Bonding the Risk

Another sucker's market in the making, the bond markets are playing off Geitner's sentiment for a more progressive tax code to reverse a strong deflationary tendency and an exploding budget deficit to support demand and, more important, recycle the debt.

The gamma risk is getting too high--so high that even some of the wealthiest people are calling for a more progressive tax code.

To reduce the gamma risk and recycle the value in a classic form, it is necessary to bond the value to the risk taker. With a $500 billion move into municipal bonds so far, and the bubble growing, for example, there is plenty of money to buy the debt, but where is the money going to come from to pay it? Keep in mind that most of the federal stimulus money has been earmarked for state consumption--a public good being financed by monetizing the debt at the federal level and appled at the state level at around a seven-percent yield.

In order to keep the risk distributively valued in the form of a public good, the lost value to assets, like housing, incurred by the average income will be recycled in the form of a generalized benefit, operationalized with a "bonding authority" to convert the lost value into a consolidated gain. That gain, of course, is to be taxed at a low marginal rate to ensure economic growth which, again, invokes the detriment (the lost tax revenue that will be monetized into public debt) as a generalized benefit.

The objective is to regress the burden of the public debt, reversing the empirical expression of retributive value presenting a gamma-risk ontology (risk--a liability--that cannot be avoided). The risk must be restructured to ensure its future, accumulated value. Debt will be restructured, bonded, and recycled to achieve that objective. It is a process the Fed and Treasury are now engaged, facilitated by major bond brokers like Pimco who suggest recycling real estate debt with a new thirty-year bond at six percent.

(Hmmm... how about three percent... or maybe one percent considering that too-big-to-fail financial institutions leave the mortgagee with all the risk!)

Rather than write down the losses, and retribute the value, big banks are looking to turn this liability into an asset, engaging in all manner of technical analyses along the way to narrate the regressive burden as bonding with the general welfare (turning around the housing market), gaining large amounts of arbitraged value, derived from the gamma risk ontology.

While the risk bonded to The People is sold as a public good, it actuates a consolidated benefit that accrues to the upper-income class of the private sector. It is a fraud to be perpetrated without risk of liability, accumulating even more gamma risk, which is dangerously overaccumulated now, indicating a high-frequency, accumulation-distribution oscillation that makes a double dip look like wishful thinking.

Distribution of the Risk

Take a simple concept like, "tax cuts for the rich promotes economic growth."

With economic growth there is a diffusion of risk, but economic growth does not diffuse risk, diffused risk causes economic growth.

When wealth becomes so consolidated you can act without risk, "tax cuts for the rich" promotes economic crisis with slow to no growth, like we have now.

Ten years of tax cuts for the rich resulted in negative growth and the prospect for a lengthy recessionary trend--The Great Recession. Now, since Democrats have been unable to reverse the trend, which provides empirical confirmation of how "negative" growth is with a Republican regime, voters are flirting with a Republican agenda that provides tax cuts for the rich.

Not only is the tax-cuts-for-the-rich argument, and its newly found popularity (an implied consent) illogical, it is an empirically disconfirmed hypothesis.

The negative vote rigs the free-market of ideas (concepts) and working hypotheses (conceptual models) with a dummy variable--Republicans or Democrats. The practical model in operation effectively consolidates the risk, conserving its current value, which is why voters are "rationally" considering the Republican agenda, all be it an irrational alternative.

Pluralism is all about maximum, not minimum, distribution of risk, and voters are trying to effect a pluralistic outcome with a non-pluralistic organizational model that consolidates risk for elite management. That consolidated value (the power it accumulates), just like consolidation of economic value, is redistributed by the elite for public consumption, effectively--irrationally--rigging the market.

Non-pluralistic conceptual modeling, and practical organizational technologies modeled to fit the concept, cultivates irrationality. It is not the mass of voters--the mob--that is irrational, it is the elite "concept" of it, enabled by consolidation of the risk.

Enabling rationality requires deconsolidation of the risk, politically, economically, allowing for a distribution that empirically minimizes error (like tax cuts for the rich) and operationalizes the general welfare with a process of continuous improvement.

Creating Risk Exposure

Creating risk exposure relates to accumulation of wealth, consolidation of risk for distribution, and limiting the risk of liability.

Let's say you are an investment bank, Soldem Craps. You are looking to benefit by causing a detriment without liability. You want to avoid the risk that will retribute the value back to the risk taker--the party that unassumingly assumed the risk by your risk-transfer devices, creating a zero-sum, high-yield gain without risk to you, defying the high-risk/high-return hypothesis. It is your job to turn private property (like savings) into capital for gain, and so you "make the market" to create the risk that causes the reward.

Pleased with your record profits, having sold 'em plenty of crap, everybody gets a bonus, having turned capital into your gain (private property). While you built a lot of houses, the accumulation of capital into private property (your savings account) has reduced demand and left millions of Americans with all the risk in the form of a deflationary trend. You now look to gain favorable tax policy in order to turn your private property back into capital, but it is really so the accumulated value will not be "confiscated" and retributed to the risk "takers" which will reverse the deflationary trend that gives the risk the current value you want to conserve.

You pollute popular media with supply-side propaganda, vehemently arguing tax cuts for the rich or the economy will get worse. There is no incentive to turn private property into working capital for economic growth (adding supply to disinflate rather than deflate prices) if government (the sovereign power) is going to tax away most of the return (the property) to be gained.

There is plenty of supply, however, just no demand. There are plenty of empty houses for sale, and homeless people to occupy them, but they are unaffordable at any price (because potential buyers were given all the risk, and thus they are considered "high risk" and not creditworthy).

The supply-side argument is absurd to even the most casual observer, but it is not clear why. If the "risk takers" know why (and keep in mind that "taking" implies consent if not intent), the risk goes dangerously gamma, and according to your elitist hypothesis, mob rule is to be avoided at all cost. So, it is necessary to consolidate the risk for redistribution, which is your "market-making" specialty, leaving the means of power (accumulation of value) intact for elite rule.

Considering your capital-marketing practices are a public menace (increasing "the risk" for mob rule and a possible Reign of Terror), you fully anticipate being regulated, but that's alright, you have plenty of lobbyists on retainer and only two parties to contend with full of politicians that aspire to be wealthy members of the ruling class, if they are not already. No problem!

Since you "made" the market, the only risk exposure left to you is gamma--the risk that cannot be avoided, only recycled and transformed into beta risk, which you use to magnify your profit (your private property) back into capital to arbitrage (recycle) the value of the risk you have created. Where does that added value come from?

While you have accumulated wealth, you have not created it in proportion to the profit that you "made." The disproportion causes a demand crisis--there is plenty of money, but not adequately distributed. As the economy cycles into a deflationary spiral, the capital you have recycled is being evermore exposed to the gamma-risk proportion. It becomes apparent that the profit (wealth) has been accumulated in a zero-sum proportion. Now you have to testify to the social benefit of your accumulated wealth in a public forum.

Since the accumulation of wealth is an honored profession, being called to justify the accumulation is a symbol of status, a mark of achievement to be entrepreneurially aspired. You do not fear the gamma exposure because you are protected by moral imperative--the accumulation of wealth. It is confirmation of an honorable achievement as much as it is a public scourge.

As long as the inquiry is focused on the accumulation and not the creation of wealth, the issue is debated in a safe mode--your private property is constitutionally protected and public policy is focused on turning your private property into capital. The value of the accumulated risk is conserved in a gamma proportion to be recycled, exposing everyone else to the gamma risk.

As long as the political apparatus is organized to protect your right to your private property--a redistribution being next to criminal, you are protected from the gamma risk. It is essential to correlate the accumulation of wealth with the creation of wealth in order to conserve the value of the risk you have "made" and will continue to make and consolidate in market form.

As long a you are the source of the risk (made possible by the accumulation of value and reduction of demand), your exposure (the risk of liability) is limited to anything and everything but a deconsolidation of the risk. You may pay huge civil and criminal penalties for all manner of abuse, but you can afford it. You are shielded from the risk of liability to the reward because you can and will be held accountable for damages on a divisible basis in a court of law. The systemic risk you create for an indivisible public consumption is a political, not a legal, matter to be sanctioned by popular vote, which is binomially determined and bureaucratically managed by highly technical means well beyond the understanding of the non-elite.

Good job!

Everybody is exposed to "the risk" but you!

You deserve a raise!

Anyone that has not achieved elite status is exposed to the liability of the risk. Non-elite investors, for example, must have a way to turn their savings into capital without being exposed to the risk created by consolidated capital.

The only way to do that is to deconsolidate the capital, accumulating wealth for the nation created by a more divisible distribution of the risk.

It is time to create and accumulate wealth, not risk!

Deconsolidation of the Risk

The risk is not circulating. It is consolidated. As long as it remains consolidated with the accumulation of value it represents, the recessionary trend will have a strong deflationary tendency.

Counter-cyclical measures that resist deflation are not enough to resist recession, but support it, recycling the risk into consolidation and, thus, the expectation that the recession will persist.

The over-accumulation of value presents the risk of a more progressive tax code. That risk is not the result of a partisan ideology. It naturally occurs with an accumulation of value that partisan politics recursively manages into a predictable, stable, value of consolidation that can be recycled in the form of "systemic risk" (the gamma risk--the risk that cannot be avoided, so it is recycled in lieu of the needed circulation of the risk).

Market analysts are apt to say that risk tends to be overpriced. It not only states a risk-prone disposition, and so we tend to overvalue the probability of risk, but recognizes the probable effects of over-accumulated value and consolidation of risk for public consumption. Identifying the effects as the problem is intended to conserve it.

The sudden stock market crash on May 6, 2010 that wiped $30 billion of market capital in a matter of seconds is a clear indication of a capital market that is risk-prone. How does the market price that risk?

The market does not price consolidated risk, the managers of the risk do. It is less a pluralistic market mechanism than determination by fiat. The effect is short-term volatility that deliberately scores the long-term value of the risk, modeled with a certainty that supports the future value of the public debt. While the debt may grow, there is no risk the federal government will default as long as the value that supports it is consolidated. The accumulated value (and the consolidation of the risk) generally prices the value of the debt as "low risk" despite the volatility of its current valuation.

The value of the risk (the probability of default) is operationalized with a high order of cognitive intent that syllogistically correlates low risk with the consolidation of the value. The theory it presents operates with the premise that leaving risk to a free-market process increases uncertainty and volatility while the hypothesis it poses is always disconfirmed (the coefficient is zero)--an economy-of-scale consolidation of risk always increases volatility with uncertainty over what the economic incentives will be by fiat (by government decree), like we have now.

Interest rates are currently next to zero, indicating low risk, pricing-in the probability of low inflation. The risk, rather than being mispriced, is fully valued with the probability of default on the public debt being next to zero.

What is not priced-in is the retributive value. It is recognized to be the level of political uncertainty that is preventing the investment necessary to pull the economy out of recession. This is the risk that analysts refer to as being overpriced although that price does accurately reflect the liability of the risk...without admitting to it, of course.

As the Fed now begins buying Treasury debt (consolidating the risk, or uncertainty, to be recycled into investment, coaxing accumulated capital to buy treasury bills to cover the debt at higher rates rather than borrowing at the discount window for next to nothing), circulation of the money supply needed to resist deflation will be accomplished and the risk of default is virtually none even without a more progressive tax code. Either way, the risk is all but uncertain. There is no risk to the consolidation of the capital. That risk will be individually (divisibly, not collectively) consumed by The People recognized to be the most at risk of default--and so they will, soliciting (demanding) the consolidated management of the risk, conserved and redistributed (recycled rather than circulated) in a gamma proportion. (The demand for gamma risk is the demand missing--the circulation--that a free market otherwise provides and "the risk" otherwise avoided--the uncertainty of government intervention and a current, volatile valuation of the risk by fiat, or the accumulation of value beyond a free-market proportion.)

It is important to understand that this process defines who the legal sovereign is. While "We The People" are collectively sovereign, the debt (the risk) is redistributed to individuals in the form of income (when Goldman Sachs and Bank of America win, We lose our assets to the so-called "free market"). Again, consolidation of the risk gains the distributional characteristics of a public good with an indivisible detriment that is means-tested to be divisibly consumed. The benefit side accrues to the accumulation of value that is privately owned, but with the risk consolidated and controlled by the state (the legal sovereign--The People), implying the direct consent of the governed commonly defined as uncertain risk. That risk, however, is actually the certain retributive value of accumulated wealth and power.

There is a simple, verifiable hypothesis at work here: the more accumulation of value, the more acute the crisis and the tendency to consolidate the risk to manage it.

In every case in our economic history, when income accumulates at the top, there is a crisis with a deflationary tendency that poses a risk to the accumulation--deconsolidation. It is time We take that risk!

The argument against deconsolidation is that it does not produce as much value. The argument tries to equate consolidation of value with accumulation of value, implying that consolidation is pro-growth, which it verifiably is not.

A growing economy adds value, and wealth accumulates. Consolidation of that wealth, however, accumulates risk that, when consolidated, is redistributed (recycled) instead of the wealth, creating a demand for government consolidation (big government that wants to rule every aspect of your life, diminishing freedom that is socially expressed in the form of a free-and-unconsolidated marketplace).

Quite the contrary to both liberal and conservative sentiment offered to promote growth and control risk, deconsolidation adds value by controlling risk (not allowing it to accumulate). The effect, unlike the allowable alternatives offered-up as popular sentiment, is less need for government.

Deconsolidation will effect less need for government. Less government will not effect less need.

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.