Consolidation of Risk

With risk comes reward...or failure. The hypothesis is tested by assuming the risk, and the marketplace arbitrates the empirical value (your income). So, in order to control the risk, it is necessary to control the marketplace.

You can take control of the market by providing the best quality at the lowest price, or you can consolidate it to provide the best return on investment with the lowest possible risk, accumulating wealth (and power).

Accumulation of wealth, and power, typically suffers the delusion of eliminating risk, but the accumulation of wealth also accumulates risk--political risk, which is a dimension of power. The question then is, how will this risk be assumed?

Consolidation of risk in a post-industrial society is assumed as a public good, and goods are something to be consumed. The higher the income, the less consumption of risk in the form of a public good.

Executive compensation for big bankers that engineered the Great Recession (the source of their compensation) is not at risk, but the average income is. The reason average incomes bear the risk is because they have less control over the risk. In order to have more control, the risk must be deconsolidated.

The way it is now, the people who have the least risk-tolerance bear the risk, and since they cannot get credit without borrowing at high rates because they are too risky, the demand to reverse the recessionary trend continues to fall. The probability of a deflationary trend is getting little resistance which, of course, tends to consolidate the risk.

Analysts are now focused on the Fed--the emblem of centralized control--for the "fix" that controls the VIX.

If accumulation causes the lack of demand that supports a deflationary trend, then a distribution from that accumulation must occur. Avoiding that risk accumulates into crises, and the anticipation of counter-cyclical measures that do not distribute from the accumulation, but borrows from it, creates the volatility that gives current value to the risk arbitraged (converted) into consolidated value.

The Federal Reserve, a public/private institution empowered to dispense the public good in a representative capacity, has enabled the borrowing from the accumulation, monetizing the debt. Its chairman, however, has now indicated the possibility of reversing "quantitative easing" which suggests an unwillingness to support a debtor-financed recovery that accumulates the risk of a deflationary crisis.

Preventing a depression is his charge, and with plenty of empirical evidence to support the hypothesis, he knows that continued accumulation and consolidation of the risk into the empirical value of the public debt supports the probability of a deflationary crisis.

The chairman of the board knows that the recovery must be financed from the accumulation, avoiding further consolidation (leveraging) of the risk through the Federal Reserve.

Recursion of Risk

Let's say you are the wealthiest person in the world and, admittedly, your lowest-paid employees pay more taxes than you do.

While distributing half your wealth would single-handedly pull the economy out of recession, the risk to your entire fortune is reduced (avoided) since it will recycle back to you and accumulate into a crisis proportion.

While resisting the gamma risk, you have supported the beta risk which can be arbitraged to produce more value in the form of capital gain, especially if taxed at the Bush schedule, with virtually no risk. By resisting the gamma risk, you support the current value of the risk to your account; and as that beta value accumulates, it transforms (cycles) back into a gamma risk proportion, with the assumption of risk recursively valued.

Although the risk accumulates into a gamma proportion to be politically managed, its recursion through cyclical and counter-cyclical policies renders identifying the source of risk a fractile affair of competing and infinitely innovative hypotheses.

Beyond the aggregate, the risk fractionates into infinite possibilities and circulates in the form of modeling premised on its assumption in any particular case. While it appears pluralistic, the possibilities are reduced and the probabilities determined by organized consolidation of the risk, most recently identified as "too big to fail."

Like with the circulation of water, the volume tends to accumulate at the bottom, not the top, by the natural force called gravity. Liquidity must be forced to the top where it is managed to trickle down, governing the rate of growth, currently slow to negative. The value labored to the top is the retributive value of the risk, assumed in the form of reward to the capital put at risk (which, recursively accumulated, has virtually no risk).

If you labor in the marketplace for a wage or salary, you assume the risk of rising prices, just as capital assumes the risk of loss (which is less likely with the ability to raise prices). The premise of the market model assumes no risk of liability for rising prices (and falling demand), assuming, of course, that it is a free and unconsolidated marketplace in which risk is fully (legitimately) valued, and empirically transparent without government intervention.

Virtual elimination of risk means its value is fully retributive and critically gamma. If labor, for example, was so consolidated it could command the price, its risk value would be fully retributive and critically gamma, but the market for labor is not as easily consolidated as capital.

Being more mobile, and more convertible (easily transformed into means derived to transfer the risk to unwitting parties--"the last fool standing"), capital more easily ensures a free-market price for labor than labor for capital. The differential accumulates the retributive value of the risk, perceived to be fully valued in a free-market proportion, discounted with the risk of government intervention.

Risk is always present. It can be retributively valued at any time, empirically tested and measured, on a small or large scale. It is ontologically recursive as it is being avoided, indicating the probability of crises, dependant on the action (the risk) taken. At the same time, paradoxically, the probable outcome is independant of the observer, becoming recursively retributive with action taken to avoid the risk without seeing to the fundament (much like we are doing now as we muddle along in a persistent recessionary trend).

As the risk compounds and accumulates in active, deliberate avoidance (remembering that it presents independant of the observer's perception of it), nature will correct for the accumulation of errors in the form of crises that cannot be avoided (the gamma risk is fully valued and gains critical, current presence).

The accumulation of value into an unavoidable presentation of the risk is what the framers of the Constitution sought to avoid by politically keeping the value pluralistic at the fundament. They recognized that as power becomes more consolidated, it becomes more retributive (gamma) and uncontrollable (unstable). They had the French Revolution as empirical confirmation of that hypothesis; and we currently have healthcare reform undergoing the empirical test of political pluralism with the limits of federalism being tested just as the framers knew it should if we are to conserve the value of freedom (liberation from tyranny) first.

On the one hand, there is a tendency to pluralism, on the other, the tendency to tyranny. The discussion of risk then begs the question--what is the dominant tendency?

What is the expected value of the risk?

Hamiltonians contend the elite will always define the expected value of the risk by taking it. In other words, society is risk prone, and it is the role of the elite to organize society to reduce the risk, mainly by consolidating it.

American colonists that managed the risk for the king recognized the distribution of risk-to-reward to be unjust. The king expected to take, and redistribute, the value without taking the risk, just as economies of scale are organized to do today. The king found out the risk cannot actually be avoided--it reoccurs.

If you take liberty, you assume the risk, and that is what happened when Americans declared independence. The legacy is to be verifiably risk prone, and here we are today obsessed with measures that will regulate and govern risk. We see then, a convergent tendency of being risk prone (liberal) and averse (conservative).

Synthesizing the polarity of risk results in a recursive dynamic, and many theories emerge to define its expected, absolute value.

If we follow the theory that labor and capital eventually converge to be the same thing, for example, the risk, rather than being eliminated, is consolidated and in a form that is easily manipulated and corrupted. The value of the risk could be just as retributive, retained as a vestige (a constant) that is not synthetically (dialectically) derived because it is fundamentally derivative (recursively deriving from the accumulation of value).

The gamma risk is a constant, dialectically deriving from an accumulation of value from the fundamental alpha-risk ontology. Avoiding the gamma risk requires empirical deconsolidation of the value accumulated (like our founders postulated politically and free-market economists of the Enlightenment postulated economically).

Virtual elimination of risk means its value is fully retributive and critically gamma, leading to magnanimous, philanthropic gestures to manipulate the perceived valuation of the risk.

It is the function of popular media to control the perception of assumed risk, communicating its perceived value in order to command its real, current value. The difference between the sentiment and the actual value is gravity-defying, beta-risk volatility, arbitrated (arbitraged) and pumped to the top of income class. More value is accumulated at the top over time than the value expended to accumulate it, resulting in general economic crises described by classical economists.

Neo-classically, in order to conserve the value of the risk, it must be re-assumed, or reoccur. The business cycle is augmented for the reassumption of the risk (alpha and beta risks are not innovation and growth, but the risk re-invented and reassumed). It is then the media's role to describe and expalin the conserved valuation of the risk in a binomial fashion, suggesting a pluralistic political process (along with market volatility that suggests a pluralistic economic process). The risk reassumes as either Democratic or Republican by consent of the sovereign, which presents a problem for a democratic-republic.

If the accumulation of value is consolidated, like the king did before The Revolution, empirically confirming his sovereignty, what is to keep the sovereign from claiming such a verification now? Thus presents the gamma risk and the need to recycle, or reassume, the empirical value it currently represents. The value must be continually reconfirmed in a dimension that is befitting a king, or be distributed to the legal sovereign.

Where once it was the king, The People are now the sovereign. It is absolutely critical to understand this dimension of political-economy for predictive modeling. It is what keeps the risk recursively valued in the gamma dimension.

Since The Enlightenment, it has been necessary to derive technical theories from natural law to resolve the empirical test of sovereignty. (Remember that "natural laws" are discovered by empirical process from which the concept of our "natural rights" is derived.) From an efficient-markets hypothesis and a rational actor model, to an inefficient-markets hypothesis and a model of irrationality that reduces markets to the risk assumed by the greater fool, we have just about run the gambit.

Generally, however, the more measureably consolidated the marketplace, the less empirically sovereign The People. The amount of de jure sovereignty measures the gamma risk and the degree of risk in its other forms.

Equities, for example--the current high-beta on low volume indicates a recursion of the risk in a post-accumulation phase of the cycle. What net worth remains unconsolidated is at risk of trying to recoup its losses, taking on more risk than it can actually bear--thus, the low volume. All that needs to be done to falsely signal a bull or bear market is "pump" the volume (force the liquidity to the top). The more retributive the value of the risk, the lower the volume, and at this phase of the recursion, higher volume falsely indicates reduction of retributive value and economic recovery.

Rising commodity prices, as well, will not be the signal for recovery--falling prices will. That is why this market is being described as the most difficult to predict in recent memory--because the value is so retributive. When the value becomes more distributive (with less accumulated value pumping commodity prices without fundamental demand), recovery is being indicated.

There are as many degrees of risk as there are analysts. Each actor sees the risk, and the liability associated with the risk, in a relatively different way. Bankers that were relieved of toxic assets with funds borrowed from the treasury (the larger purpose of monetary easing) see the income accrued to them as compensation for the expertise, the talent, to prevent the risk of general economic crisis (while accumulating the wealth that causes it). The victims (the people stuck with the accumulated, overleveraged, risk that accumulated the wealth) see the compensation as paying the robbers to rob them, and then having to borrow the money back from the robbers to make ends meet, with interest!

Quantitatively, the risk is recursively fractile. There is the risk that the risk will occur...and so on. It is the probability of the risk as well as its dimensional aspect that puts it at the center of analytical abstraction, always rendering the arguable quality of chance operationalized with a sub-routine of assumed risk.

Risk is infinitely recursive, and the analyst does not have to cognate all the possibilities to experience the recursion. Bankers do not have to feel the pain of the recession's victims to know their income is retributively valued. Resisiting redemption of that value is what they are paid to do--technically skilled to represent the risk in new and innovative ways that suggest an intent that is anything but criminal, like robbery. Their intention is derived from the legal fundament--a function of pursuing life, liberty, and happiness--but without, of course, assuming any liabilty.

Liability presents another degree of risk that is best limited with a recursion that appears to be an ontological and exculpatory presentation of the risk.

As risk is transferred from one dimension to another through innovative financial vehicles, it becomes evermore complex (multi-dimensional) and much easier to limit the liability of the risk.

If large, too-big-to-fail financial entities are hording cash and arbitraging the risk it represents to make a profit instead of investing it (supporting equity prices, commodity prices, and the recessionary trend), is there not a liability associated with the knowing-and-willing intent to cause the detriment that produces the benefit? There has to be a source for the profit. There is no free lunch. It has to come from somewhere.

A bank robber, for example, assumes a degree of risk beyond the reward--the risk of liability for the detriment caused by acquiring the reward. For the barrons of industry and finance, the liability for the detriment is recursively reduced to the assumed risk of the marketplace, and the value of the risk is recursively consolidated into the value of being acquired without risk, but it is, nevertheless, retributively valued, posing a political (gamma) risk.

Avoiding the gamma risk is a confidence game--a manipulation of sentiment that converts value and consolidates it.

Pensions, for example, are faltering with heavy losses of net worth and low returns following The Great Recession. Now, the accumulation of value that has been consolidated by a recursive presentation of the risk (the business cycle) can be construed as the virtue of capital formation that makes for a healthy economy, or outright thievery. Which one is it? If it is the former, the distribution will occur to abate the retributive value, with the value of the risk (including the risk of liability) recursively maintained as legitimately assumed risk.

What remains is the political risk. It is the object of gaming strategies, clogging the popular media with contentious resolve that does everything to game the risk into varying degrees, and nothing to retribute the value.

Demand-Side Economics: Unemployment Compensation and Counter-Cyclical Measures

According to classical economic theory, when demand meets supply, equilibrium is achieved.

Intervention distorts an equilibriated marketplace in which buyers and sellers have freely agreed on price, quantity and quality. Without intervention, the risk, and the aversion to the risk (the motive to act), is alpha, and has a stable current value (a stable beta and gamma risk valuation).

The current debate over extension of unemployment compensation insurance, and other counter-cyclical measures, versus deficit spending derives from the classical fundament of modern economic theory. Pure theory has a practical application for determining the current valuation of the risk.

At this point of the business cycle, demand is in decline. Accumulation of income into the upper two quintiles of income class has caused a demand deficiency. Without a distribution, the recovery continues to get resistance as the accumulated income holds out for favorable tax policy.

Restoring the missing demand (the accumulated income) restores equilibrium, reversing the recessionary trend. The intervention required is operationalized with the party system, accomplished largely along ideological lines with the Democratic faction initiating the reversal with Republican opposition. At this point, given the strength of the accumulation, Democrats are looking to strengthen the progressiveness of the tax code.

While in order to resist inflation it is necessary to target the accumulation, it is not a sufficient measure; and in order to achieve the classical Republican alternative--the efficient market theory--it is necessary to deconsolidate the means of accumulation, but that is not on the party agenda. Deconsolidation is strongly resisted by both factions, considered to be inefficient if not inconsequential.

If left alone, Republicans argue in opposition to demand-side (counter-cyclical) intervention, markets efficiently self-correct, achieving equilibrium. The Democratic faction, however, seeks to avoid the risk assumed without intervention--deflation and the increased probability of deconsolidating the means of consolidating the value of assumed risk.

Classically, when you move off the farm and join industrial society, you assume the risk of cyclical trending. Of course, starving in the city or on the farm is not much of a choice; and though, classically, a person could not reasonably expect to be paid for unemployment, progressively, neo-classically, you can.

Neo-classically, the current value of assumed risk (the risk of doing business in the marketplace) has the expected value of market intervention. Valuation of the risk becomes so complex that there is a tendency to consolidate the risk so it is assumed gamma.

The recent bailout of the financial system, and now extending unemployment compensation, represents the value of newly assumed risk. It consolidates into the empirical value of the budget deficit and the accumulation of debt in a gamma-risk proportion (the expected value of the risk).

If the value is expected, it is predictable. It is manageable, predictably more, or less, cyclical or counter-cyclical.

The marketplace has become so political, risk is largley assumed in the political form. Americans assume the risk in the form of a democratic-republic with the current (useable) value of the risk predictably determined to inflex between those two dimensions.

While each dimension has a particular quality associated with the present value of the risk, the empirical valuation of the risk is largely maintained in the current, aggregate value. The aggregate value is "ruled" (measured) to produce an expected future value that stabilizes the current value despite its cyclical presence (the Hamiltonian model). The value is more, or less, Democratic or Republican at any particular time, but in the aggregate, the current value of the risk is maintained in a classical proportion of expected accumulated value.

The more value accumulated, the more risk accumulated. When the economy disequilibriates with the assumption of accumulated risk, its value must be politically trended and cyclically derived or it will naturally trend to equilibrium in a free-market fashion. Equilibrium, then, is to be avoided because it will present as a crisis, unwinding the derived value of the risk. "The risk" will re-present with a current value in the form of a correction.

In the current case, demand is in decline. It has been consolidated into the highest income classes through supply-side (Republican) economic policy (increasing supply by reducing demand). Thus, the political-economic trend for demand-side (Democratic) economic policy (increasing demand to reduce supply). The former is deflationary. The latter is inflationary. Stagflation, however, is the compromise measure, binomially derived, cyclically presented, with a conservative (republican) bias.

A conservative bias literally "governs" the trending. It is Hamiltonian. It gives value to the debt, based on the certainty its "currency" (the useful value of the risk) will not default.

Demand-side trending (the stagflationary tendency) supports the value of the accumulated risk with what suggests to be a free-market mechanism, correcting toward equilibrium, giving current value to the risk without failure (without default). This is what Republicans mean when they aptly describe the Democrat's financial reform as a measure to support "too big to fail."

Republican opposition suggests they support a free-market solution that affords the benefit of failure... and they do, with abandon. Failure would consolidate the marketplace even further (making markets more efficient, they argue). The risk of failure is "ruled" (measured) so that when it does occur, it increases the gamma-risk proportion (see the recently enacted measures for financial reform and economic stabilization). In either case, Democrat or Republican, the free market is all but abandoned.

Since, however, the free market cannot be abandoned because it provides the legitimacy for the value accumulated, the risk it presents always has current value but is cyclically trended either democratic or republican in the gamma form of the risk.

The gamma risk--the risk that cannot be avoided--is the accumulation of value in a politically manageable proportion, deciding who wins and loses (the value of the risk) by operation of public authority. Its value is not only predictable, it is determinable. It is the object of command and control--what the free market is not.

Currently, due to cyclical trending that has deflated market value and consolidated assets, middle-class income is being directly subjected to the objective of consolidating the risk (thus, the Tea Party). Though its subjection is being directly applied to the detrimental consolidation of its value (recession and unemployment), it is acculturated to perceive it as market risk despite being clearly managed in consolidated, gamma form.

If the risk is assumed ontological (lacking motive, or purpose, as in natural processes), the sum is likely to be perceived as legitimately actuated and accrued. The risk, and the reward, has to at least look like it is ontologically assumed.

With a natural tendency to pluralism, the Tea Party emerged representing a middle class, populist sentiment, detecting a deliberate zero-sum detriment. It is critical for the mainstream party to capture or divide this sentiment as either progressive or conservative, and re-present the risk it poses to be managed in the form of an economy of scale. Since an economy of scale is considered to be an advantage (avoiding ontological risk, rendering independent wealth to which the middle class aspires), the Tea Party will be co-opted, and the risk ideologically conserved in a gamma (binomial) proportion.

The perception of "the risk" and its legitimate current value is absolutely critical for maintaining its consolidation and ensuring the probability it will produce an accumulation of future value. It critically avoids, by ideological inflection, deconsolidation (the crisis of "too big to fail" actually failing, or being subjected to the declining rate of profit, both of which consolidation of "the risk" avoids).

As long as the risk of failure is consolidated into an economy-of-scale efficiency, deconsolidation has the perceived risk of failure. It is a false assumption inherent to economy-of-scale modeling. It not only leads to bad economic policy, but inherently inaccurate financial risk analyses.

Marginal tax cuts and integration of financial markets are the most recent examples of faulty modeling, expanding debt with the income to support it being accumulated in the upper income class. The operational model falsely assumed expansion of the money supply (overleveraging to capitalize on the marginal tax cuts) and integration of financial markets (achieving a too-big-to-fail economy of scale) would reduce risk and make markets more efficient.

Financial reform, subsequently, has not changed this model, but has affirmed it. Policy that now favors a more demand-side dimension assumes it will supply the accumulated capital with demand, causing investment, but it will supply the demand for accumulated capital required by law to operate in a proportion that is too big to fail.

Proponents of the efficient markets theory that favor an economy of scale contend that a more pluralistic practical modeling leads to unemployment. However, a sure measure of mergers and acquisitions is reduction in force. Similarly, our recent financial crisis was analytically flawed, ideologically motivated to conserve the current value of the risk in a Hamiltonian fashion. Subsequent measures, we will find, are similarly flawed, actuating the value of the risk to cycle in the gamma dimension.

While the current policy trend is counter-cyclical, for example, it is to counter a strong deflationary trend in this particular case, not to counter cyclical trending generally.

There are two principle reasons to not change the analytical model: admitting that a pluralistic model is not in operation, and because it produces volatility. The two operate cross-effectively: the more error produced, the more value created to be accumulated through both short and long-term cyclical processes. Without the proper model, value tends to appear unexpectedly and is easily attributed to an exculpatory risk ontology suggesting free-market mechanics when the risk-to-reward is really organized to be too big to fail.

Deconsolidation of the risk is where "too big to fail" actually fails. Ideologically, however, it is impeded with an associative model of failure in the gamma proportion that results in crises. Providing for the unemployed is a moral hazard, for example, and not for the well-off because we fear the risk of failure.

Ironically, it is the fundamental risk--the fear--of failure that makes the pluralism of a free and deconsolidated marketplace the moral imperative and the model of success.

The classical statement of the general case is that "redistribution" of the wealth is a moral hazard--something to be feared because it will redefine the risk, causing uncertainty that resists "reinvestment" of the wealth. Despite, for example, that a distribution from the accumulation is what is needed to pull us out of recession (i.e., the accumulation caused the recession), that redistribution of income is to be feared if it does not recycle into an accumulation (the risk valued in the form of debt--Hamiltonianism). We will not be productive if we are not in debt, and we will not be productive if we do not face the risk of unemployment.

If we cannot prosper without debt, and we cannot be productive without unemployment...what exactly should we be afraid of?

We are so convinced that deconsolidation of the risk will result in a crisis, it is ideologically prohibitive. (Never mind, of course, that crisis is what we've got.) Not only does ideology culture the expectation of a crisis, and the expectation of its distributive value, but impedes equilibriating into the stability of free-market value.

Remember that the Democratic authors of financial reform were sure to admit that it will not prevent crises and it will not replevin the value consolidated. We can fully expect crises to occur with "the risk" of redistributive (and accumulated retributive) value fully expected (your assets being debt-consolidated and resold back to you at a profit in the legitmate form of a cyclical, free market, economic trend).

What the Democratic faction of the party does promise is a largely unconfirmable hypothesis accurately described as "change we can believe in." Much like the argument that the current crisis would be much worse without the bailout, Democrats argue the financial reform signed into law will prevent cyclical crises of less severity. The critical, evaluative measure is largely speculative--it begs the question--but the current value of "the risk" is essentially conserved, to be sure, with counter-cyclical measures characteristic of the Democratic faction of the party.

Fighting deflation without a distribution from the accumulation (essentially a debtor financed recovery) is stagflationary, which accounts for the support we see in equities on low volume, technically indicating a short macro-economic interest despite the government effort to counter the cyclical, deflationary trend.

(Growth is currently at a slow pace, not seen since 1946, indicating that the stimulus, as I predicted while it was being made, is a sausage that feeds the beast but starves The People. In order to deflect from a proper cause-effect relationship, elite analysts tend to focus on reversing the housing market as a pro-growth catalyst. It is incorrect to pin recovery on reversing the housing market. A debtor financed recovery supports the deflationary trend being countered, creating a panoply of false signals and misguided expectations to be arbitraged and consolidated into the current value of accumulated risk. A double dip will be the result.)

For investors, counter-cyclical measures indicate resistance to a deflationary trend (hording cash); but in the current case, as the Fed chairman points out, it is not a clear point of inflection.

Chairman Bernanke warns that the current trend is "unpredictable."

Uncertainty is good for traders and bad for investors, and the Fed is indicating--signaling--resistance to the counter-cyclical trend despite an overt "open market" signal of a low interest rate that supposedly counters the current cyclical trend with pro-growth investment. The risk is gamma, nevertheless--it is so consolidated that counter-cyclical measures will quickly absorb its value into the gamma proportion. The value accumulated is likely to be traded rather than invested in that proportion, indexing a volatility suggesting crisis derived from a lack of investment. The gamma risk then presents as a net short interest that had existed in the dark, but financial reform is supposed to bring it to light.

With financial reform, the risk will be more visibly unavoidable. Despite reform, interfering with the distributive benefit of recurrent crises (cyclical presentation of the risk in crisis proportion) is a moral hazard--it is, according to elite analysts, the risk to be avoided.

The gamma risk does not have to present in crisis proportion according to the rules of Ivy-League economists supported by super-rich donors. Monetarism can be as easily used to deconsolidate the risk as to consolidate it, allowing for correction without crisis.

Consider Bernanke's decision to bail out big financial institutions. It was based on the experience of The Great Depression in which banks were allowed to fail. Bernanke supposedly averted the latest crisis of a declining rate of profit (deflationary trending) by bailing out firms that, according to free-market standards, should be allowed to fail.

Bernanke's decision, ironically, supports failure (the future value of the risk) by resisting it. (The irony is where the arbitraged value is.) His technical authroity to act did not end with the mission to conserve the institutions responsible for capital formation and economic liquidity (their social value conserved in the public interest), but also provided public funding that has paid both the TARP funds and big executive compensation.

Wage earners that pay a payroll tax in addition to the income tax have to consider they are paying the malefactors to benefit at the detriment of wage earners--planning the use of capital for economic disequilibrium, arbitraged into a net short for a capital gain distributed to the upper-two quintiles of income class. Where, with positive empirical evidence that does not fallaciously beg the question with speculative commentary, is the Fed acting in the public interest?

According to this apparent practical model of conserving disequilibrium, the social benefit trickles down. The evidence clearly supports the Hamiltonian model. Elite analysts, however, will not use that model to assess the current value of the risk because it overtly confirms an elitist hypothesis that indicts the wisdom of any popular consent. At the same time, falsely inducing a pluralistic, free-market model renders a future value of the risk that is all but certain to any financial interest other than those that the Fed is lending to at virtually no interest, who then buy treasuries at 3% to repay the TARP funds. It is the Enron model, and will account for volatility despite the certain value of the risk.

We know what the risk is of using the Enron model. To anyone that is not sending the signals, the signals are false--it is not a free market. So, if you want the signals to be of predictive value, you must reject the free-market model and accept an elitist model.

The practical model, despite the current Democratic trend, is decidedly supply side. Unemployment compensation will be quickly consolidated into the upper quintile, supporting the recessionary trend. The TARP, and associated executive compensation, is being monetized into a budget deficit and added to the "public" debt along with unemployment compensation. Without a highly progressive tax code (eliminating the payroll tax!), the debt will be largely paid by the least able to pay, fitting the Hamiltonian model supporting the recessionary trend to date.

Reversing the current deflationary trend requires a policy reversal that is not a false supply-side or demand-side economics that keeps our economy in a state of general disequilibrium, producing value when arbitraged into a correction. That corrected (arbitrated) value, consolidated into non-market gamma risk, is then translated into a current democratic or republican valuation of that risk. It is a circular (cyclical) process that gives current (purposefully useful) consolidated value to "the risk" while appearing to be driven by a process for the purpose of deriving the consent of the governed.

When the distributive detriment of the consolidated value is realized, however, the false consent realizes its true retributive value. That value is managed with the disequilibriating, political-economic process, cyclically transforming "the risk" into value that usefully avoids the retributive value of the risk (the "current" and stable value of "the risk" conforming to the Hamiltonian model).

Currently, to authenticate the value of the risk abstracted from the political process, the "tea party" movement has emerged with the historic consolidation of income (the strong deflationary trend) and accumulation of its retributive-risk valuation. The alternative movement has the pluralistic function of arbitrating the risk into empirical value, verifiably derived from the cyclical abstracton being currently applied as counter-cyclical trending with only the most specious hypotheses and utilitarian casuistry.

(Ideologues who have accumulated value at risk are quick to contend that applying the scientific method to politics always begs the question. The objection is really that political questions are subjected to testable hypotheses, resisting the sophistry and casuistry that recycles an accumulation of errors. Alternatively, ideologues who want to feel powerful by dictating tastes and preferences in the marketplace argue righteous application of the scientific method in the public interest, but are then unwilling to embrace the empirical value of the marketplace as a measure of liberal philosophy constitutionally empowered with the freedom to choose.)

That citizens are ideologically frustrated is not hard to understand, giving practical value to a non-ideological alternative that is the persistent presence of fundamental risk. It is risk that cannot be avoided, only accumulated in the gamma dimension, forming the current value of the risk.

For example, we often see an empirical valuation of risk technically presented in the abstract. Like when building a bridge, if it collapses, the reality of the model is no longer empirically abstract--it is an empirically confirmed failure. If the failed model continues to be used--if it remains current--the risk has been transformed into certain failure. Like the modelers of financial reform have said, "crisis will happen." Empirically, however, it only pretends to be an unavoidable, and exculpatory, risk.

Rather than science "dictating" public policy, which is illiberal, the method is an ethic of thinking, turning political-economic arguments into empirically verifiable measures that, unlike ideology, transforms belief into knowlege.)

Current public policy appears to be demand-side, but we know by recent experience it will not have a potent counter-cyclical effect. It is really a pro-cyclical policy in a neo-classical environment, allowing for infinite accumulation of debt whose value is arbitraged into correction without the risk of a depression.

Financial reform is also pro-cyclical but anti-depression, allowing for arbitrage that recursively accumulates and distributes the value of the risk without economic growth.

While unemployment compensation will not be considered a moral hazard any more than huge executive salaries paid to arbitrage that value into a net short, the debt will accrue in proportion to the accumulated benefit--a simple economic calculus that cuts through the dense complexity of general equilibrium theory and the complex modeling derived to accumulate value without assumption of the risk.

The risk is recursively assumed in a neo-classical environment. Theories that espouse the utility of phasing into a supply or demand-side dimension are practical tools for misdirecting the assumption of the risk alienated from the accumulated benefit.

Recursion of the risk is a gaming phenomenon. It is the subject of quantitative analytics with an exculpatory objective, disguising the accumulation of wealth and the exercise of power as the reward that comes with taking the risk. It rewards the value of the risk that is never really taken without the corrective feedback of a free-market process ensured to prevent the necessity of its arbitration in an accumulated proportion.

Legitimately confirmed by the consent of the governed in the first order, instead of soliciting the consent of government in the second (like the way healthcare and financial reform was represented, soliciting a disconfirmation), the ruling class represents the ruled rather than presents the rule, supplying the demand instead of demanding the supply.

The People can take control of value stored in consolidated form by democratic-republican means, but a false pluralism presented by a false point of political inflection (binomial realignment) prevents it from happening.

After the supply-side policies of the republican faction, it appears necessary to accept the demand-side politics of the democratic faction. It is a false choice, recursively applied with a continuously disconfirmed hypothesis, impeding the positive test of political hypotheses a democratic-republic otherwise provides.

There are so many different schools of economic thought that can be invoked to narrate a legitimate distribution of the risk and value of the reward at any particular time, the cognitive process for the evaluation of policies and programs is undisciplined and prone to pseudo-scientific methods of analysis. The critique is reduced to an unresolvable relativism, and subjective indices are disguised as objective indicators with a predictive utility that is nothing but self-fufilled prophecy (manipulation of determining variables). Markets can be easily manipulated if the capital is consolidated--it is an easily confirmable hypothesis, but subject to all manner of evaluative measures, including moral hazard.

If counter-cyclical measures (the TARP and extended unemployment compensation) are a moral hazard, that hypothesis has been disconfirmed, yet it is still a working hypothesis. Why? Well, it is "relatively" complicated. The cognitive process suggests there is no natural law to be discovered and consistently applied; and there is value to be "derived" from that uncertainty, arbitraged by a "speculative" demand that arbitrates the relative value of the risk into an empirical (knowable) value for current, practical use.

While there is freedom, a priori, to pursue wealth and power, its legitimate constraint is relative to a mutli-dimensional space-time continuum that has no natural law that objectively "rules" without the consent of the governed. If we do not adhere to this principle, we are cognitively condemned to a complex uncertainty that perpetually oscillates with no objective reality. It is the model of instability that solicits elitist authority and diminishes our "natural rights" discovered, a posteriori, with the emergence of the scientific method in the age of Enlightenment.

If we are to reduce the human condition to relative uncertainty in a post-modern era, the reduction to a reality of inherent complexity, multi-dimensional, multi-phasic, leaves us all in a condition of vulnerability that demands an accumulation of power and authority (the accumulation of gamma risk that, by our own cognitive device, cannot be avoided in a crisis proportion).

Imbedded in a general equilibrium theory, for example, that is closely associated with a supply or demand-side dimension, legitimate market mechanics is hard to understand and an easy object of eristic reasoning. It impedes the objective application of reason to the functional legitimacy of pluralistic process to provide a peaceful, productive prosperity.

Prosperity does not have to be the result of cyclically destructive processes. In a post-modern era, the legacy of the Enlightenment is not recurrent presentation of risk (making the same mistake over and over again), but the logically positive presentation of pluralistic processes that objectively operationalizes continuous improvement with confirmable hypotheses.

Resisting the eristics of relativism, we together assume the well-rehearsed perils of accumulated risk with the objective of preventing, rather than preserving, its irrational recursion.

Beyond Binomialism

The practical political-economic model we use now is binomial. It is responsible for the frustration we experience with the republican form of government our founders very deliberately devised to secure the general welfare and promote domestic tranquility.

Our constitutional form of government is deliberately anti-monarchist and more pluralistic. Consolidation of power is, by the wisdom of our founders, based on the historical evidence and their own experience, to be very deliberately avoided.

While a binomial, two-party system looks pluralistic, however, it functions to consolidate power and reduce the ever-present fundamental risk of sovereign power possessed by The People to command and control their fate.

Our founders recognized that sovereignty, even for monarchs, is the baseline risk.

Claiming sovereignty for yourself is a risky business. It is the fundament of power, and its accumulation is contrary to the natural order of things, disturbing to the domestic tranquility, inimical to the general welfare.

The People are constitutionally endowed by nature to rule--to self determine. Our founders correctly recognized this to be a consistently confirmable hypothesis foolishly subjected to self-indulgent legitimacy theories.

Nature does not give a hang about the king's divine right to rule, or the more secular binomial partisan technique used now to secure a popular sentiment with religious fervor.

Where the king once needed a large, loyal bureacratic elite to manage the gamma-risk accumulation, a two-party system has emerged to suggest a legitimate pluralism characterized by the consent of the governed.

Binomialism (a pseudo-competition between Democrats and Republicans, and more broadly the public and private sectors) is needed to reduce the liability of an illegitimate, and detrimental, accumulation of the risk in an environment in which sovereignty is legally deconsolidated and devolved. A bifurcated, partisan loyalty substitutes for the antecedent monolithic allegiance of royalty.

Emerging as the republican form of government, partisan diffusion of the risk innovated its cumulative management. An iron-law, bipartisan, organizational technology evolved along with the strong democratic tendency of the risk to be managed at the fundament by the sovereign power (the natural right) of The People.

In order to avoid the pitfalls of democracy, our founders thought it best to achieve a peaceful and prosperous pluralism through a republican form of government. Although the term "democracy" does not even appear in the Constitution, its operational design is intended to maximize sovereign power at the fundament for a legitimacy of power exercised with the "consent of the governed."

Binomialism reduces the liability of the risk by simulating the consent of the governed and a process of continuous improvement that is the mark, the verifiable proof, of an operant pluralistic process.

Since the management of risk in an accumulated, gamma proportion is political risk subject to electoral sanction, the result of its management is not considered to be a criminal liability. It is absolutely critical for maintaining the Hamiltonian model to keep the management of the risk politically accumulated because of the strong democratic tendency of the republican form of government. This is where Jefferson and Hamilton parted ways.

Hamilton was more concerned with supporting the virtue of a dominant power elite endowed by nature to be the ruling class despite the utopian sentiments of language in the Constitution that suggests a more fundamental power. That language, according to Hamiltonians, is there to empower elite rule with legitimacy. The language is "loosely constructed" to allow the power elite the means to apply power with limited liability, to which Jefferson maintained the Hamiltonians should be held strictly liable.

If they seek to become "the king," which is illegal, Hamiltonians should be held liable by the strictest interpretation of the law, according to Jefferson.

Hamiltonians considered Jefferson's strict constructionism to be impractical if not dangerous. A strict legal interpretation of devolved sovereignty, for example, could lead to a Reign of Terror. To the elite, especially at the time, it was a very real possibility. Anybody could be accused of being a royalist and subjected to all manner of criminal treatment just by trying to accumulate wealth and power (by pursuing life, liberty and happiness).

Of course, the natural right to pursue happiness includes the accumulation of riches, like a king. Resolution of this paradox is at the center of the ideological debate that enslaves electoral politics to a constant accumulation of the risk. The debate (the empirical critique inherent to an operant, pluralistic process of continuous improvement) is constructed to keep the risk in a gamma proportion, motivated by the inalienable, constitutional right to pursue happiness by the strictest construction.

Since the motivational quality of the debate is essentially philosophical, and philosophy is not something most people have a practical command of, the debate lingers in a perpetual limbo of specious reasoning and logical fallacy. How many people know what a post-hoc fallacy is, or care? Their ideology is a psychological condition--literally an object of both classical and operant conditioning. When the bell rings, we salivate; and when that fails, the critical philosopher will be starved into submission, learning his lesson, operantly conditioned, having learned what his happiness really means. Is that not what we are facing as the unemployed face the prospect of no relief until either Democrats extend unemployment or Republicans get their tax cuts for pro-growth investment?

With the probability that we will get a combination, a compromise measure, of both keeps the risk in a gamma proportion, dependant on the directives of a power elite that defies natural law, our Constitutional rights and privileges, by the strictest construction.

Loosely constructed, our natural rights are a philosophical eristic--a tool for gaming the system by psychological manipulation (popular sentiment) just as Jefferson, and Socrates for that matter, critically described and explained it.

Since drinking the hemlock is not the ideal redemption of pursuing "the good life" for most people, popular sentiment is largely limited to a phenomenological interpretation of a power elite, persuading us to run with the herd.

According to bankers, for example, the populist sentiment following The Great Recession is more a nuisance than a force to be reckoned with. The populace, however, is not so naive to think that the compensation of bank executives just appeared out of nowhere. It has to come from somewhere...like the net worth of their own customers.

Despite all the phenomenologizing of expert, Ivy-League economists and pop-media commentators, the value lost and gained that supports bank profits following The Great Recession did not just vanish and reappear out of thin air. It has been consolidated and is being largely distributed to the upper income class. Thus, as Bernanke recently reiterated, we will be in a recesionary trend for at least five more years.

The resulting austerity "derived" from deliberately inscrutible and circuitously indirect means is described and explained by the power elite as the administration of the public good. The People are then rounded up to binomially align, re-align, and run with the herd.

Hamiltonians argue their policies and practices avert the probability the herd will stampede. The herd (the legal sovereign) is a crude, unruly mass that must be ruled by a representative form of government, expressly endowed by the Constitution with the power of any and all means necessary, loosely constructed.

The bailout, for example, and bank profits described as "well in excess of expectations" (not admitting, of course, that the austerity is the source) was sold to The People as a necessary means for securing the general welfare.

We The People must now patiently wait for all that welfare to trickle down, allowing over-consolidated financials to accumulate profits from much-needed austerity.

The market is made for The People to sacrifice as liabilities are settled without risk of criminal liabiliy by too-big-to-fail firms like Goldman Sachs who, after The Great Recession, is only guilty of an omission of information, not commission of a crime.

Despite the glaring miscarriage of justice, The People will be assuaged by the sheer force and legitimacy of public authority described as any and all means necessary having been applied with all due diligence to derive the consent of the governed and secure the general welfare.

Goldman Sachs will publicly disclose its omission, but its admission presents no firm risk because it is too big, by confirmation of public authority, to fail.

Goldman Sachs will continue to be the largest investment bank entrusted with trickling down wealth it only seeks to accumulate (the problem, not the solution).

A concise critique can only describe the public administration of the Goldman case as a tragic farce, not to be tolerated, but it will be.

The outcome reflects badly on the Obama administration and the two-party system. It cannot be blamed on the Bush administration, and the organized alternative is the Republican party. It not only tends to confirm the one-party-system hypothesis, but also provides more evidence the free market is rigged for the consolidation of capital and markets.

At the same time of the Goldman Sachs settlement, Senator Dodd said, not ironically, with full disclosure, following the passage of financial reform, "crisis will happen."

The task now is to organize the consent of the governed, post hoc.

So our choice (falsely constructed) is binomially reduced to either Democrats dictating freedom for the general welfare, or Republicans dictating freedom in the name of the general welfare, to mind the potentially unruly herd. The effect is a net consolidation of the risk, and an aversive consolidation of its value by limiting the risk of liability (the retributive value of the risk--the populist sentiment considered to be more a nuisance than a threat) to political process, managed in gamma proportion.

The binomial processing transforms the alpha risk, accumulating it into a gamma proportion. Elite management of the risk arbitrages the gamma into beta risk that accrues in the form of the current value of the risk.

The TARP program, for example, arbitraged the value of the limited liability to the risk by political, non-market, means. Since the market could not, and still cannot, democratically sanction the bank recipients because of their size, the value of the risk was, and will be, representatively awarded to conserve the value of the risk in the gamma proportion (the value is re-presented and arbitraged as the current value of the risk).

The liability of the banks bailed out by the TARP was inextricably bonded to the current value of the risk, marked to the market. Their failure would have completely reduced the current value to a summary accounting of the risk, suffering the liability of being collapsed, transformed, into an alpha-risk, crisis dimension. While Senator Dodd accurately describes it as an unavoidable risk, the crisis associated with the accumulation of alpha risk can, however, be averted.

While the hypothesis that the elite operated to avert complete economic collapse (complete devaluation of the current risk) is a true statement, it fails to recognize that the means to avert it--gamma risk management of the risk--is what caused it.

Reforming the hypothesis would mean destroying the current valuation of the risk arbitraged into a gamma dimension and returned to be arbitraged in the form of beta-risk volatility, avoiding the alpha risk (the risk of liability).

The Hamiltonian model cycles and recycles the risk, re-presenting its value in a current, useable form, driving the ideological sentiment of the binomial political system into a structured critique of validation rather than the verifiable hypotheses (the successes and failures) of an unfettered, free-and-open market ruled by the herd.

The best way to not be trampled by the herd is to be so big you can't be trampled. It works both politically and economically.

Goldman Sachs and Bank of America are so big they cannot fail; and following The Great Recession, with the market having been even more consolidated and financial reform that assures bigger is better, they only get bigger.

Neither Democrats or Republicans are willing to fix this problem of scale. We have to go beyond binomialism to operationalize the value of the risk with the risk of liability at the fundament.

There is not a political duopoly of power, there is a monopoly of power. Busting this trust requires going beyond the binomial management of sentiment to encourage an alternative independent of bipartisanship.

More powerful than the organizational technology itself is the psychological element operationalized with it. A perpetual lust for dominance is the motive that drives the organizational machinery.

When Democrats and Republicans compete for public sentiment, popular consent is secured in name only (bi-nomially), limiting the liability of the powerful while deriving current value from the aversion of that risk. Deriving that value without true accountability is a psychological trick--it is the risk that is averted.

A true accountability reverts, rather than averts, the value of the risk. President Obama was an ingenius psychological ruse. His rhetoric suggested the subversive reckoning of the risk. The party, post hoc, considers its policies and programs to therefore be the empirical consent of the governed, and the negative vote that disconfirms that hypothesis will be, in the same way, considered by Republicans to be positive verification of its policies and programs.

Breaking the cycle of false induction--to truly test hypotheses--requires a pluralistic mechanism. A binomial party structure is not that mechanism.

The beauty of a free-market mechanism is that it subjects ideology to the rigors, the ethic, the virtue of emirical verification. Its recognition is a transformative process interrupted by eristics concerned with the false efficiencies of consolidated power and the natural predisposition for its pursuit, shaping the sentiment that literally rules the value of our existence.

The transformation is a philosophical one, initiated by recognizing the virtue of an inductive, cognitive process toward realizing the good life of our "natural" existence. It is an ethic to which our founders had been so enlightened, intending a free-market mechanism to be the object of political process (limited government) rather than being subjected to it.

It is time to re-declare independence and re-present the natural rights of sovereign power.

Beyond binomialism is the democratic-republic. It is not one or the other. They are not mutually exclusive practical models, but work together to yield a syncretistic practical effect. Weakness of one is compensated by the strength of the other.

We tend to use an either/or application of the model, however, diminishing the syncretism that would reduce the amount of error toward applying the popular consent of the governed. Instead, there is a deliberate trade off that produces an unstable value of current risk.

The elements for stability are present but ideologically bifurcated to produce a current value of the risk that requires cyclical correction without improvement.

Financial reform, for example, having become law after members of the Republican faction, staging a strong partisan resistance, finally signed to it following a highly technical debate, is a cycle of regulation and deregulation that measurably destabilizes the value of the risk, providing the motive to change it without any real improvement.

Bipartisan compromise is not syncretic, it is discretely binomial, appearing to be an inductive, pluralistic process of improvement. It is idiosyncratic, validating the status quo ante through a deductive process that only looks like confirmation of a popular sentiment ideologically derived.

Popular sentiment beyond the binomial is considered idiopathic and functionally deficient; a psychological disorder that undergoes intensive media therapy to exorcise the radical demons of change from the absolute and uncompromiseable morality of the body politic.

The democratic component of our democratic-republic largely exists in economic form--the private sector: the free-market domain.
From our founding, governance is largely a function of private practice, ensured by governmet in that limited capacity.

Where government acts to ensure consolidation of the marketplace is where we see it beyond its limited capacity (e.g., a multi-billion dollar bailout and a financial reform that accomodates crises its authors assure will subsequently occur).

Free-market economics works, but it requires income to vote in the marketplace. If the income is not present for democratic governance (liquidity crisis), it is well within the limited capacity of government to deconsolidate the capital and provide the liquidity necessary for a democratic form of governance.

The binomial expression of that capacity is bailouts for consolidated banks and compensation for being unemployed.

Beyond the binomial expression is the assurance of a free and unconsolidated marketplace in priority so "We The People" can get down to the business of governing ourselves with the naturally endowed freedom protected by The Constitution of the United States.

Stump'n for Dump'n

With the president out stumping for dumping the Republican policies responsible for the worst economic crisis since the Great Depression, voters must be stumped with policy alternatives that did little to dump the recession and pump a deflationary trend.

The Democratic alternative presents the unfaded image of Nancy Pelosi schleping an oversized gavel to bang-in an oversized healthcare reform bill in the midst of economic turmoil.

While Wall Street was provided with all the funding it needs to plunder Main Street (making markets to produce the "social value" of record debt and massive unemployment), the Democratic party, in a fit of compassionate conservatism, has also been sure to provide a healthcare program. Being poor does not have to mean being unhealthy in the neo-classical, neo-conservative world of capitalism.

The political picture is a farce of monumental proportion, but the consequences are all too tragic and familiar.

Despite the overwhelmingly tragic consequences, and with the political solution being classically reduced to either inflation or unemployment, and both of those being bad for the economy, both parties are nevertheless secure in the binomial domain of a perpetual partisan hypothesis.

"If not this, then always that" is anything but uncertainty. It is a low political volatility that ensures the current value of the risk.

The president's mid-term campaign rhetoric begs the question. If Republican policies are so obviously bad, why is it necessary to feverishly campaign to maintain a Democratic majority? The deficiency here is obviously not Republican.

The current choice (inflation or unemployment) is the classical alternative in neo-classical garb (a deficit or balanced budget). It is a false choice, a self-fulfilled prophecy, providing alternatives that achieve the same result with the false promise of continuous improvement.

Neo-classically, where are we now?

We are currently in a classical, recessionary, cyclical trend with a strong deflationary tendency being resisted with expanded debt.

So, where is the improvement?

What has improved is the complexity of the financial tools used to derive the value from the risk. The technology is made inscrutible to the average voter so that the classical alternative always has the promise of a simple and understandable solution reduced to an either-or hypothesis.

The result is the political eristic we see now, absurdly given the choice of two cross-effective alternatives that always confirms detrimental to the average voter and progressively beneficial in income class (the Hamiltonian model of political economy).

What is the average voter supposed to do when a supposedly wiser government authority always "re-presents" the average voter with the classical alternative, inflation or unemployment (Democrat or Republican)?

The "representative" form of government will either be considered fundamentally disfunctional or, most likely, considered better than alternative models, including democracy, and possible mob rule, a la The French Revolution and The Reign of Terror in which monarchy "re-presented" as the functional alternative.

Faced with one party prepared to inflate the deficit, and the other to deflate it, voters see a compromise coming that requires a whole lot of stump'n now for all the dump'n later.

The classical alternative is a false choice, but there is another choice that is not represented.

Deriving the Value of the Risk

In the quest for short-term profit, means have emerged to derive current value from the perception of future risk.

The perception is not limited to deriving the value itself to assume a useful, current value, but to also control the perceived liability of the distributive risk to the reward.

Mark-to-market accounting, for example, a favorite tool for Enroning your way to success, affects the perception of the risk by projecting it forward with current value.

Though the current value has useful presence, the future is much more uncertain. The feedback can have a disorderly effect from which current value can be derived.

The volatile value of the risk leads to "making markets" and the systemic importance of firms like Goldman Sachs and Bank of America who are so big they can determine the value of risk derived from the markets they make.

It is the size of these firms that makes them powerful, so powerful that they can govern the risk for everyone else. Both investing and trading is reduced to guessing where the big money is going next to make and mark the market, and markets will be made depending on the position taken.

The reason trading ranges are so broad is because the market is being manipulated for the short term gain of derived risk value. If your costs are highly energy dependant, for example, the probability of risk is so high you are likely to engage the market makers to make the market for you. It would be naive to think the market will not be made to your detriment with a liability limited to proving the probability of the risk defended by a firm that has all your money and none of the risk.

The housing market is a visible demonstration of derived risk. Value has been generated on both the up and down side. The price differential has been generated by derivative financial instruments that transferred the risk to future value so that the value differential is simply: long on current value, short on future value.

The risk that generates the value (the boom and bust dynamic) is always present but has current value by the disposition of instruments for deriving value from the risk.

The value of the risk is largely time dependant, and it is the function of risk-transfer instruments (making markets) to time the market with certainty that is limited to the market maker. The result is both a zero-sum profit and a limited liability.

The value derived in zero-sum avoids the risk of liability since the value has the "assumption" of risk. The value derived, however, reflects the value of the risk whether it was actually assumed by the beneficiary or not.

Consider, for example, risk instruments designed to drive up home prices with easy credit without the investment in growth to pay the mortgages. You don't need a PhD to figure out how to derive value from the design (the making of the market) with virtually no risk, especially if the capital is so consolidated that the timing is in your control. The assumption of the risk is a fraud, and fraud is a crime, especially if it causes a detriment like The Great Recession.

Consolidation of the capital is the essential source of the value detrimentally derived, yet legislators consider it to be an asset, not a liability. Financial reform has been expressly identified as not being a function of organizational size. It is only a function of regulation, or the absence of it, according to the reformers.

This is a monumental mistake! The president can give speeches all day about how the Democratic Party's economic plan is obviously more practical than staying the Republican course, but without clearly identifying the size of the firm as the source of the problem, the derivative value of the risk is conserved. Only the timing changes; and since the timing of the value derived will be determined by government regulation, the derivative value will then have the legitimacy of public authority. Not only is the risk of liability reduced, but any retributive value can be blamed on government intervention.

The retributive value of the risk is then freely associated with government intervention and not a fundamental attribution of organizational size, except that government is too big.

What continues to ail us will be legitimately blamed on government intervention in the marketplace, but only as a derivative of that value. The value is actually derived from the allowable size of the firm and the consolidation of the risk.

The Value of Uncertainty

Uncertainty creates value.

Beta risk, arbitraged into short-term profit, fits an investment model that is operationalized with the gamma risk accumulation of that value.

All the "uncertainty" that has pro-growth investment on hold (an unsure tax liability and the level of anti-deflationary stimulus) is being fundamentally attributed to government intervention in the marketplace (the gamma risk).

While the fundamental attribution of risk is correctly gamma, the causal relationship is false, resulting in fundamental attribution error and a psychological affectation we call "market sentiment."

The false sentiment creates a false valuation of the risk. Its current value must be adjusted for the fundamental attribution error. It is an affective disorder--it literally has a disorderly effect--that results in volatility.

The volatility created is transformed by the free-market mechanism into what appears to be an uncertain oscillation of current value based on the future value of the risk. The value is rediscovered with such a high frequency that it appears to be out of control.

The future value of the risk, however, is all but uncertain, and the disorderly oscillation, defying technical indicators to suggest all the uncertainty, is really the deliberate result of fundamental attribution error.

Government does not cause the beta-risk volatility. The argument is a post-hoc fallacy.

Government does not cause the gamma risk, it is the gamma risk. It is the risk that cannot be avoided, only transformed. It is the fundamental risk that never goes away. It is always present, and always presents as the probability of risk. It is a persistent value that cannot be created or destroyed, but accumulated and distributed.

Probable accumulation and distribution of "the risk" is what causes oscillation of its current value, and that value can be manipulated into a highly certain effect with the highly certain value of a stimulus-response affectation.

Derivatives are designed to cause that affective disorder, currently the target of government regulation.

Government is not the cause of the risk associated with "making markets" (vehicles for tranferring "the risk" into a gamma proportion). It is the effect. This is where political-economic philosphers like Ayn Rand fail. If "the risk" were allowed to accumulate without "effective" government intervention, it will self-correct with complete certainty (it will, certainly, implode and catastrophically burst in a gamma-risk proportion).

Government is not what is to be avoided, it is the accumulation of the gamma risk and the beta presentation of that risk in the "certain" value of its current volatility.

The accumulation of value that occurs looks like an ontological uncertainty, but it is not.

Who could have known that trillions of dollars of net worth would be consolidated into the upper-income bracket in the latest cycle of boom and bust?

It happened, but the benefit is really not an act of deliberation. It just happened. Nobody caused it...it just happens. If it were ontologically meant to be any other way, it would be.

With or without government intervention, so the Ayn Rand kind of argument goes, the result is ultimately the same--the winners will win and the losers will lose. However, the argument continues, government intervention to reduce the risk of loss causes a productive deficiency and deflationary crisis, resulting in a dead-weight loss. We are better off just letting the market be (and allow the Enrons of the world to manufacture shortages and commit massive fraud).

Adherence to the Hamiltonian model of government (cumulative management of the risk to a narrowly distributive benefit) makes the value of "the risk" all but uncertain.

Without government intervention that prevents accumulation of the risk, promoting its deconsolidation rather than its consolidation, crisis will always determine its value, and its current (useable) value will always be more determined by the probability of its political than its economic management.

Political management of the risk gives it elasticity. If it is too inelastic, the crisis will have a more uncertain market value.

Since the accumulation of value relies on the certainty of a market legitimacy, it is absolutely critical to maintain the value of that legitimacy. Without it, the value is highly uncertain. The polarity of the current value can change with sentiment, and that kind of retributive volatility presents a current value that is detrimental to the currency (the use value) of a power elite functioning as a ruling class empowered with market value "governed" by political management of the risk.

Political management of crises cycles the gamma risk into beta proportion, preventing an alpha valuation of the risk. When the gamma is too high, as it is now, it transforms into beta risk to be managed by government authority. That authority will be used to prevent the declining rate of profit, presenting a current valuation of the risk that is really anything but uncertain.

Take high-frequency trading, for example. As it becomes apparent that it can "govern" the trading range of equity markets, the loss of legitimate process causes regulatory intervetion. Since trusting self-regulation of the market is a low probability without deconsolidation, government will intervene to "govern" the process, giving the outcome the force and legitimacy of public authority. The value of the risk has been transformed from private to public authority, and conserved as "market" value. The uncertainty (the risk) is still present to produce an alternating currency of value, but easily transformed into a direct currency of accumulated benefit with a low impedance value.

At the macro level, the false uncertainty (the fallacy) creates the value to be arbitraged in the free market which, in turn, resists the declining rate of profit without growth until a favorable tax policy can be extorted or a Keynesian stimulus occurs.

Since there is no deconsolidation into an alpha risk proportion, the elasticity of the risk is "governed" to effect a shortage (slow growth).

By increasing the supply of money in the name of growth, the declining rate of profit is resisted as margins get support.

It appears that government is causing shortage. Profits, then, due to shortage, are "fundamentally" legitimate, not the result of speculative demand, and the proposed financial reform will, by misattribution, kill the formation of capital needed to relieve the shortage government has seemingly caused. Government, then, foolishly kills the hand that feeds it.

The fallacy built into the Hamiltonian model is an ingenious fraud. It stems from an error of known quantity that fundamentally misattributes the risk, and thus the value of that risk, inspiring a false sentiment that keeps the media fully involved with a persuasive but fallacious, post-hoc political ersiticism.

A problem kept fully involved is never likely to be resolved.

The eristic provides uncertainty of a known quantity, and the problem preserved is value conserved.