Deficiency of the Use-Value Argument

Deficiency of the use-value argument is readily apparent. The capital is absorbed into hedging the risk caused by not being invested in economic growth and stability.

Continuous use of the capital to hedge the risk--the industry of making markets through derivatives--causes the fractile transformation of risk that justifies the valuable use of consolidating it into an economy-of-scale efficiency. That is, the risk becomes so complex that it must be managed into a form that is characteristically too big to fail.

The use-value of the argument is essentially this: failure cannot occur because the risk is "too big." The argument falsely implies that resolving with alpha risk is tantamount to allowing failure, which if allowed will result in systemic failure (failure in a gamma-risk proportion).

The argument is entirely false. Alpha risk does not exist in gamma-risk proportion. It is unaccumulated risk. The risk is spread to avert accumulation, and if accumulation does occur, it will likely fail if it is an abuse of power in the alpha form without failing the whole system.

No bailouts are needed to conserve the value of alpha risk--the risk of failure. An alpha-risk system (ensuring a free-market legitimacy) is inherently risk averse.

The system we have now is verifiably risk prone.

The risk is caused by hedging it so that causing risk, rather than hedging it, is the reward. Risk becomes fractile and cumulatively unstable with risk being compounded on the probability of the risk. Risk then becomes so overweight that the probability of default is 100 percent (what Germany is trying to avert by inverting the risk hypothesis, or the expected, directed value of the risk).

Timing a market space is then a function of tracking the transference of risk, and who exactly is qualified to do that without gambling with the capital?

If you are not a favorable credit score, you are likely to lose by being positioned to intersect with the transference of risk (by always being "put at risk").

Always being put at risk, or in harm's way, naturally accumulates risk at a higher level that requires a high level of power to manage. The benefit becomes retributively valued and the risk to that value gains a gamma proportion that requires either force or finesse to conserve.

Exercising power in zero-sum does not require political finesse if it is absolute. An inscrutible derivatives market combined with the legitimacy of free-market economics provides finesse where absolute power is not legitimate, like in America where The Revolution rendered absolute power not only crude, obsolete, and unproductive, but illegal.

In the case of a free-market legitimacy, finesse is required where force cannot be legally accomplished without a risk of liability on the zero-sum. Economies of scale, however, operate with impunity because they are too big to fail, which also means they can operate with illegitimate force and stay in business. That is, economies of scale operate with minimal alpha-risk accountability. The risk is transferred, or transformed, into beta and gamma risk.

Financials are currently high beta because they are the target of regulatory reform, having accumulated excessive gamma risk (having excessively reduced the alpha-risk, cost/price-to-accountability coefficient). This is the space where finesse critically operates to prevent disaggregation of the risk to correct for an abuse of the market mechanism (the over-accumulation of risk).

Instruments used to transfer risk accumulate the risk into a bubble. Inflation and deflation of bubbles is accomplished by bundling (combining) the causal factors into the control of the elite insiders, who bundle the products to define the risk. The risk can then be inverted at will, at any particular time, in any particular space, to score a profit. The score is what makes the elite insider more credit worthy, providing the liquidity to hedge, or define, the level of "perceived" risk.

Prop desks of big banks, for example, positioned against bonds they issued for municipals, putting the bonds at higher risk, "making" a short-term profit differential at the expense of both buyers and sellers. The profit generated can only be considered legitimate if the abusive practice can be considered useful, mitigating the perceived loss in zero-sum.

The illegitimately gained benefit actually belongs to the loser, less the useful value which will largely be realized by having reduced the alpha risk. The abuse will survive the marketpace as beneficial because it is "too big" to fail. The abusive firms are not smarter than the losers, just bigger.

While economies of scale are much more credit-worthy, they are much less trustworthy. Replevin is considered to be revenge since they have "successfully" transformed alpha into beta risk. The risk of liability accumulates and transfers into the space of gamma-risk authority where it is managed to legally mitigate the possible loss to the gain, accumulating the gamma risk to a crisis proportion over time.

The perceived risk and market sentiment can be technically changed in a flash. Effective financial reform will have to deconsolidate the risk in order to keep the risk-transfer market being re-made faster than reform.

Accumulated risk must be transformed into an alpha-risk ontology in which the technical indicators reflect the fundamentals rather than the beta-risk mainpulations of collusively consolidated financial entities.

The question is then, will the specific measures offered for financial reform devolve the risk into a more fundamental form of risk ontology, utilizing the collective wisdom of a free marketplace rather than the elite manipulations of plutocracy?

Acquiring Market Share

Acquiring a share of a free-market, rather than mergers and buy-outs, requires replicating or improving the successful behavior that causes the empirical measure of success--the profit margin.

Replication and improvement means proliferation--expansion--of the marketplace, not the contraction of merging and acquiring markets which, for the most part, is the business of investment banks, private equity firms and hedge funds. These financial firms know very well their investment practices deflate the economy. They position with various kinds of instruments structured to gain value on the short side as the economy declines--the notorious credit default swap, for example.
The effect is an economy in command and control.

If the profit is margined on command, it is not free-market economics.

In a free market, an expanding profit margin is a measure of an expanding marketplace and demand (supply-side economics).

In a consolidated organizational environment, despite being touted as the best model for expanding supply, a contracting marketplace and a declining demand supports the profit margin (sustained capital accumulation) and resists the declining rate of profit (the distribution necessary to sustain demand and make a profit in an expanding free market). This intentional support and resistance occurs in both the short and long term. The result is a net gain for the commanders (the elite) and a net loss for the commanded (the non-elite).

While the gain is considered to be legitimately ontological by the operation of free-market economics, the gain is nevertheless retributively valued by the loss. A correction of the value is then always in demand and forms a gamma-risk ontology. Managing that risk, instead of the free marketplace, leads to a growing authoritarian regime that is equivalent to the lack of free-market legitimacy.

Mainstream economists who strongly supported the investment methods that led to the current liquidity crisis, known as the Great Recession, said these means, now the subject of heightened regulatory authority, would lead to optimal economic expansion and, therefore, no need for government. These economists explain the massive accumulation of errors as, not fully understanding how the economy equilibriates.

Notice how investments made in "dark markets" free of government regulation did not result in less need for government. Quite the contrary, too-big-to-fail firms rely on government intervention. Let's face it, the Ayn Rand philosophy is a lot of hocum if the organizational model is not there to support it.

Free markets do not operate in the dark, and the dark marketeers say they were operating with Rand's practical philosophy. They continue to advocate Rand's philosophy despite the practical failure.

Clearly, then, there is a practical effect to be achieved despite the free-market philosophy having been accepted by a controlling elite authority (and there is no reason that will change with a socialist legitimacy). We must consider that if the dark marketeers knew their methods would achieve the Great Recession, it would be necessary to operate in the dark.

Now that the free-market correction has come in the form of government authority, complaining that there is too much government intervention, which, like Ayn Rand says, causes the problem, is complete nonsense!

Government intervention does not cause itself, and if too-big-to-fail firms were really the model of free-market efficiency, it would not be necessary to operate them in the dark.

Not learning from the mistake here means that the Great Recession is no mistake. It is, as we now hear the conservative argument being delivered, the classical, free-market model of comparative advantage at work to re-adjust labor costs to third world levels where peasants just left the farm.

The problem here is not labor, it is capital. It is capital that needs the adjustment, allowing for economic expansion at the lowest possible price, rather than contraction of supply at the highest possible price with labor always trying to cause the distribution necessary to prevent crises of liquidity.

Increasing supply and controlling costs, whether forging steel or providing health care, is less about combining Ayn Rand with a too-big-to-fail efficiency than just simply accepting the model of pluralism.

Since the too-big-to-fail practice is, by definition, so obviously an organizational technology inimical to free markets, mainstream economists are now saying this "doctrine" should be abandoned to allow for failure. It is absurd, of course, because being so organized is too big for failure. The remedy is to allow for failure, not to disallow being too big.

The mainstream does not give up easily. They are apparently paid to persist in error which, of course, suggests there is no error, just fully intended consequences. The mainstream fully understands that the economy will not "equilibriate" with the investment vehicles being utilized, but "dis-equilibriate."

Now that the crisis of disequilibriation has occured, mainstream economists now argue we can benefit from the correction of valuations. Specifically: we will now benefit from the readjustment of labor costs, or a deflationary reduction of demand that increases supply without expanding the marketplace (false supply-side economics).

Rather than contracting the available supply by growing the size of a fewer number of corporate bodies, supply is added by adding to the number of firms available to supply the "growing" demand and acquire market share. The rate of profit, rather than declining, gets pluralistic support--it is growing, economic growth is occurring--without inflation or unemployment.

It is possible, then, for capital formation to occur without either the inflation liberals prefer (flooding the market with demand without increasing supply), or the unemployment conservatives opt for (starving market demand with an accumulation of capital to grow the economy which, of course, is not growth at all). Both options, of course, as we observe over and over again, cycle to progressively consolidate power, politically and economically, into one big corporate body with an evermore complete command and control acting to manage "the systemic risk."

Deciding how market share can be acquired is to decide how we manage the risk.