the gamma dimension, concurrent with this late-cycle compression, is politically risky as well.

Both parties face a growing negative sentiment that is not fully represented in the risk proportion and its political settlement. This unsettled, risk proportion is less divergent, and being less avoidable, the tactics used to negotiate the political settlement become more extortionist. Raising the debt ceiling (avoiding disaster) is contingent on both budget and tax cuts, for example. Since all the probable options are disastrous (when risk converges with reward), equity values and other asset classes are negatively valued going forward.

Acting in self-interest is rational, assuming that everyone knows what their self-interest is.

When the convergence occurs--as industry and markets become more consolidated, and capital is formed in a gamma-risk proportion with large margin requirements--it is apparent that self-interest is a political, not an economic, determination.

Truth, and self-determination, is not found by trying to prove what you think it is, but by discovering it. This empirically practical concept of testing the truth is to be found everywhere in America's Constitution. It ensures freedom by the rule of law, not of men, and is in this way exceptional.

Truth is as indicated, constitutionally confirming or disconfirming what men think it is, wisely converging it with what we divergently think it might be, or perhaps, unexpectedly, should not be.

America's founders recognized that truth is absolutely not dogmatic. By making the Constitution amendable, truth is confirmed by the founders to be a process of discovery.

Bromides abound about the way things should or should not be. Tired phrases like "that's life" or "that's just the way it is" is a lazy, common-sense wisdom that does not pursue truth but self-determines a common fate resigned to an untested, natural condition. It is a fate our founders naturally rejected when the king said it was his divine right to determine. "The way it is" unexpectedly converged with the way it apparently should not be, with "the way it should be" yet to be determined (tested).

Even today, monarchs are discovering the natural right to self-determine, and as we progress, by virtue of tested means, we discover truth to be what we always knew it to be. A natural fate in the pursuit of freedom is not at all unexpected.

Not only will the truth set you free (enable self-determination), but the pursuit of freedom finds it--it tests it; and when you find it, the risk of loss fully assumed is the risk of loss fully consumed. The risk fully converges with the reward, and freedom with the truth--the expected value--of your self-determination.

It is possible not to be in persistent pursuit of preventing dystopia. When the angst-principle is fully assumed (like between kings and their subjects), and the risk of loss is fully consumed with life, liberty, and the pursuit of happiness (the revolution), is when risk converges with reward.

Defining the Policy Space for Economic Expansion

Addressing a ground swell of populist sentiment, public policy is focused on the causes of The Great Recession.

Policymakers and analysts are busy confirming a policy space that will essentially define the problem in which the solution is to be logically deduced.

If it is true that government is largely captive to big business interests, definition of the policy space should confirm that hypothesis. With very little to suggest that policy will
eliminate management of risk that does not effect economic expansion but accumulates wealth, for example, it appears the hypothesis will be confirmed.

While deliberation of the financial system appears to be looking for new definition, the space is actually occupied by a pre-defined policy now being temporized to fit that space over time. Big business interests and populist sentiment will be forged to fit the defined policy space. The result will be policy that does not compromise the distributional properties--the means to ends--of the organizational structure while giving the appearance of change. Much of that appearance comes in the form of public-policy process both in the formation of policy and later in its administration.

Sufficient time passes within that space for a distribution to occur on the accumulation. Enough revenue can then be generated to pay on the public debt and secure its value without having to source the cause of the recession (the overaccumulation of capital into liquidity crisis--the benefit of accumulated wealth).

The debt needs enough support to make it worth buying. Securing that value is essentially accomplished by minimizing the amount the buyers are taxed to support it (essentially those that are too rich to fail the recession--the beneficiaries of the accumulation). The more you are taxed to pay the debt, the less value the debt returns to you and the less likely you are to buy it.

It is necessary to regress the tax system to give value to the debt for the people that have the money accumulated (the cause of the debt) to buy it. A VAT tax is being proposed to fill the policy space. It will give the appearance of change and regress the system to support the value of the debt without sourcing the accumulated benefit.

Through means of apparent change, the accumulated benefit, and the Hamiltonian model of finance that causes the problem, is conserved within the defined policy space over time.

Defining the policy space refers to a highly deliberative process that lends legitimacy to the dictates of legislative authority. That deliberative process functions to define a problem which will deliberately limit the probable outcome of the law, or provide large loopholes to ensure a probable behavior as result of those limitations.

It is important for legal consequences, like the legal act of a bank to sell securities long and proprietarily short at the same time, to have the appearance of a highly deliberative process that is intended to produce the public good.

In the absence of a directly effective democratic process, especially diminished by economies of scale, it is essential for the legal process to have the appearance of intentionally approximating the legitimately popular consent of the governed.

Defining the policy space is a game to be played out in the theatre of politics. Controlling this space is a defining characteristic of power and the ability to exercise control with the appearance of democratic process (without appearing to be dictatorial) is to exercise power with elegance.

While health care reform did little to provide a policy program that the public generally perceived to be the product of a popular consent, there was a social satisfaction of having successfully exercised power (the measure of popular consent: the less popular, the more power demonstrated).

We should not allow financial reform to seek the same measure of success as health care reform. It is critical the policy space be redefined for economic expansion instead of conserving the means of accumulating wealth in zero-sum and the pro-cyclical liquidity crises it causes, enabling a political-economic process to legitimately function without a popular consent.

Specific Crisis Indicators

Organizational size is a broad indicator.

There are other indicators more specific to a particular time and organizational or policy space.

Prior to the most recent liquidity crisis, the subprime rate fell below the prime rate, for example. The rate inversion was a very clear signal of crisis within the specific time and organizational space.

The space in which capital was organized for application was both consolidating and unregulated. Combined with the timing of the rate inversion, it was easy to see a big crisis of liquidity coming. For the policy makers and analysts in control, however, the inversion was being considered a positive signal, inferring confirmation of the tax-cut hypothesis. Inferring a negative signal did not fit the hypothetical effect in time and organizational/policy space.

Financing the Bush tax cuts with a surplus of Chinese dollars was a neo-conservative policy product that did not fit America at the time given the organizational/policy space. America was primed for strong economic growth.

A budget surplus and a strong dollar, however, resists China's growth and support for the price of commodities which were key to precipitating The Great Recession and development of a financially interdependant global economy that is too big to fail.

Instead of achieving a high rate of growth, the Bush tax cuts achieved an economic contraction of monumental proportion. Consolidated corporates can now consolidate even more, gaining even more command and control over capital investment. The cyclical consolidation is a specific signal in the space of capital investment. The Chinese economy is not threatended by the possibility of a more pluralistic American economy that includes increased manufacturing jobs.

The best-and-brightest Ivy League elite were, and still are, in control of this policy space, not the American people--a highly specific indicator of crisis in political-economic time and policy space.

At the time of the Bush administration, Alan Greenspan, Chairman of the Federal Reserve, considered the budget surpluses to be too high. The policy space was then fashioned to fit what, at that time, was touted to be a mandate for neo-conservative economic policy and programs. It was a very specific indicator of crisis.

Keep in mind that the Chinese dollar surplus was the direct result of an economy-of-scale model of efficiency. Specifically, the Wal-Mart model combined with consolidation and deregulation of the financial sector. The net effect has been to drive commodity prices up (exporting our raw materials) and labor costs down (importing finished products), organizing a "global economy." The result is a high margin of profit and capital formation without growth.

The time, however, is now for a distribution on that accumulation that benefits the American people. It is an undubious benefit that goes well beyond "always the lowest prices" that supports the lowest possible wages and the highest Wall Street salaries.

Presently, as we move forward with a very clearly disconfirmed neo-conservative economic hypothesis, having been very clearly and specifically indicated with a massive liquidity crisis and unemployment, consideration of financial reform occupies the organizational/policy space toward full liquidity and full employment, not just a means of keeping Wall Street safely rich without economic growth.

Financial Reform: Support and Resistance Indicators

Analysts discern the practical model being used for the development of public policy by identifying patterns and relative levels of support and resistance.

As the congressional debate proceeds on financial reform following the crisis in 2008, both parties are predictably poised to define the problem as the solution.

Democrats argue their reforms will end the too-big-to-fail organizational ontology that commands government bailouts. The Republican party, in faux opposition, contends proposed reform will "institutionalize government bailouts."

Equity valuations for large banks are getting support because the probability that any reform will end the too-big-to-fail model is virtually none.

While the Republican critique is correct, the party's solution to the problem is to stand in opposition to reform. The overall effect is to support the problem (and the associated equity valuations).

The entire reform process is in a prima facie state of regulatory capture to conserve the economy-of-scale modeling that consolidates wealth and power.

It is no coincidence that Wal Mart, in the midst of the recessionary trend, has now surpassed Exxon-Mobil at the top of the Fortune 500 list of largest companies. Consolidation into economy-of-scale "efficiencies" both precipitates the recessionary trend and validates the value of the efficiency.

As long as the means of consolidation is conserved, subsequent measures to counter its negative effects and support an economic recovery, like a more progressive tax code by letting the Bush tax cuts expire, for example, are rendered ineffective. The recessionary trend (unemployment) and equity values get support while a less accomodative monetary policy is resisted. Cheap money is available to the too-big-to-fail banks through the discount window to finance mergers and acquisitions (the economy of scale efficiency). The problem is supported, the solution is resisted.

A persistent recessionary trend will then be blamed on a progressive code and a value-added tax will be installed to finance the deficit in Hamiltonian fashion (with a regressive tax burden).

Since the tax on the value added is included in the consumer price, the tax increase will be regressive and deflationary (reducing demand), supporting the recessionary trend and the budget deficit while resisting higher interest rates.

The type and strength of support and resistance strongly indicates a persistent stagflationary trend that supports an arbitrage economy with high volatility, expertly engineered to favor firms that are too big to fail and a system of finance designed to generate profits without employment or economic growth.

While the reform debate correctly identifies the problem to be solved as organizational, it critically fails to identify that being "too big" is the determining variable. The practical model in operation is decidely, then, not pluralistic.

If analysts and policymakers rely on the pluralistic model for a predictive utility, the model will predictably fail.

Being organized "too big" will predictably fail the model of pluralism.

Government bailouts are necessary to avoid the catastrophic consequences of conserving the Hamiltonian model in a post industrial society.

The solution is to finance a more pluralistic model, not a more consolidated one.

Did Sub-Prime Lending Cause the Liquidity Crisis?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Tobin Tax

Discussion of the Tobin tax gets little discussion in U.S. pop media because, first of all, pop media outlets are controlled by a consolidated capital which proponents of the tax argue needs to be controlled.

The tax has a progressive, proportional quality because it is targeted at high finance. However, the tax also has a regressive quality because many income classes do engage in the transactions the Tobin levy proposes to tax in order to control the perils of speculative demand (the classic peril of causing liquidity crises and a deflationary trend that consolidates the capital and benefits the primary "class" of the tax's target--those who largely own the capital and apply the peril/benefit).

The tax will not solve the cause of the problem. The income necessary to demand the markets remains consolidated to command it. It is just another Keynesian-like symptomatic treatment. The revenue will be used to fund the welfare state, empowering the bureaucratic model and the elitist technocrats that run it for the power elite in the name of democracy.

The income policy necessary to actually solve the problem of algorythmic, recurrent liquidity crisis is a purely progressive tax: the higher the income, whatever the source, the higher the tax. The retributed revenue puts the "demand" back in the market quickly and easily, defeating the classic benefit of the deflationary trend to keep the capital, and power, consolidated.

The Tobin tax will be falsely sold as a progressive tax measure to falsely satisfy the need, the demand, for that measure. The tax is only "progressive" because it conforms to policies and programs of the progressive era of politics.

The progressive era represents the emergence of a new middle class of elits that aspire to the ruling class, legislating all manner of limits to liberty and raising huge tax revenues that supports their sense of an upper-class status. This cohort largely disguises themselves as "liberals."

The liberal description of progressivism is false. It is an endeavor to tyrannize society with the always-better-judgement of elite authority. It is a tendency that is inimical to a free and civil society and gives credence to the consolidation of wealth and power. It is the problem, not the solution.

No Demand for the Moral Imperative

Forty-six million Americans are currently without health care insurance. They do not have the income to demand it, yet the cost continues to rise in a deflationary trend. Just exactly how is that?

The SCHIP, for example, provided funds for price increases. It pulls up the cost without providing the income necessary to demand the cost come down. Rather, the tax funding provides for unconditional payment of the price; that is, without any demands. The income that is being provided is to command the price up, and that distribution deprives the income necessary to demand the price come down.

A market demand of 46 million is surely enough to demand the price come down if they have the income to demand it. Government providing the income by tax and subsidy does not, very clearly, demand the cost control needed to reform the system.

Paying the price on command is being masqueraded as a moral imperative.

Every American deserves health care, and every American deserves the income necessary to demand it at a an affordable price determined by the logic of collective action in a free and unconsolidated, competitive marketplace.

Ensuring a free-market mechanism in priority includes the pricing and organized practices of health care professionals and the AMA, as well as insurers. That will be the reform that both controls costs and satisfies the moral imperative.

Income and Capital Formation: Paying for Healthcare

The call for healthcare reform is a call for choice and affordability, and the objection to the proposed reform is the lack of it.

Americans are not clueless. Once healthcare is in the sector of public authority, where choice is "subjected" to the force and legitimacy of that authority, the supremacy of choice (democracy) is subordinated.

Voting with dollars in the marketplace is a direct and immediate democracy with direct and immediate authority that is directly and immediately verifiable. The choice is not "subjected" but objectively applied to fit the liberal taste and preferences of the individual. That is called freedom. That's why we want it!

The proposed consolidation to make healthcare universally accessible because it is fundamental to human existence is in fact a declaration that liberty and freedom must be diminished to attain the greatest good.

Soundly rejected!

The consumer knows that public sector consolidation of the system is as much to conserve the accumulation of wealth that makes healthcare unaffordable as to universally provide it.

Whether public, private, or public and private, organized consolidation rigs the price and concentrates income, which is argued to be the efficiency of capital formation for investment.

Does the cure for rising costs have to be the formation of concentrated capital (demand reduction)? We certainly have plenty of that (recession).

Controlling costs is a demand-side factor as well as a supply-side factor.

Cost control also comes in the form of ensuring adequate distribution of income (dollar votes) in order to demand it.

Public policy is needed that ensures adequacy of income to participate in the marketplace, not a system that ensures an accumulation of that income in the name of an efficient capital formation.

Consolidation of wealth and power is not a necessary condition for provision of the public good.

The current administration and congress seems to prefer, however, ensuring financial adequacy from the top down, a system that has failed "We The People," preventing the full and stable operation of democratic economic means, for over 200 years.

Conservatives argue that ensuring consolidation of wealth and power (low-to-no taxation for the wealthy--the regressive tax burden of the Hamiltonian model) is the stability we all want and need.

Is it?

If a lack of income prices Americans out of the healthcare market, how does ensuring the lack of income price them in?

The income that has been accumulated needs to be distributed to allow for participation in the marketplace. That will provide the demand that not only pushes the price up, but can be applied to "demand" the price come down.

Where healthcare does not rely on public finance in which the industry is paid whatever price it commands, consumers are more able to demand what is considered a fair price if they have the dollar votes to demand it.

In order for the healthcare industry to increase its income, it will be necessary to lower the price and allow for maximum participation (completely different from the budget-busting public option of assuring the highest participation at the highest possible price).

Even in the case of a life-saving medical procedure (a relatively inelastic demand), being held hostage to the price is a function of spreading the risk which, again, is mitigated by exposure to the ability to demand affordable insurance premiums to spread that risk.

A lower price increases income. Increased income increases the capacity to participate, and the need for more providers (employment and a share of the income), which spreads the risk to demand an affordable price (on a limited supply of available funds) rather than just paying what a limited number of providers command (on an unlimited supply of public funds).

A budget deficit to finance whatever the provider commands concentrates an accumulation of wealth. The redistribution of income reduces the amount of money available to spread the risk and demand the price without progressive taxation.

We are being told the free-market model of "demand" economics is impossible. It is a rhetoric applied to rig the price--to command the price rather than demand it.

What is impossible is to continue allowing for an overaccumulation of income if we want a healthy economy, and affordable healthcare.

Organizing to Control Costs: Healthcare and Energy Markets

The tendency to organize into horizontally and vertically integrated, monopolistic entities to distort valuations into the realm of the irrational was strongly argued against and identified as inimical to free markets by Adam Smith, founder of classical economic theory.

Smith argues that organizing into ever larger entities consolidates power in the marketplace and creates false indicators (the irrationality). Smith's solution is to be sure capital, industry and markets are deconsolidated. The profit margin is then a more accurate measure of future expectation (the trend) that is less likely to become a failed expectation and a sudden shock (the crisis) that further consolidates the wealth and power (systemic risk management).

According to Adam Smith, it is the job of government in priority to ensure the marketplace is free and unconsolidated. That, according to his theory, will effectively manage the systemic risk we are now grappling with. The government, then, according to classical theory, is in the business of creating jobs and wealth by ensuring it in priority despite the rhetoric of neo-conservative propagandists.

Notice that there is little to no evidence of government operating to apply Smith's prescription of deconsolidation.

Healthcare relies on the "public option." Energy relies on the regulation of derivative markets, like futures, which will innovate to avoid the gamma risk. Both elicit the need for progressive taxation to keep capital from the overaccumaltion that causes a deflationary trend with inflationary, monetarist counter-measures (stagflation).

The "need" for the progressive tax is obviated by organizing for a free-market system in priority. The need for a more progressive tax code is an accurate measure of extant free-market (democratic-economic) modality: the more the economy is organized for free-market mechanics, the less need for progressive taxation to technically correct for over-accumulation (liquidity crisis, or the systemic risk).

Government has operated largely to encourage and protect the organization of consolidated entities to the point of absurdity, irrationality, we have now: economic entities that are too big to fail and paying outrageous bonuses to business elits that have clearly managed the system into what is considered an illegitimate failure by the vast majority of Americans.

(The ultimate ignominy is to pay the devil a bonus for making you miserable! Is that the ultimate con game or what? The con is systematically organized to convert and consolidate value without legal liability. The liability is purely political. It is the gamma risk with a retributive, economic value.)

Current econmic policy clearly indicates a strong tendency to support state capitalism--a command economy with private consolidation of the wealth bureaucratically managed to protect the interests of the wealthy elite in "the public interest." Just enough pluralism is allowed, like a "public option," to give the consolidation of power a popular legitimacy.

The pluralistic legitimacy is really false. It is a Hamiltonian trick that keeps being reapplied in the name of democracy and self-determination.

Despite the freedom to pursue success and fully enjoy its reward without taxation, according to the conservative argument, the accumulation of wealth and power is nevertheless endowed. It is a legitimately necessary condition endowed by the god in which We all trust. The outcome is ontological--it just "naturally" happens. Thus we have the conservative concept of the Rights of Man: the utilitarian free pursuit of happiness with a naturally endowed outcome that if technically corrected for is contrary to the natural order of things.

Any attempt to correct for the accumulation of power and wealth that causes crises is considered to be an unnatural tyranny imposed on the natural order of things. That, according to the conservative argument, is the cause of perennial, systemic crises, like the deflationary trend we are experiencing now.

Not allowing for the naturally endowed tyranny of those with the secret, elite knowledge (the noble character to rule which, as far as I can tell, is merely the capacity to be corrupt and self-seeking in the name of the public interest) is an unnatural tyranny that causes crises. It is a self-fulfilled, teleological argument masqueraded as an ontology. It is a lie, a polemic, a lawyers trick, a sanctimonious, self-serving profanity that keeps the wealth, and power, legally consolidated as an act of God. Deconsolidation, then, is considered not only illegal, but a constitutional deprivation of the Rights of Man that is fundamentally evil.

Yes, deprivation of the Rights of Man is fundamentally bad. It results in crises and all manner of humanity's inhumanity to itself. It is an illogical, irrational, condition. It is an irrationality that mirrors the Hamiltonian ontological argument.

The Hamiltonian ontology is nothing but sophistry, later in history embraced as a moral ontology (an objective, untranscendable truth to be scientifically acknowledged) "beyond good and evil," as Nietzche described it.

The power elite is fallaciuosly argued to be a breed beyond the masses with a secret knowledge that is the public good...the general welfare. Why does Goldman Sachs give exclusive information, "tips," to its most privileged clients? (Recognize that the word "privilege" is a combination of the words private and legal).

The masses can never know, then, what the public good is because...it's a secret! It is entirely antithetical to a popular (pluralistic) legitimacy. The contradiction is not reconcilable, but historically it is ontologically played out in the natural order of things in which the truth naturally prevails over the lies.

The need for a progressive tax code to correct for an over-accumulation is considered by conservatives to be inimical to the public's best interest. It is therefore necessary to hide the wealth with innovative investment vehicles that are only accessible by the wealthiest clients (the consolidated capital).

The consolidated capital cannot be progressively taxed to correct for the over-accumulation if it is hidden. It's a secret. Can't tax what you can't see. All in the public interest.

It is then up to the Ben Bernankes of the world to save us all from the ontology of ourselves; from the mindless consolidation of power beyond good and evil, armed with the philosophy that conserving, rather than preventing, what is too big to fail will "reliably" effect the crises. If the effect is predictable, the risk can be "effectively" managed and predictably trended, which is what Keynesian economics does.

If the element of uncertainty is eliminated, the systemic risk can be effectively managed to keep the patient alive while we ontologically play out the proper diagnoses.

Rather than deconsolidation, government operates to regulate and technically correct for the lack of free-market mechanics (collective, direct democratic legitimacy).

The technical corrections (the gamma risk) plagues small investor analysts with a complexity that suckers them into following trends rather than predicting them. It is a furtive, systemic racketeering (yielding a privileged--a legally secret or private--benefit) that, as small investors found out, will result in reduction (consolidation) of net worth that supports a long deflationary trend, like we have now.

Until the means of deconsolidation is applied--a progressive tax code and reinvestment to pluralize consolidated markets and entities--small investors must always be on the defensive. They must protect themselves from trends commanded and controlled by entities too large to fail by applying an effective counter-tyranny in the marketplace.

Always being opposite the big money momentum (predicting the trend) is essential for capital preservation (to keep assets from being consolidated). It is a lesson to well be learned by the Obama administration and the current congressional delegation as we watch the stimulus money being consolidated into paying state debt and overpriced medicare bills, but that its leadership is unwilling to learn, much less apply. Changing that would be change we really need.

It is important to understand that, for example, what the Obama administration is recognizing as a necessary command and control of the futures markets by regulating the purpose of its participation is to control the ability to command the deflationary trend. Understand that both the problem and the solution are the same thing--command and control, not free-market economics.

At the same time, understand that the objection to the proposed action by the CFTC to remove the buyers (the speculators) dark marketeers say is needed to make futures markets operate with optimal efficiency to hedge the risk is not in any way supported by the evidence.

Physical users of the futures markets are penalized by the mass movement of private equity and hedge funds into futures contracts, driving up their costs and deflating the economy--the consequence (the trend) in command, and "the risk" to be controlled in "the public interest" (We, the ignorant mass of The People, can't be sure what that is, of course, because it's secret, privileged, knowledge).

We cannot legitimately measure the success of managing the risk by the depreciation or appreciation of income because it all happens by the secret knowledge of elite authority. All we supposedly know is challenging that elite authority, like allegorically realizing what causes the shadows on the cave wall, is inimical to our self, the public, interest.

Medical professionals, for example, have the esoteric knowledge of what drives the unlimited cost of healthcare. Talking about what a particular medical procedure costs is an uncivil questioning of authority (questioning the legitimacy of commanding the price).

Demanding the price is considered by the elite to be an ignorant act of defying civil authority. The equilibriating effect of a democratic, free-market economics on income will destroy the natural ability of the best and the brightest to protect the public's interest. Of course, it will not. The protection will be best afforded by not impoverishing the protected.

Controlling costs will be a function of ensuring economic democracy--free-market economics--in priority. As long as the price is commanded, either by public or private means, fair value is not empirically, legitimately, verifiable for either producers or consumers.
Incomes as well are not measurably fair and equitable without ensuring a free-market economics in priority.

We often hear conservatives say it is no one's business what their income is, and conspicuous consumption distributes the wealth fairly and equitably. The crisis that ensues from overaccumulation is falsely attributed to government intervention (the gamma risk) that distorts the free market. The cure, according to conservatives, is laissez-faire.

The reason income is a desireable "secret" is because it is an empirical measure of inequity. That inequity is retributive in value that must be protected. It is a risk that must be managed to be conserved (...sshhh... that's supposed to be an analytical secret well hidden within the dirty bowels of academe where obsequious conformists fear to tread). If the value was not retributive, no one would care what your income is, and you wouldn't care if it was a secret.

Empiricism is by definition to know, not to not know. It is antithetical to the privilege of the elite and why they resist free-market, demand economics for command economy. It is why income should be secretive and should not be considered the object of public policy to distribute it by free market means or any other means, but to conserve it.

Focusing on controlling costs is to focus on incomes and the legitimacy of those incomes. Costs have less to do with the esoteric knowledge of doctors, lawyers, business professionals... than with having the organized, systematic ability to command prices, and economic trends.

Controlling costs is a function of controlling the ability to command the price (ensuring a free-market mechanism in priority).

Controlling the ability to command the price is not accomplished with the ability to command the cost, like the public option does, or like the big box-store model does in which the provider commands the price and the consumer picks the quantity, but by The People having the power, the income, to democratically demand the price and thereby legitimately control the cost unless, of course, there is some secret knowledge I am unaware of.

Ensuring in priority a free and unconsolidated marketplace is to organize to control costs, and policy focused on income, rather than reorganizing the effects like a public option, is essential to ensuring it.

What's the Difference?

Small investors need to recognize the differences between today's economics and the past. Identifying false indicators is key to successful investing and preservation of net worth.

The economy undergoes innovation to maintain control over the determinants (the indicators) of value and the distribution of the value. The innovation is largely driven by gamma risk--public sector intervention that affects value and its distribution (see the article, "Assessing the Value," and "Indications of Recovery" at griffithlighton.blogspot.com).

Gamma risk innovation occurs mainly to avoid and recapture payment of the retributive value (the distribution of capital that relieves liquidity crisis and reverses a deflationary trend). For example, the dip in the price of crude oil, oversold to nearly $30/bl signaled a recovery. The recent spike in the price, overbought over $50/bl reverses the trend.

The causal relationship between the price of the energy benchmark and the directional trend of the economy is quite clear. In spite of political measures to infuse liquidity to cause a sustained distribution that will stop and reverse the deflationary trend, the price of crude is being used to effect (command) the trend posteriori. The gamma risk is being effectively managed by the private sector.

As the retributive value is politically infused, energy prices increase, consolidating the infusion and reversing the trend. The portion of the capital infusion that does trickle down inches the economy toward recovery with a highly measured pace determined by the private sector.

The political element of the political economy can claim being in control to satisfy the demand for public action while, at the same time, the private sector commands the pace of recovery. The gamma risk has then been successfully managed and the distribution of value (the retributive value) legitimately conserved both publicly and privately. It is an ingenius application of the Hamiltonian model of power and political economy that maintains a strict class distinction as the result of the naturally endowed freedom of each individual to equally pursue life, liberty, and happiness without intervention of the sovereign (government).

Equal pursuit does not ensure equal results, thus the need to manage the retributive value and the gamma risk to the reward.

Self-determination of "The People" (the legal sovereign) obtains by a long and complex process of illusion in which both wealth and power are consolidated and conserved with the force and legitimacy of public authority.

The Hamiltonian model survives by innovative means. The main threat to its success is a progressive tax code that will not allow the capital infused to pluralize the economy to be consolidated and the elitist model conserved. Changing the model is not mere normative sentiment, but a descriptive analysis that accouchers the practical understanding of trend indicators and predictive utility.

Identifying what the difference is, the innovation, that gives meaning to the old adage, "past performance is no indication of future performance," and why economic data and trends are too often reported as "unexpected" by analysts, allows the small investor to manage the risk with the certainty of current means to ends that must predictably conform to old legitimacies (normative legal parameters).

Buying an oil futures contract is certainly not illegal, but if capital is allowed to consolidate and massively move into futures contracts, the effect determines the direction of the economy. The cause-effect relationship lacks the normative pluralistic legitimacy of free market economics. Technically correcting for it (the gamma risk) is where the innovation occurs and the predictive utility of the difference obtains.

Notice that the recent rise in the price of crude correlates with the "unexpected" trend back to deflation. It is a causal relationship that will keep the economy in a stagnant state (see the previous article, "Crude Indicator" at griffithlighton.blogspot.com).

Until there is a more progressive tax code in place, rising energy prices will falsely indicate a definitive SAR recovery point as long as it is a speculative means of directing it by reversing the trend.
A more progressive code will make pluralism more profitable. Energy prices will then rise on the health and wealth at the fundament (on demand and not command). The recovery phase will otherwise be weak and stagflationary with a strong deflationary tendency that will appear unexpectedly only by those that do not know the difference.

The precipitous drop in the price of crude late last year signaled the beginning of the recovery phase of the current business cycle. Recovery will be expressed with a positive, long and linear slope when the noise (the deflationary tendency: the short-term effect of the recovery indicator) is regressed from the oscillation.

At this point, falling energy prices is a means of controlling the depth and breadth of the deflationary trend and the amount of retributive value accrued, manageably spreading the gamma risk on that value over time. Each peak above or below $50/bl is a short term accumulation and distribution within a stagflationary macro model.

The cycle of boom and bust is innovated into more frequent, short-term events favorable for arbitrage and leverage finance that cultivates a take-the-money-and-run mentality. A more progressive tax code is a sure cure with a level of certainty that can be measured by the level of resistance to it if not the carefully deliberate ignorance of it.

April Fools

The huge federal tax increase on tobacco that takes effect April 1st is our first indication that toggling between Democrats and Republicans is a false pluralism. The first act of a so-called "new" congress and administration--a huge regressive tax increase triumphantly passing congress and signed by the president--appropriately takes effect on April Fool's Day.

The best way to ensure children get the healthcare they need is to control the cost and increase the income to pay for it. SCHIP does neither!

When the government tries to control rising prices the new pool of money the new tax provides, the medical profession will simply reluct the service to be rendered in a free market fashion. Without meeting the price, and increasing the need to tax, the newly insured will be faced with a shortage. Everybody loses to the non-market, cost-push distortion of the regressive, tax-funded insurance program. The free market mechanism, instead of an equitable efficiency, is then rendered to increase the income of the healthcare sector and reduce the income of the consumer--a deflationary whipsaw effect (a continued consolidation of wealth), just exactly what we do not need!

A progressive tax will be required to correct for the distorted distribution of income, rendering the distribution more equitable so that the free market mechanism will work to everyone's benefit and not just a few market tyrants armed with an elitist, self-satisfied sense of superiority, the will to power, and a tax authority.

Instead of controlling the cost and increasing the ability to pay for it, all healthcare consumers will be whipsawed; and the race is on to see how quick an economic sector can get rich at the public trough...not exactly the legitimate model of a free-market mechanics.
Rather than freedom, the entire scheme, from the regressive, inferior-lifestyle-targeted tax burden to the distribution of the economic benefit, induces the model of tyranny being the preferred model of a two-party, duopolistic system, and a false pluralism. It is a tyranny of false choices that raises its ugly head to gain a legitimacy of power characterized by a superiority of lifestyle that especially opportunes in a time of crisis, like The Great Depression. It is a tyranny that we have learned at great cost burgeons a philosophy of intolerance that will destroy freedom in order to save it only for a few that have the will to claim righteousness and the virtue of choice for themselves.

State capitalism is not socialism. Nor is it a free-market economy.

The hope of ensuring a more free-market mechanism to control costs and increase incomes--the sure cure for deflation--by toggle-switching to the Democratic Party...April Fool!

Gaming With Too Big to Fail

We will see the oversized financial firms being compensated by the public sector for wrecking the economy bargain to have it all their way with the threat of not participating in the government programs, or threatening to wreck it even more. That is what organizing to be too big to fail is for--to have it all your way. To be a tyrant.

Considering that "too big to fail" means they are indispensable, it is nothing but extortion. The fraud and abuse we have come to expect from these unexpendable economic entities is apparently not enough to demonstrate the extent of corporate hegemony.

Fascism is not the acceptable alternative to the threat of socialism.

What is too big to fail is easily cured with the public sector operating to ensure a free and unconsolidated marketplace in priority, the antithesis of "too big to fail." Fascism or socialism (another false binomial choice in which to toggle) is not the only alternative. The government action will not be ex-post-facto, it will not be a bill of attainder to punish corporates that have organized to get away with fraud, abuse and extortion. The progressive tax code needed to finance the third alternative will be to pluralize and destroy the tyranny that plagues The People.

The lack of action to progress the tax code renders the Obama administration's Keynesian stimulus plan equally unstimulating because it depreciates the value of the dollar. Energy and food prices will rise with a depreciating dollar, deflating the economy, what the stimulus spending is supposed to cure.

Understand that being able to dictate the cause-effect relationship of the dollar's value coupled with consumer prices is accomplished by organizing to be too big to fail, mainly by being able to restrict supply and thereby determine demand (deflation).

Being too big to fail does not suffer from deflation. It is a winner on the up cycle and the down cycle. It is being too small to survive that incurs all the detriment, and that detriment is consolidated into the benefit of being able to dictate the relationship, the ability to assess the value, control the bid, of commodities and currencies.

Ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority cures this organizational problem of being too big to fail. The economy is then dominated by small firms with highly adaptable and innovative efficiencies that are as much concerned with low prices, full employment and adding supply (a strong dollar) by default of the system than just making a profit and deflating the economy by default.

Large, too-big-to-fail corporates benefit from deflation. It is profitable. It strengthens the ability to tyrannize the marketplace. The favorable terms for the corporate to be offered by treasury secretary, Geitner to recapitalize the financial market is a demonstration of "success" of the business model that Federal Reserve chairman, Bernanke describes as inimical but inevitable. Tyranny is the efficiency that a consolidated and collusive corporate achieves (and that can be a socialist legitimacy as well) at the expense of all other efficiencies.

Arguing that the large size, and big profits, of the large corporate allows for risk taking that would not otherwise occur, providing productive and innovative efficiency that only organizing to be too big to fail can provide, is an empirically nulled hypothesis. Maintaining the argument at this point is just a lie intended to conserve the means of tyranny (the elitist model of power and political economy).

The treasury secretary's plan to recapitalize "too big to fail" (remember, huge profits were made and converted into private equity before big financial firms "failed" with the probability of global economic collapse, which means that they--what is inimical--really should be allowed to fail) will be a demonstration of the power of the corporate that will confirm by false induction the Hamiltonian model as the only possible alternative: the private sector's too-big-to-fail corporate structure trumps the value of government (the sovereignty of The People). The empirical measure of superior value will be the assessed value of return on investment for one private enterprise dollar over a government (The People's) dollar. According to Geitner's plan, "The Public-Private Investment Program," The People's dollar only has a fraction of the value a hedge-fund, private-equity dollar of the private sector. The value of the private sector's dollar is considered, and validated, as supra-sovereign, and in the same way, as Nietzsche describes it, the inexorable "will to power" that is "beyond good and evil."

The difference between the public and private sector's return on the investment is the reward, the vigorish, of the will to power (to organize to be too big to fail). The struggle for political-economic dominance, hegemony of power, is the reason for being and existence again being played out and verified by the gaming we see now in progress. If we want to be verified existential moral deficients, we buy into this philosophical construct and practical modeling of power.

If we want to ensure the good life (a moral existence), we should try the third alternative: ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority to cure the organizational problem of being too big to fail.

Federal Reserve and Treasury Action to Recapitalize Financials is Old School

What we need for economic recovery, reinvestment and stabilization is not what is now old school, status quo Keynesian economics that ensures the Hamiltonian model of political economy in priority.

Fed Chairman, Bernanke says it is not possible to have large financial institutions that are not too big to fail. While the chairman identifies the problem as an organizational one (and the chair of the nation's primary quasi-public/private financial institution admitting that is quite the coup), he nevertheless will not admit he is resorting to a passe' organizational model that needs to be thrown out.

The Hamiltonian model of political economy is an empirical failure. It always results in the volatile cyclical events that Bernanke decries as inimical to general economic health and social stability with the private sector causing economic crisis with support of the public sector, the tax authority, a quasi-public central banking system, and with the function to manage the effects (the negative externalitites: the retributive value) being neo-classically added. The model has evolved into a systematic complexity that is critical to its survival despite being an obvious empirical failure over and over again.

Bernanke alludes to the complexity of the system as both the problem and the solution, which is the first indication that change we need is not forthcoming. The complexity will be the medium in which to "manage" the system to fit the existing practical model that, while the means can be changed, determines conservation of the ends.

The system of banking, being critical to assessing value, for example, by who gets a loan and for what, is critical for the development of economic entities too big to fail and can, thus, control the value to be assessed and the assessment of the value. It is an absolute power that corrupts absolutely that decides, dictates, beyond having collateral or not, the success or failure of the non-elite with assessing the value of loyalty in service to the overlords, the owners, of the capital. It is an evolved form of feudalism that Thomas Jefferson argued was an unneccesary vestige of an evolving structure of power that the American Revolution and the new democratic-republican form of government was intended to prevent.

The American Revolution represented the expansion of sovereignty to prevent, according to Jefferson, what Hamilton wanted to ensure.

For Alexander Hamilton, the nation's first treasury secretary, the revolution represented an expansion of elite rule with a democratic legitimacy of power that would make the right to rule immune to revolution and beyond the claims of a sovereign, including The People. He set to bifurcating the power structure into public and private domains in which the private sector rules and the public sector supports and legitimizes, always having the support of the king (now The People), the sovereign, by default. It allows the legitimacy of power, the means justifying the ends, and the virtue of what is public or private, to be whatever the power elite say it is with their status or "class" being supra-sovereign.

The elite claim the vulgar status of sovereignty only when the means of power, the consolidation of the wealth, is threatened by action from the public sector, invoking constitutional prohibitions like ex-post-facto laws and bills of attainder that are argued as "punitive" measures designed to unjustly punish success in the private sector.

Hamilton's scheme of bifurcating the power structure, neither purely public or private, is intended to satisfy the element of democracy that verifies its existence, pluralism, with "two" elements of power that, operationalized with elitist control of the banking system and public finance (controlling the assessment of value), ensures the power structure always operates to conserve the collateral and the ability to distribute rewards and deprivations from the private sector based on loyalty to the values of the power elite. Those values extend specifically from the prime value of providing for the welfare of the rich in priority, like we have now. The two elements of power operate to provide a false pluralism acting as one system of power that defeats the distributive benefit of a democratic-republic while maintaining the democratic means (the pluralism) that justifies (verifies) the ends (the distribution) of power.

Hamilton's scheme of a verifiable pluralism in which the public sector (government) ensures the sovereignty of the individual private citizen ensures that some people are more equal than others. It provides the dynamic for crisis that Bernanke refers to as inimical to the general welfare, meaning that Hamiltonianism, despite his corrective measures being consistent with it, is unconstitutional since the general welfare is what the government is in business to provide; but, of course, Bernanke's technical status is "quasi" neither public or private. He is a tool of the private sector masquerading as a civil servant with the legitimacy of public service ensuring Constitutional outcomes with distributive value verified by the means justifying the ends.

While Alexander Hamilton provided us with an ingenious system for democratic means legitimizing the distributive benefit of unequal power so it may be defined as indivisible "with liberty and justice for all," two hundred years of boom and bust is quite enough evidence that the trickle-down model of public finance does not work if the goal is the general welfare. The Hamiltonian model is intended to ensure in priority the economic welfare of a small elite ruling from the private sector with the support and legitimacy of public (constitutional) authority through the cyclical process of boom and bust. The benefit, by definition, cannot be indivisible, and the application of Keynesian measures fits the model perfectly with a much needed element of adaptability to allow the status quo ante to appear as the means of change despite the divisibly distributive benefit.

Arguing that ensuring the welfare of the rich--ensuring the survival of an organizational technique that cannot be allowed to fail--is the general welfare is nonsense. It always has been. It is now! It dooms everyone but the elite to a tyranny of avarice, greed and all manner of stupidity, ignorance and amoral, if not deliberately immoral, behavior all for the "utility" of achieving the greatest good always to be announced with forever innovative means.

The next "ism" of a failed socio-political hypothesis is always lurking just below the horizon, reinvented to extract the economic value that supports the superior right to rule that is otherwise The Constitutional Right of The People.

Thomas Jefferson was right. The revolution is always "occurring." According to Jefferson, Alexander Hamilton's organizational technique of public/private finance that keeps a "reoccurring" debt obligation, with a regressive tax burden, will ensure it, and here we are.

The Fed's latest plan of action keeps the debt in a state of "reoccurrence." Keynesian economics is just an innovative means of recycling the debt, turning the economy into a perpetual-motion debt machine, politically and economically providing the highest return at the lowest possible risk.

Bernanke is not implying that technically organizing to be too big to fail needs to be deconsolidated into firms that are small enough to fail with investment from private equity. It is absurd to think private equity will invest without the no-risk/high return model of too big to fail fully in operation, and so treasury secretary Geitner's plan to "detox" the bad debt with a large leveraged return for private funds and a small simple return for public funds is purely representative of the Hamiltonian model.

It is in the best (divisible) interest of private capital to allow the Fed to inflate the economy with fresh capital (monetize the debt) to liquidate the leverage that became toxic and recycle that bad debt indirectly into the indebted economic rent that keeps the rich rich and the poor poor--Hamiltonianism.

No! It is clear. The Hamiltonian model needs to be junked!

The vast majority of Americans have a clear sense of ethical (indivisible) economic equity that has nothing to do with bills of attainder or ex-post-facto laws. These legal arguments, while appropriate for preventing the abusive power of kings, are being used as a ruse intended to discredit the call for equity and justice as mob rule (the political legitimacy of the Hamiltonian model to prevent the chaos of the ignorant masses). The People do not intend to persecute individuals, but to simply prosecute the systematically unjust, divisible distribution of wealth and power being falsely argued as an indivisible social benefit that prevents, rather than provides, a more perfect union.

The reinvestment to restructure the financial system must come from the existing capital that is consolidated. A progressive tax code is necessary to finance a safe, secure and easily accountable marketplace that is not dependant on the success or failure of any one firm, and is to be ensured by means of public finance in priority.

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.

Your Tax Money at Work

When it was decided that tax money would be used to bail out financial firms too big to fail, I asked the question: what is the probability the money will be used to continue the practices that caused the financial crisis considering that causing the crisis is profitable?

The probability turns out to be, of course, 100 percent.

Your tax money has been, and will be, used to finance credit default swaps in a deflationary trend. The taxpayer directly pays, by default of the system, the profit to be had from a failing economy through bonded insurance derivatives that the interlocked firms receiving TARP funds--the network of integrated financials too big to fail--buy and sell. The direct payment of the profit is in addition to the indirect benefit that the deflationary trend produces in the form of consolidating capital and markets.

AIG (your tax money), for example, will be paying hedge fund operations within the integrated system that bet the economy will falter and credit (bonds) will default. Considering that allowing wealth to accumulate into the upper class (consolidation of the capital) always results in recession, there is virtually no risk to the CDS buyers who can be, and are, also CDS sellers (remember, it is an "integrated" system). The profit is systematically ensured with no risk and paid by the taxpayer, which is not the hedge funds since they are exempt (a regressive tax code). The systematic model is state capitalism, not socialism though both can be argued as the same thing with being "too big to fail" the determining (controlling) variable.

So, we see that the effect (the profit) is systematically caused by a circular and recycled accumulation of the effect organizationally integrated and paid largely by The "little" People (regressive taxation) so that the reward is always disproportionate to the risk to conserve the status quo of disproportionate (elitist) power, or Hamiltonianism.

This system of finance, this business model based on being too big to fail in order to dictate the marketplace and control the bid, literally has the victim taxpayers (the non-elite that suffer a regressive tax burden) paying the wrongdoer to do the wrong and finance the means to do it all at the same time. It is a system of finance that can hardly be anymore unjust and inequitable. It is the model of finance that Thomas Jefferson so strongly opposed (the Hamiltonian model), with the inequity having become evermore visible, disfunctionally passe' and a model of absurdity.

For the small class of people accepting public funds to stabilize the economy, using it to cause a profitable instability with a circular system of effects while telling the taxpayer we should fear socialism all at the same time, fascism is not the acceptable alternative!

Progress the tax code so that your tax money is working FOR YOU, and not against you!

Now is the time to do it!

Fear or Loathing: Do Economists and Business Leaders Lack Expertise to Manage the Economy?

There has been criticism that our technocratic elite have shown considerable incompetence to predict, prevent, and now control and abate the economic crisis.

The criticism, getting a loud voice from a wealthy class of new rich who are now being branded in the media as "less rich," is incorrect. The economy has and continues to be managed with competence to define class distinction, or the measure of "success" that occurs with the deflationary phase of the macro-economic business cycle.

The "class" dimension is absolutely critical to understanding the measure of success or failure. What appears as a political failure--a maldistribution of wealth to the upper class--is an economic success. That is what the Hamiltonian (elitist) model of power and political economy is supposed to do: operate to clearly confirm class distinction, defining just exactly who the elite are. At this point within this elitist model, there is, of course, the impetus for a political solution to catalyze a recovery phase of the cycle that is the antithesis of deflation, or inflation (an economic metric).

As long as the recovery phase is managed within the Hamiltonian model, the political measures taken will be inflationary: monetizing the debt with a regressive tax code that produces a budget deficit. The alternative to the budget deficit (inflation) is an equally massive economic detriment, like people starving in the streets, that no one can tolerate, not even the elite because it accumulates too much retributive value to be managed at one time.

At this phase of the political-economic cycle we can choose to finance the recovery with a regressive tax burden that confirms operation of the practical elitist model, or we can choose to progress the tax code and modify the working model to a more pluralistic effect.

Progressing the tax code will not destroy our nation or the free market as all the conservative rhetoricians, that have all the access to media form the margin because the elite can afford to own it, say it will. The fearmongering is an expression of this marginal disproportion of power that the elitist model produces and is designed to maintain with a level of competence that is the best money can buy.

The experts are busy telling us that the prospect of progressing the tax code is keeping the economy in a deflationary trend. We should be afraid of that prospect. It will spoil recovery by discouraging the reinvestment needed to trickle down to the masses and overcome their fear of having no income to spend. Nevermind, of course, that expert implementation of this theory led to their having less income to spend, record depreciation of household net worth, and the fear (the prospect) that it will get worse. What is bad about the economy, what is to be loathed, is being expertly attributed to the fear the elite have of probable change that occurs with the depth and breadth of the cyclical trend and the unequal distribution of wealth and power it is intended to conserve. What the elite fear is, by the absurd reduction of the 18th Century collective utilitarian argument, what we all really fear in our collective self-interest.

What is the elite's fear is the non-elite's triumph of a constitutionally endowed pluralism. The fear that our technocrats are telling us is driving our economy into the ground is a misattribution. The fear factor is the political will to switch to a more pluralistic model that threatens the status quo of power a la Thomas Jefferson.

Our economy is not continuing to trend deflationary out of fear of the largely non-elite consumer who is not spending. The spending is inadequate because the income is not there to support it. It has been consolidated as per the elitist model in operation, and being very competently applied. The trick is now to fool us into believing that choosing the means for a more pluralistic model of power--a more progressive tax burden that will enhance non-elite spending--is antithetical to the basis of our constitutional form of government that protects our freedom. The argument is, of course, absurd.

Operating with the elitist, Hamiltonian model causes the lack of income because it has been accumulated in the upper class to now be consolidated through political process of a regressive tax burden so that the recovery will be financed by borrowing from the consolidated wealth with interest (a budget deficit) instead of taxing it.

The elite of power are afraid, they fear The People will realize that the practical model can be easily changed so that instead of financing the means of consolidating power, We finance the means of real freedom we are all endowed.

Instead of financing the means to defeat free-market economics, We finance the means to allow for it in the fullest measure. We may then confirm what it is we have to fear: a free market or the lack of it?

The expertise being used is being mistaken for the lack of it because the complexity of the problem is being used to convince us all that the cure for our loathing is to be feared: that the problem is the solution; to identify the fear of the elite--the solution--as the object of the loathing, or a fundamental error of attribution. It is a deliberate error, a fallacy, being detected but erroneously interpreted as, attributed to, incompetence of the technocrats instead of the successful operation of the organizational technology--the elitist model of power and political economy.

The bad economics we all loathe is not the result of free-market economics, merely the lack of it. Realizing that is what the elite fear and will do whatever it takes to turn what We loathe into what they fear with the highest level of expertise.

Science and Life

While we learn that science is for designing computers, orbiting satellites and going to Mars, the application of the scientific method is much more.

Science has application in everyday life. We tend not to apply it because it is impersonal and associated with abstruse mathematical language and a strict, unrelenting logic of always trying to disprove what we consider to be the truth.

Look at the state of our economy, for example. While it determines every aspect of our lives, we tend to analyze it with unscientific cognitive process.

For example, if we say that all fair-haired people are criminals, there will be a tendency to treat them as criminals, and they will, then, tend to be criminals at the margin of social acceptance and participation. It is a tautology, a deduction that proceeds from a false premise resulting in a false confirmation of the hypothesis by causing the evidence. The result is a false induction.

Now that we face verifying the effectiveness of the various means to stimulate our economy out of a great post-Keynesian recession (deflation) in which economists are falsely arguing is unprecedented and are therefore at a loss for what to verifiably do, our ability to give the scientific method an application to everyday life is being saliently challenged.

If we proceed from the premise that government intervention in the marketplace is bad, there is a tendency to treat the need for intervention as bad, and that will, then, tend to result in policies that directly or indirectly result in a regressive tax burden that has a deflationary tendency that causes the need for government intervention. It is a tautology, a deduction that proceeds from a false premise resulting in a false confirmation of the hypothesis by causing the evidence. The result is a false induction.

As we apply the scientific method it is critical that we recognize that empirical truth is not something that can be proven. It can only be continuously tested and disproven (not confirmed by the evidence). Truth, then, is always becoming evermore apparent, or cognizant, as we always try to disprove it. This is called the null hypothesis. Like Einstein once said, paraphrasing: science is the cognitive process of always trying to disprove the existence of God. Since the process of nulling the hypothesis is in continuous process, the existence of God is continuously confirmed. Rather than being in conflict, science and theism is thoroughly compatible, reinforcing, and is unreasonably rejected as a cognitive method for evaluating everyday life. Rather, God challenges us to null the hypothesis--to find the truth.

If we are to find the truth of our economic predicament, what about the working hypothesis has been nulled or disconfirmed?

That would be the "trickle-down" hypothesis, or the hypothesis that regressive taxation produces the general welfare or the greatest public good.

The hypothesis has been thoroughly tested and decidely nulled!

The course of action to be taken for economic stimulus and reinvestment in 2009 is empirically clear and convincing.

A progressive tax code will be a minimal government intervention that will maximize the ability to reinvest, recapitalize, our economy into a sustainably peaceful and prosperous pluralism without either monetizing the debt or burdening the least able to pay it only with the assurance of future deflationary trends that can in no way be defined as the general welfare or the greatest public good.

Economic Stimulus: What To Do, What Not To Do

The depth and breadth of the current macro-economic cyclical trend has everyone's attention. Its saliency is marked by a spreading economic detriment that reaches into the upper middle class. The current economic trend defines the distinction between being middle and upper class--the degree to which you sacrifice your net worth to the capital owned, consolidated, by the upper class.

Since the effect of the boom-to-bust trend is to define class distinction, there is a tendency to trickle down the demonstration of power by the middle class with regressive tax policies to address burgeoning budget deficits. Exacting a regressive tax burden is a demonstration of power that gives a sense of parity with upper class status. The financing for the SCHIP program recently legislated is highly regressive, for example, providing a source of revenue for members of the upper middle class along with a sense of being powerful enough to politically apply their economic self-interest (regressive tax policy) in the name of the public good or the general welfare, just like the upper class does.

Regressive tax poicy is highly deflationary. It is the first thing NOT to do if we are to stimulate the economy out of the deflationary phase of the business cycle, yet it was the first thing to do once a new administration took power and a new congress sworn in.

Where regressive tax policy thrusts us into the depths of recession, a progressive policy will effectively pull us out. If, as a practical example, we want to fund health care for those that cannot afford it, a progressive burden is the pragmatic measure, but the cohort that is to shoulder the brunt of the burden do not occupy legislative seats at any jurisdictional level of government.

For the middle class cohort seeking to demonstrate power in the throws of class distinction, a regressive tax burden is not in its self-interest. Rather, it sustains and validates a tax policy that is the source of its detriment, giving false confirmation to economic policy that is otherwise not confirmed in the most salient way, becoming the willing tool of the upper class and its confirmably disreputable mode of systematic operation by pragmatic means of a regressive tax burden.

A Vote for Productive Incentive

We hear candidate McCain argue that Obama's economic policy will deprive The People of productive incentive.

It is the classic conservative argument that productive incentive comes from the top down, from the managerial skill of organizing, or "factoring" resources to provide what we want and need. A progressive tax code, they argue, renders the capital necessary for factoring unproductive because it does not have the full capacity of the return on investment. It therefore will not be optimally invested.

Furthermore, they argue, a regressive tax code is only necessary to support the needless operation of government regulatory authority and wasteful welfare programs. The conclusion is that taxation is a non-productive incentive and should be minimized if not eliminated.

According to the conservative argument, a federal government was founded to ensure the sovereignty of The People; that is, to ensure eliminating the non-productive tendencies of consolidated power and wealth. The best way to provide society with what it wants and needs is to deconsolidate power and constitutionally endow The People with organizing its means.

That is exactly what Obama's economic plan will do: diminish the verified unproductive tendencies of consolidated power and wealth.

It is exactly what McCain's economic plan will not do: provide the means of The People the productive incentive, the opportunity, to provide what we want and need; what allowing for the consolidation of the capital will not verifiably do without punctuated periods of deprivational crisis like we have now.

If you want to vote for sure means of deprivcation and a non-productive incentive of the capital, vote for McCain.

If you want to ensure the free flow of capital and the maximum productive incentive that comes with it, vote for Obama/Biden.

Technical Correction to Tax Policy

McCain argues that the Obama/Biden tax plan will require the average income to write a check to itself because the tax reduction will have to be financed through the deficit, or monetized, by borrowing it from the upper class of incomes.

The argument is pure deceit.

The average income, under the current regressive tax code, writes a check to upper class incomes to finance what the rich do not pay in taxes but is borrowed in record amounts through a regressive tax policy that McCain not only wants to sustain but increase to ensure our productivity, or the creation of wealth.

First of all, regressive tax policy is proven pro-profit, not pro-growth. The policy is deflationary because it increases the tax libaility of The People, reduces buying power and increases debt. The result is deflationary crisis.

Regressive tax policy does not improve productivity, it decreases it.

Second, the tax reduction for the average income is offset by a progressive increase for upper incomes who can afford to pay down the debt, immediately improving buying power, reversing the deflationary trend and strengthening the dollar.

The Obama/Biden plan is a much-needed technical correction to tax policy and the macro economic.

Obama/Biden is change we need!