Capital is being used not to provide income--to trickle it down--but to deprive it and deliver it to the upper class in zero-sum. Inherent to this sum is a risk proportion that is not settled with taking title to the sum, and the proportion of the risk you own is determined by its settlement. The settlement yields the proprietary risk.
Proprietary risk is composed of ethical arguments premised on necessary and proper incentives (endogenous risks) toward beneficial action and verifiable outcomes. If, for example, we tax the upper class to ensure the lower classes do not experience economic distress and desperation (an endogenous political risk that, without a free market, must be exogenously controlled), productive incentive will diminish resulting in hyper-inflation and, eventually, negative economic growth (economic depression). The cost exceeds the benefit and is verified by chronic deficit spending and accumulating public and private debt (a declining rate of profit and a rising rate of default).
Yes, without ensuring a free market in priority, political risk must be exogenously controlled. Without a free market, the moral hazard of perverse incentive reduces to a proprietary risk based on qualities that are quantitatively measured and verified by income class.
Proponents of consolidated capital contend the more income you have the more verifiably capable you are to manage wealth toward the common good, which is typically a function of building economies of scale through consolidation of industry and markets (what a free market is not). What is wrong with this argument is that while consolidation reduces the risk for a power elite of consolidated capitalists, it increases the risk for everybody else (and reversing this risk proportion is what a free market is). The Great Recession, for example, produced huge profits for consolidated capital, huge losses for everybody else, and has resulted in further consolidation of industry and markets.
The result of consolidation is a proprietary risk proportion that must be politically settled with at least the appearance of a popular, pluralistic legitimacy (like a free market) to promote domestic tranquility and achieve civil order (the general welfare). Typically, this pluralistic legitimacy is falsely argued to be the result of a free-market process that provides an alpha-risk determination of the outcome (by the direct, democratic determination of a popular, dollar-denominated vote of consent).
If you are not sharing in the wealth (the income necessary to legitimately determine outcomes in the marketplace), according to the proponents of a consolidated capital it is because you are not capable of managing your debt to provide equity (the capacity to determine), and that puts you in a subordinate position. You need not worry, though, because there is a huge shadow banking system in which to subordinate your risk. Proprietarily lurking in the dark, these are people you can trust with your proprietary risk, as far as the FDIC will insure it anyway, and failing that, don't worry, government will bail us out because "we" are too big to fail.
Look at how our economy was managed into the Great Recession. Either the best-and-the-brightest, Ivy-League managers are really smart (getting exactly what they wanted--converting huge amounts of wealth with virtually no liability) or really stupid (getting exactly the opposite of what was promised--slow growth and massive unemployment, but without admitting being wrong considering the call is for extending the Bush tax cuts and an even more consolidated financial sector to fix the problem).
If insanity is doing the same thing over and over again expecting a different result, the Ivy-Leaguers are certifiably insane. While borrowing our way out of debt is exceedingly counter-intuitive, devolution into a state of economic desperation and civil disorder is not the only other alternative, which would lack both technical intelligence and moral competence.
When provided, debt serves to support the marginal profit (equity) and keeps the economy growing, but according to the Ivy League, only if incomes are low (except for Bank of America and Goldman Sachs employees, of course, with whom we can proprietarily trust our self-interest). The contradiction (the problem to be solved) presents as a paradox of thrift, but it is really a means of systematically creating counter-party subordination of the risk.
Debt is a function of subordination. Debtors are subordinated to creditors. While the social value of extending debt is normatively described as pro-growth expansionary, and liberating, it is in practice a means of accumulating risk-value to be arbitraged into default (consolidated capital pushing up futures prices rather than adding supply, for example). When default occurs (depreciation of income, or purchasing power), the surplused value (the wealth accumulated that is the need for debt, like the large cash reserve big corporates currently have on hand) is there to buy (merge and acquire) the "distressed assets."
The assets in distress include the declining incomes of the workforce (the inability to pay taxes or higher prices). While the decline pushes equity values up, along with commodities and the cost of living, the ability to buy into the equity stake, and budget the cost of living, is diminished in zero-sum. That appreciating value in zero-sum is the value of the debt being increasingly demanded, or needed. That value is also the risk the debt assumes (the accumulating liability--the political risk--to be avoided), which is the risk of default (the declining rate of profit). The cash reserve is neither accumulated or distributed to produce growth, but is technically engineered to produce default (deflation and unemployment).
The reserve is there to consolidate industry and markets into a self-described economy-of-scale "efficiency." In practice, however, the economy of scale serves to subordinate The People. It creates the need for debt and destroys purchasing power needed for the direct means of democratic self-determination that forms the foundation of a limited, republican form of government with a strict constitutional construction as Jefferson described it.
Where we do not organize the economy into the scale of an exogenous, gamma-risk proportion (in which a political settlement--the need for government authority--is required), the alpha-risk proportion otherwise endogenously obtains. The alpha is a risk of loss (an endogenous liability) fully assumed and is directly applied to the economic rent.
For example, when we argue whether the healthcare legislation is constitutional, we must consider what commerce is. Opponents contend not buying care or insurance is not commerce. It most certainly is!
Not buying something is a disconfirmation. Businesses must compete for market share--that is, they must fundamentally compete by reducing price and/or improving quality to get consumers to buy. If we have to buy something--if we can't say no--it is not a free market, and proponents of consolidated capitalism know that very well. They intend to defeat the direct, verifying mechanism of a free market that operationalizes fundamental alpha risk so that they can unaccountably tyrannize the marketplace, forcing the consumer into a false bargain (an economy-of-scale efficiency) described as "our" self-interest (the general welfare).
(I dare say that anything that secures the general welfare without self-determination is fundamentally unconstitutional!)
Consolidated capitalists choose the price and "We the People" choose the quantity, or not; and if We choose "not," then we are not considered to be engaged in commerce and, therefore, "idiotically" (from the Greek, "idios") deprive ourselves of the efficiency (being the idiots we proprietarily are, unable to know what our self-interest is, needing the efficiency of consolidated, elite authority to determine it for us).
Not only is a mandate to buy wrong, but the arguments presented against it are wrong in a typical binomial fashion. It is a false dichotomy in which our attention is redirected to avoid the real issue (the loss of value fully assumed)--the accumulating debt in lieu of the income we need to buy (or not).
Consolidated capitalists want us to be in the marketplace, but only on their terms. That, of course, is not a free marketplace at all.
In a free marketplace "We the People" (all of us) proprietarily participate (or not). If people do not buy healthcare or insurance, more likely than not it is because the price is too high. The signal to lower the price is unintelligible to a consolidated marketplace intended to defeat the power (the purchasing power) to democratically and pluralistically self-determine.
A consolidated marketplace is intended to resist deconsolidation of the risk for application in the alpha proportion. When fully applied, the alpha-risk directly and immediately presents the risk of loss fully assumed (the consumer's choice to buy "or not") rather than being cycled and re-cycled toward a political settlement. It maximizes "discretionary" income to proprietarily avoid and reduce debt in priority rather than reduce income and increase consumer debt with an economy-of-scale efficiency.
(Also be aware that the no-commerce argument is also a semantical, legal trick perpetrated to rationalize deregulation, rather than deconsolidation, of markets. If the healthcare legislation can be struck down because it unconstitutionally mandates consumers to buy, regulation of consolidated industry and markets, including keeping them unconsolidated, is just as arguably unconstitutional.)
Direct, endogenous, alpha application of the risk relieves the burden of debt (the subordinating value of the risk), allowing for expansion where contraction otherwise deliberately occurs and results in default by means of consolidation. Without ensuring an endogenous, alpha application of the risk by default, The People are subordinated to the value of the risk, by default, rather than liberated with the power to purchase in the free marketplace.
Economies of scale are intended to efficiently maximize profit by minimizing employment costs (by maximizing unemployment, like we have now, whether it is in the U.S., Egypt, Libya..., which also maximizes the gamma-risk proportion resulting in force-majeure disruption of production and higher prices). The reduction of income (proprietary purchasing power of the middle and lower classes) reduces the freedom a free market ensures right down to each and every individual to maintain a direct and highly divisible (proprietary) accountability (the endogenous, fully assumed, risk of liability).
Revolutionary sentiment in Libya, for example, is being countered by its power elite with a promise to give the provinces more power to determine their budgets. (In the U.S., we can counter the accumulated risk with budget deficits since our currency is not dependant on any other currency. The political risk can be, subsequently, counter partied--toggled between two parties to conserve the stakes over time in the gamma-risk dimension without too much instability). In other words, Libya's elite authority has realized the risk fully assumed in the accumulated, gamma dimension (and there is no counter party in which to offset the risk--it is a monarchy).
In order to retain power, Libya's elite authority has offered to share power, rendering a more pluralistic distribution of the risk, which here-to-fore had been consolidated into the hands of a monarchy along with the reward. At this point, The People are not buying it, and since the risk is fully gamma, unlike in a pluralistic (alpha-risk) free-market proportion, saying "no" (the empirical, verification of a popular consent) is in a destabilizing crisis proportion that the elite depend on to force a popular consent for elite salvation. The offer has not been accepted and the monarch faces force-majeure deconsolidation of the risk proportion, which increases the gamma risk, and thus beta risk, for everybody else.
Consolidation does not reduce the amount of risk. It is conserved and redirected (what hedge-fund managers call "offsetting risk"). Building economies of scale reduces the responsibility--the liability--that goes with maintaining a genuine free-market legitimacy. Where the means of self-governance has been organizationally reduced, the liability (the endogenous alpha risk) is transformed into the need for protection by means of civil authority.
Economies of scale are built through mergers and acquisitions. M&A is a primary utility of private equity and is a specialty of big banks like Goldman Sachs and Bank of America. These big banks, by the way, after having paid the TARP bailout funds, are now allowed by the Fed to pay dividends. Since we have been in recession, the proceeds are not derived from economic growth. The proceeds being paid out, rather, including the TARP payments, are essentially derived from the "productivity gains" of the Great Recession--unemployment--which has reduced the income and net worth of the employed.
QE (monetary infusion to offset accumulated market value) has also been a source of TARP payments, and now it is a source for dividends at an especially low tax rate (the value of which is supposed to trickle down). The liability (the assumed risk) is offset, keeping industry and markets profitably consolidated, effectively reducing the freedom (the market value) to exact an immediate and divisible, direct accountability that requires less need for government authority and political settlement of the risk proportion.
It is important to understand QE as an "open market" regulatory mechanism. It is being used by the Fed to open a market that has been closed by an overaccumulation of its value into the upper class (which defines the proprietary risk proportion to be managed). The money infused is used by professional investors to arbitrage risk (to speculatively position for the economic contraction that derives from speculative use of the capital) rather than derive value from expanding the "real" economy on Mainstreet (the deprivation--the detriment--being the value derived).
When no more value can be derived from Mainstreet without a full-blown depression, the market is quantitatively opened by the central bank to "accommodate" the accumulation of market value (the free-market value of self-determination) by resisting the declining rate of profit. The liability the accumulation assumes (the detriment that derives the value) is minimized, absorbing it into the regulatory authority by buying assets that have been fully arbitraged and deleveraged.
It is important to understand that the purpose of QE is not to provide the means of self-determination. It is not a means to literally open the market, but to regulate the political risk (the liability, like an increasing marginal tax rate) a closed market fully assumes in priority and therefore organizes to be managed toward a political settlement.
A political settlement naturally involves deregulation. Markets, conservatives argue, naturally open if deregulated, and a more pluralistic marketplace will accommodate a lower marginal tax rate. The lower marginal rate causes robust capital investment, thus producing the employment that pulls us out of recession.
Keep in mind, however, consolidation causes regulation. It substitutes for the free-market value consolidated (the ability to self-determine). Regulation reduces abuses of consolidated power and mitigates the liability so that a firm's cost efficiency (the economy of scale) is the measure of its effective success (its high profitability), producing the capital--the profit margin--that employment depends on.
Deregulation will not render a pluralistic deconsolidation despite the argument being made that it removes barriers to entry, which would provide the market value that allows for direct accountability (the purchasing power full employment provides). The barriers are caused by consolidation, not regulation.
Regulation provides the co-optative value of government to firms so big that market forces are ineffective, and so their legitimacy is questionable. Regulation provides legitimate authority along with cost barriers to entry. It allows for an indirect accountablity (and co-optivity) instead of a free-market legitimacy that would otherwise control (substitute) the proportion of debt (the risk of default) with cost effectiveness and efficiency ontologically determined from the bottom up rather than imposed from the top down. Whether business or government, the organized ontology is the difference between freedom and tyranny (the production of growth and distribution of equity, or the production of risk and the distribution of debt).
The cost of compliance supports barriers, which resists the value of direct accountability and propagates the need for more regulation. The propagation often takes the form of regulatory reform to control its extension without deconsolidating the extended proportion of risk and the value it consumes.
Barriers are an effect of consolidation, which includes the regulatory costs that encourage consolidation. The cumulative cost--the measure of efficiency that creates the effective barrier--positions those outside the barrier with the risk of default, which accumulates political risk offset by regulated accumulation and distribution of debt through monetary and fiscal policy. The cumulative cost ends up on the tax bill where it is ready for a political settlement and must be cut to control government spending, reduce the burden of debt, and position The People to take proprietary ownership of the risk.
Since the cumulative cost reduction of deregulation does not deconsolidate the risk, the risk of default gains support rather than resistance, which needs to be regulated to control the instability of accumulated political risk. To remove barriers and free the market of government tyranny, however, the budget to regulate will be cut, and deregulation achieved, because non-government tyranny is the free-market, American way.
Cutting the cost of regulation also cuts the benefit of political stability, but the counter-political party is positioned to be sure the costs and benefits are politically realigned to protect and conserve the economic value of the risk.
By means of regulatory authority, the proprietary position of The People as counter party to the economic risk, and the legitimacy of its political settlement, is ensured in the gamma proportion.
Thursday, February 24, 2011
Thursday, February 3, 2011
Monetizing the Political Risk
When small investors moved into treasuries to minimize risk exposure after the Great Recession, bond prices, with the help of the Federal Reserve Open Market Committee, peaked to accommodate the demand for debt. Small investors were effectively positioned to pay the government to hold their savings and watch bond prices fall. They were positioned to, once again, take all the risk while too-big-to-fail financials made off with the reward.
Capitalism builds great things. It reduces chronic shortages, expands the middle class, and builds economies of scale. Allowing industry and markets to consolidate into economies of scale increases income and builds the American dream by expanding the opportunity for an equity stake. Unregulated, too-big-to-fail financials were, for example, supposed to be building equitable opportunity, but what they built was negative equity (to which the 80 percent employed are not immune).
After deregulation, positioning the middle class for negative equity was not enough. Also consider, after the Great Recession, all the big financials were at the table to bid for issuing AIG's new stock--profiting from wrecking the economy and profiting to rebuild it, or recreate the problem, that is (see also Joseph Alois Schumpeter, 1883-1950). Ivy-League MBA's beat anything any union shop ever came up with to achieve job security; and while it was necessary and proper to bail out wealthy banks, we will soon see legislation proposed to discontinue bailing out pension funds to balance the budget.
The middle class is positioned for wholesale reduction (endogenous re-distribution to the upper class) of income and net worth after a fifty-year equity accumulation (the K-Wave accumulation and distribution of the risk proportion).
The result, after a K-Wave correction of risk proportion, is even more political risk added to the current account of apparent (endogenous) economic risk. Apparent distribution of risk (like a rising rate of default) and actual reward (rising bank dividends and bonus compensation, for example) must be managed in a political proportion. As we well know, the current call to account is being popularly applied as debt reduction through tax relief, and the only way to do that, short of a more progressive tax code (regressive tax relief), is to monetize the accumulating political risk.
Cutting spending has less priority because it is both economically and politically risky. Since slack demand is the deflationary problem to be solved, cutting spending does not make a lot of sense, increasing the already overextended political-economic risk. Instead, the political risk will be monetized through the Federal Reserve system to resist falling demand, a declining rate of profit, and avoid, as much as possible, paying the public debt with public debt through the Treasury. Otherwise, bond holders are just sending themselves a check in the mail.
Short of nationalizing industry and markets, government is limited to taxation to pay its debt. Like the top income class, by no coincidence, government increases revenue by raising taxes (prices). Increasing the rents accumulates wealth (surplus value) and tends to trend deflationary. A distribution from the accumulation reverses the deflatonary tendency.
Without the distribution, political risk accumulates. The risk is managed by manipulating the rate of interest (expansion and contraction of the money supply). Monetarism tests the extent of the risk and exogenously increases or decreases the rent to control its extent. The risk is then described as endogenous (systemically inherent) and ontologically legitimate (determined).
When government, like the upper class, gets too rich (when the rent gets too high), the economy slows. At this point, raising taxes to pay the debt churns the debt and accumulates political risk. Without taxing the least able to pay (increasing the risk), which supports a deflationary trend, government, and the upper class, is left being both the debtor and the creditor (sending yourself a check in the mail to pay your debt--the declining rate of profit to be avoided).
Unemployment is not the problem to be solved, the declining rate of profit is.
Capitalism regards employment as a by-product of the profit margin. Unemployment is thus a product of a diminishing profit margin and, according to the minor premise of this syllogism, full employment is therefore dependant on systematically keeping incomes low. The resistance (unemployment) creates the demand for debt (and increases the profit margin). Unemployment (the deflation phase of the business cycle), therefore, is necessary to maximize employment.
In other words, the best way to achieve full employment is through unemployment. Costs are macro-adjusted (deflated) to support the marginal profit (the corporate profit margins currently driving equity values to near-record proportions, for example) thus preventing the declining rate of profit that results in unemployment. The argument, of course, is clearly absurd and is central to economic theories like Reaganomics, which produced record budget deficits surpassed only by Bush-era economics and the Great Recession.
The employment-cost adjustment is a priority. Following the Great Recession, the Democratic majority focused on healthcare, not providing the employment and income necessary to pay for it; and following the realignment, Republicans have been focused on repealing it.
Republicans maintain they are acting to create jobs by repealing the Democrat's "job-destroying" healthcare legislation. The action of both parties, however, supports the "trickle-down" theory of economics in which the employment-cost adjustment must occur to achieve full employment without inflation (i.e., employee income has to be destroyed in order to create capital and jobs).
Notice, however, the capital created is being applied to destroy jobs, not create them. Its application is deliberately designed to support the profit margin by resisting the income needed to pull us out of recession. It is the perfect model of trickle-down economics, being applied by both parties, in which the welfare of the rich is supported to resist the declining rate of profit (the amount to be monetized and paid by the lower classes in the form of public debt to, supposedly, provide for the common wealth).
After all the commissions to study the causes of the Great Recession, after all the inquiry, we not only have the same problem, but it is now even worse. Instead of reducing the gamma-risk proportion, we have increased it (Tunisia and Egypt being the latest evidence of that gaining proportion). The capital accumulated is being applied to drive up prices (and upper-class incomes) while driving middle and lower-class incomes down. Modeled to operate in zero-sum, this is what trickle-down economics is fully intended to do.
The theory of "trickle-down economics" (with the legitimacy of being the best way to achieve the common wealth) continues to be the only alternative to what is called "liberalism," which is always identified by its counter-party as the source--the cause--of deficit spending. The source of deficit spending, however, is really the deliberate creation of counter-party risk. It is a creatively destructive process that transforms the risk into a stable, predictable outcome that conserves its distributive value. Since the value is cyclically rendered and associated with free and fair elections, its conservation has the appearance of a pluralistic legitimacy when it is really the construction of consolidated power.
Binomially organized, the risk is consolidated and politically managed through economic means (the buying and selling of financial assets in the marketplace through the Treasury and the Federal Reserve System), providing the debt needed to resist the declining rate of profit. Thus, employment will not occur without debt, and its burden assigned to the least able to pay to support the rich with the pretense of providing capital for the common good (the commonwealth).
The Fed and Treasury have pumped trillions of dollars into the economy, for example, to resist a debtor-financed recovery. Quantitative and qualitative measures are touted as not being a proportion of the public debt, but it is debt nevertheless. These public, so-called assets are "derived" from future earnings, providing capital without risking the accumulation of capital that has been converted into wealth, protecting it from an increasing political liability (mitigating the loss fully assumed).
Keep in mind, wealth is private property. It is not capital to provide for the common good (the loss of ownership to be mitigated), but proprietary extension of the risk. It empirically confirms class distinction measured by the ability to self-determine, including how much "endogenous" risk everybody else apparently owns.
We now have both the accumulation from the Great Recession and QE funds (the added capital) driving up futures prices and reducing purchasing power (reducing incomes), increasing the demand for debt (the apparent, endogenous, proprietary proportion of risk you inherently own as a result of your class, or position). According to the advocates of consolidated capitalism (the people that condemn criticising welfare for the rich as destabilizing "class-warfare" rhetoric), debt is good because it both provides the capital and the productive incentive for growth. The by-product is full employment (i.e., the income that pays the debt).
The only reason all this monetary accommodation has not resulted in core-inflation risk is because it is being used to resist, not support, the by-product of full employment through headline-inflation risk. Thus, Bernanke continues to forecast unemployment that is too high and inflation (growth) that is too low, but it begs the question. Who, then, is going to pay the debt (the liability--the risk--posed for political settlement)?
The rich and the middle class are fully assembled in Washington to protect their proprietary positions. The time it takes to come to a political settlement without sacrificing the value of the risk (without a socio-political meltdown, or "class warfare") has been bought and paid for by monetizing it (by transferring the risk to the future).
Capitalism builds great things. It reduces chronic shortages, expands the middle class, and builds economies of scale. Allowing industry and markets to consolidate into economies of scale increases income and builds the American dream by expanding the opportunity for an equity stake. Unregulated, too-big-to-fail financials were, for example, supposed to be building equitable opportunity, but what they built was negative equity (to which the 80 percent employed are not immune).
After deregulation, positioning the middle class for negative equity was not enough. Also consider, after the Great Recession, all the big financials were at the table to bid for issuing AIG's new stock--profiting from wrecking the economy and profiting to rebuild it, or recreate the problem, that is (see also Joseph Alois Schumpeter, 1883-1950). Ivy-League MBA's beat anything any union shop ever came up with to achieve job security; and while it was necessary and proper to bail out wealthy banks, we will soon see legislation proposed to discontinue bailing out pension funds to balance the budget.
The middle class is positioned for wholesale reduction (endogenous re-distribution to the upper class) of income and net worth after a fifty-year equity accumulation (the K-Wave accumulation and distribution of the risk proportion).
The result, after a K-Wave correction of risk proportion, is even more political risk added to the current account of apparent (endogenous) economic risk. Apparent distribution of risk (like a rising rate of default) and actual reward (rising bank dividends and bonus compensation, for example) must be managed in a political proportion. As we well know, the current call to account is being popularly applied as debt reduction through tax relief, and the only way to do that, short of a more progressive tax code (regressive tax relief), is to monetize the accumulating political risk.
Cutting spending has less priority because it is both economically and politically risky. Since slack demand is the deflationary problem to be solved, cutting spending does not make a lot of sense, increasing the already overextended political-economic risk. Instead, the political risk will be monetized through the Federal Reserve system to resist falling demand, a declining rate of profit, and avoid, as much as possible, paying the public debt with public debt through the Treasury. Otherwise, bond holders are just sending themselves a check in the mail.
Short of nationalizing industry and markets, government is limited to taxation to pay its debt. Like the top income class, by no coincidence, government increases revenue by raising taxes (prices). Increasing the rents accumulates wealth (surplus value) and tends to trend deflationary. A distribution from the accumulation reverses the deflatonary tendency.
Without the distribution, political risk accumulates. The risk is managed by manipulating the rate of interest (expansion and contraction of the money supply). Monetarism tests the extent of the risk and exogenously increases or decreases the rent to control its extent. The risk is then described as endogenous (systemically inherent) and ontologically legitimate (determined).
When government, like the upper class, gets too rich (when the rent gets too high), the economy slows. At this point, raising taxes to pay the debt churns the debt and accumulates political risk. Without taxing the least able to pay (increasing the risk), which supports a deflationary trend, government, and the upper class, is left being both the debtor and the creditor (sending yourself a check in the mail to pay your debt--the declining rate of profit to be avoided).
Unemployment is not the problem to be solved, the declining rate of profit is.
Capitalism regards employment as a by-product of the profit margin. Unemployment is thus a product of a diminishing profit margin and, according to the minor premise of this syllogism, full employment is therefore dependant on systematically keeping incomes low. The resistance (unemployment) creates the demand for debt (and increases the profit margin). Unemployment (the deflation phase of the business cycle), therefore, is necessary to maximize employment.
In other words, the best way to achieve full employment is through unemployment. Costs are macro-adjusted (deflated) to support the marginal profit (the corporate profit margins currently driving equity values to near-record proportions, for example) thus preventing the declining rate of profit that results in unemployment. The argument, of course, is clearly absurd and is central to economic theories like Reaganomics, which produced record budget deficits surpassed only by Bush-era economics and the Great Recession.
The employment-cost adjustment is a priority. Following the Great Recession, the Democratic majority focused on healthcare, not providing the employment and income necessary to pay for it; and following the realignment, Republicans have been focused on repealing it.
Republicans maintain they are acting to create jobs by repealing the Democrat's "job-destroying" healthcare legislation. The action of both parties, however, supports the "trickle-down" theory of economics in which the employment-cost adjustment must occur to achieve full employment without inflation (i.e., employee income has to be destroyed in order to create capital and jobs).
Notice, however, the capital created is being applied to destroy jobs, not create them. Its application is deliberately designed to support the profit margin by resisting the income needed to pull us out of recession. It is the perfect model of trickle-down economics, being applied by both parties, in which the welfare of the rich is supported to resist the declining rate of profit (the amount to be monetized and paid by the lower classes in the form of public debt to, supposedly, provide for the common wealth).
After all the commissions to study the causes of the Great Recession, after all the inquiry, we not only have the same problem, but it is now even worse. Instead of reducing the gamma-risk proportion, we have increased it (Tunisia and Egypt being the latest evidence of that gaining proportion). The capital accumulated is being applied to drive up prices (and upper-class incomes) while driving middle and lower-class incomes down. Modeled to operate in zero-sum, this is what trickle-down economics is fully intended to do.
The theory of "trickle-down economics" (with the legitimacy of being the best way to achieve the common wealth) continues to be the only alternative to what is called "liberalism," which is always identified by its counter-party as the source--the cause--of deficit spending. The source of deficit spending, however, is really the deliberate creation of counter-party risk. It is a creatively destructive process that transforms the risk into a stable, predictable outcome that conserves its distributive value. Since the value is cyclically rendered and associated with free and fair elections, its conservation has the appearance of a pluralistic legitimacy when it is really the construction of consolidated power.
Binomially organized, the risk is consolidated and politically managed through economic means (the buying and selling of financial assets in the marketplace through the Treasury and the Federal Reserve System), providing the debt needed to resist the declining rate of profit. Thus, employment will not occur without debt, and its burden assigned to the least able to pay to support the rich with the pretense of providing capital for the common good (the commonwealth).
The Fed and Treasury have pumped trillions of dollars into the economy, for example, to resist a debtor-financed recovery. Quantitative and qualitative measures are touted as not being a proportion of the public debt, but it is debt nevertheless. These public, so-called assets are "derived" from future earnings, providing capital without risking the accumulation of capital that has been converted into wealth, protecting it from an increasing political liability (mitigating the loss fully assumed).
Keep in mind, wealth is private property. It is not capital to provide for the common good (the loss of ownership to be mitigated), but proprietary extension of the risk. It empirically confirms class distinction measured by the ability to self-determine, including how much "endogenous" risk everybody else apparently owns.
We now have both the accumulation from the Great Recession and QE funds (the added capital) driving up futures prices and reducing purchasing power (reducing incomes), increasing the demand for debt (the apparent, endogenous, proprietary proportion of risk you inherently own as a result of your class, or position). According to the advocates of consolidated capitalism (the people that condemn criticising welfare for the rich as destabilizing "class-warfare" rhetoric), debt is good because it both provides the capital and the productive incentive for growth. The by-product is full employment (i.e., the income that pays the debt).
The only reason all this monetary accommodation has not resulted in core-inflation risk is because it is being used to resist, not support, the by-product of full employment through headline-inflation risk. Thus, Bernanke continues to forecast unemployment that is too high and inflation (growth) that is too low, but it begs the question. Who, then, is going to pay the debt (the liability--the risk--posed for political settlement)?
The rich and the middle class are fully assembled in Washington to protect their proprietary positions. The time it takes to come to a political settlement without sacrificing the value of the risk (without a socio-political meltdown, or "class warfare") has been bought and paid for by monetizing it (by transferring the risk to the future).
Tuesday, January 11, 2011
The Political Will
In recent testimony before Congress, the chairman of the Federal Reserve said we have the reserves to pay down the public debt and reduce the budget deficit. We have the money to reduce debt, Bernanke said, the question is whether we have the political will.
According to Bernanke, current monetary policy is designed to accommodate debt reduction without increasing the money supply. The money available for debt reduction, then, as he suggests, is willfully held in reserve and politically motivated (existing in a gamma-risk proportion). It is the Fed's charge to manage the reserve (the accumulated risk) without political motive, coaxing the accumulated wealth into productive capital.
The Fed is empowered to use the reserve to charge the economy with economic incentive. The incentive, bureaucratically derived, provides jobs and consumer demand (inflation: low bond prices at a high rate of economic interest). It provides the demand needed to resist falling prices as income rises at the top margin (deflation: high bond prices with a low rate of economic interest that accommodates the demand for debt).
Debt reduction, politically motivated, poses extreme risk for an already beleaguered middle and lower class who need an economic solution. The current solution, binomially determined, is to politically exact economic austerity (exceeding a level of tolerance that a free market will not abide). While Democrats pose to resist the austerity, Republicans anchor the resulting political compromise from an extreme position. The upper class wins, and everyone else loses. It is a political solution that will increase the demand for debt while the call is for its reduction.
The instability of this contradiction is what Bernanke is referring to. Anchoring is a gaming tactic that will conserve, and horde, the value needed to achieve growth while reducing debt. With the needed value conserved as wealth in the upper class, the lower classes must submit to austerity to share in that wealth (to convert it back into working capital). The systematic alternative (the political will binomially determined) is to realign with Democrats. The inherent risk of liability associated with consolidation of wealth (the risk of loss fully assumed) is then systematically accumulated into public debt (raising the debt ceiling). In true Hamiltonian form, elite authority masquerades as the will of the people, appearing to achieve the general welfare with the consent of the governed, falsely reducing the gamma risk to a proprietary (alpha) proportion of self-determination. The risk, however, is really being managed in the aggregate by a bureaucratic elite, resisting the declining rate of profit which is inherent to consolidation of the wealth and fundamentally defines "the risk" (the loss fully assumed in the alpha dimension).
Remember, in order to make a profit from the risk, there has to be someone there to buy what you are selling. There has to be a counter-party to the risk. Binomially, the political will is systematically determined, always providing a counter-party to the risk, delivering economic detriment to The People (the non-elite) with virtually no liability. Accountability is sufficiently absorbed by the political process to ensure economic instability (the risk to be arbitraged), and the outcome is patriotically characterized as the noble heritage of The Revolution to be conserved at all cost lest we risk the foundation of civil society.
Funny how the correction for what ails us is always what ails us. The value of the risk (the risk of loss) is always conserved (fully assumed) and politically delivered to the counter party.
The fix for the fix is to demand an economic solution--the political will, as Bernanke suggests, to ensure a free and unconsolidated marketplace which requires a distribution from the accumulation to pluralize, rather than consolidate, industry and markets. Using the accumulation (the huge horde of corporate cash and personal wealth) to merge industry and markets is anti-free market (anti-American dream).
Bernanke favors a more progressive tax code (allowing the upper-end tax cuts to expire) because he knows it is necessary to open what is otherwise an increasingly closed market that supports a deflationary trend, causing the need for debt. The question is less about whether we are capitalist or communist or this or that, but whether we are free, and without a free market, freedom is lost.
According to Bernanke, current monetary policy is designed to accommodate debt reduction without increasing the money supply. The money available for debt reduction, then, as he suggests, is willfully held in reserve and politically motivated (existing in a gamma-risk proportion). It is the Fed's charge to manage the reserve (the accumulated risk) without political motive, coaxing the accumulated wealth into productive capital.
The Fed is empowered to use the reserve to charge the economy with economic incentive. The incentive, bureaucratically derived, provides jobs and consumer demand (inflation: low bond prices at a high rate of economic interest). It provides the demand needed to resist falling prices as income rises at the top margin (deflation: high bond prices with a low rate of economic interest that accommodates the demand for debt).
Debt reduction, politically motivated, poses extreme risk for an already beleaguered middle and lower class who need an economic solution. The current solution, binomially determined, is to politically exact economic austerity (exceeding a level of tolerance that a free market will not abide). While Democrats pose to resist the austerity, Republicans anchor the resulting political compromise from an extreme position. The upper class wins, and everyone else loses. It is a political solution that will increase the demand for debt while the call is for its reduction.
The instability of this contradiction is what Bernanke is referring to. Anchoring is a gaming tactic that will conserve, and horde, the value needed to achieve growth while reducing debt. With the needed value conserved as wealth in the upper class, the lower classes must submit to austerity to share in that wealth (to convert it back into working capital). The systematic alternative (the political will binomially determined) is to realign with Democrats. The inherent risk of liability associated with consolidation of wealth (the risk of loss fully assumed) is then systematically accumulated into public debt (raising the debt ceiling). In true Hamiltonian form, elite authority masquerades as the will of the people, appearing to achieve the general welfare with the consent of the governed, falsely reducing the gamma risk to a proprietary (alpha) proportion of self-determination. The risk, however, is really being managed in the aggregate by a bureaucratic elite, resisting the declining rate of profit which is inherent to consolidation of the wealth and fundamentally defines "the risk" (the loss fully assumed in the alpha dimension).
Remember, in order to make a profit from the risk, there has to be someone there to buy what you are selling. There has to be a counter-party to the risk. Binomially, the political will is systematically determined, always providing a counter-party to the risk, delivering economic detriment to The People (the non-elite) with virtually no liability. Accountability is sufficiently absorbed by the political process to ensure economic instability (the risk to be arbitraged), and the outcome is patriotically characterized as the noble heritage of The Revolution to be conserved at all cost lest we risk the foundation of civil society.
Funny how the correction for what ails us is always what ails us. The value of the risk (the risk of loss) is always conserved (fully assumed) and politically delivered to the counter party.
The fix for the fix is to demand an economic solution--the political will, as Bernanke suggests, to ensure a free and unconsolidated marketplace which requires a distribution from the accumulation to pluralize, rather than consolidate, industry and markets. Using the accumulation (the huge horde of corporate cash and personal wealth) to merge industry and markets is anti-free market (anti-American dream).
Bernanke favors a more progressive tax code (allowing the upper-end tax cuts to expire) because he knows it is necessary to open what is otherwise an increasingly closed market that supports a deflationary trend, causing the need for debt. The question is less about whether we are capitalist or communist or this or that, but whether we are free, and without a free market, freedom is lost.
Saturday, January 8, 2011
Assuming a Proprietary Position
For small investors looking to not rely on social security for retirement, investing has resulted in reduction of net worth; and at this point, of course, average-income Americans are being told they must work longer and for less money. Let's just say that small investors are expected to assume their natural position, and like it.
According to conventional economic theory, the loss of net worth (and thus the increased need for welfare) is a legitimate function of freely taking a position in the marketplace and taking on the risk "posed" by assuming the position. If we didn't want to take the risk, then we should not have posed in that position.
Even after having been thoroughly violated, the risk seems to be permanently posed in, you know, that position.
Without being too risque, but to offer an apt description, let's just say that average-income Americans have been royally turned. According to conventional wisdom, however, average Americans knowingly and willingly assumed the position.
Of course, the exculpatory assumption of the risk is false. Much of the risk was assumed in the dark. Victims were not fully aware of the extent of the risk until it had been fully assumed, and the public is still not fully aware of the extent. There is much more risk that remains to be assumed (dark marketed). At this point, the public is being politically prepared for the extended application of the risk which is modeled to be fully assumed but not necessarily assigned by visible means of tax and subsidy.
Who will be assigned the fullest extent of the risk is to be decided in the current political process, and it is no coincidence that the process is currently being defined as having a right-wing bias. The compromises that occur will be political mitigation of economic risk (i.e., mitigation of the risk in the gamma proportion).
Elite theory postulates that The People naturally assume the proprietary position they are in. It is foolish to assume the position of risk and expect not to have to take it. Although small investors didn't see what was coming, they should have known that by putting their net worth out there, they were likely to be stuck with the risk (and size, especially when it comes to investing, does matter).
So, with the risk of loss fully assumed, The People are fully expected to assume the proprietary position...but not without all the good taste, civility and propriety of due process, of course.
According to conventional economic theory, the loss of net worth (and thus the increased need for welfare) is a legitimate function of freely taking a position in the marketplace and taking on the risk "posed" by assuming the position. If we didn't want to take the risk, then we should not have posed in that position.
Even after having been thoroughly violated, the risk seems to be permanently posed in, you know, that position.
Without being too risque, but to offer an apt description, let's just say that average-income Americans have been royally turned. According to conventional wisdom, however, average Americans knowingly and willingly assumed the position.
Of course, the exculpatory assumption of the risk is false. Much of the risk was assumed in the dark. Victims were not fully aware of the extent of the risk until it had been fully assumed, and the public is still not fully aware of the extent. There is much more risk that remains to be assumed (dark marketed). At this point, the public is being politically prepared for the extended application of the risk which is modeled to be fully assumed but not necessarily assigned by visible means of tax and subsidy.
Who will be assigned the fullest extent of the risk is to be decided in the current political process, and it is no coincidence that the process is currently being defined as having a right-wing bias. The compromises that occur will be political mitigation of economic risk (i.e., mitigation of the risk in the gamma proportion).
Elite theory postulates that The People naturally assume the proprietary position they are in. It is foolish to assume the position of risk and expect not to have to take it. Although small investors didn't see what was coming, they should have known that by putting their net worth out there, they were likely to be stuck with the risk (and size, especially when it comes to investing, does matter).
So, with the risk of loss fully assumed, The People are fully expected to assume the proprietary position...but not without all the good taste, civility and propriety of due process, of course.
Thursday, January 6, 2011
Creating Counter-Party Risk
While risk is coefficiently constant, parties can be created in which risk is assigned to cause a reward. Depending on the ability to make the market, market participants are put in a position of proprietary profit or loss.
The more consolidated industry and markets become, the more ability acquired to make the market and position a counter-party to take the risk (and thus the need for government regulation to control the extent of the risk, or the externalities). In order for the beneficiary to gain and secure the entire extent of the profit, management of the risk also includes avoiding the liability of gaining profit by causing loss (the retributive value of the risk--a counter-risk--that cannot be avoided, only accumulated and distributed in a gamma, or political, proportion).
The propraetors of who win and lose in the province of finance have to be careful not to look like tyrants, especially if the legitimacy of the outcome is dependant on the lack of tyranny. In order to drive a distraction, attributions are created to suggest a cause-effect relationship--like when congressman Issa puts out a call for CEO's to contact his oversight committee regarding regulations that prevent them from creating jobs (instead of financing headline inflation, which puts jobs at risk).
Instead of creating jobs, the capital accumulated from middle-class net worth is being used to cause headline inflation. While demand is being reduced, the ability to command the price (which also determines the quantity that can be consumed without debt) increases. It gives the appearance of general prosperity (inflation), but is really an indication of general crisis (deflation). The value of counter-party risk is created, driving up stock and bond prices, for example, but at the expense, rather than the benefit, of middle-class net worth. The result is a middle class deliberately positioned to own more debt than equity. The demand for government then increases to consolidate the risk of default into the form of public, or sovereign, debt, which overleverages the counter-party risk into the persistent value of unemployment while the call is for cutting the public budget.
While cutting the public budget and paying down the debt is good for demonstrating power and verifying class distinction, it is exceedingly bad for the middle class. In fact, it is catastrophic, reducing the difference between the middle class and poor in the worst possible way--not by providing, but by depriving the American dream. We will blast back to the past when Henry Ford consoled unemployed Americans with the hope of having nowhere to look but forward. What happened going forward was world war and unprecedented government regulation of the private sector, especially the financial sector to prevent the ability to extend counter-party risk into the current crisis proportion.
While regulation can affect employment levels, it is a hefty intellectual strain to suggest, as congressman Issa does, that government causes unemployment. It is even more of a strain to suggest that government regulation of industry and markets has caused our currently high rate when the latest financial crisis occurred in the wake of a massive deregulation that congressman Issa is sure to suggest we desperately need to achieve full employment with low inflation. This policy, as we well know, positions the middle class to take the risk; and as we have seen, public policy is not based on what we know, but on what can be politically compromised into the legitimate public authority of the outcome--reduction of middle-class net worth (creation of the counter-party risk and reward).
Middle-class incomes did not gain from financial empowerment. Small, proprietary accounts have been easily positioned to take the risk. According to Ivy-League economists, the massive loss of net worth just evaporated, but small investors are too sophisticated to buy that, fully realizing that their wealth was consolidated into the upper class.
The liability of such a massive conversion and consolidation of wealth would reasonably result in the value being promptly retributed in the gamma proportion. Instead, there was a binomial, politically organized conservation of the risk. Populist sentiment was easily channeled into a conservative, ideological rhetoric that denies empirical valuation of public policy and programs by substitution, allowing continued overextension of the risk into a gamma proportion. The result is political compromise substituting for empirical truth, limiting progress to the dimension of an historical dialectic.
The political system is binomially organized to limit the liability of the risk. The two parties are counter-parties to the risk, safely limiting the liability to the authority of a political resolution. Ensuring an economic resolution would essentially mean deconsolidation of the risk into a more directly democratic (a more genuinely proprietary) resolution of conflicting interests.
While democrats have traditionally expressed the sentiment that the voice of the people is the voice of God, according to republicans, such a sentiment is inimical to brokering the compromises that are necessary for a civil society. Compromise, however, is no substitute for the empirical value (the self-governance) of direct popular consent through the proprietary means of a free-market accountability. Such an accountability (the measure of legitimate governance) only comes with ensuring full deconsolidation of the risk. It is not a rhetoric of hope. It is a practical philosophy that we need now in the fullest practical measure.
Without ensuring deconsolidation of the risk in priority, the probability of a protracted recessionary trend with high unemployment and inflation is politically confirmed. The retributive value has been successfully retrenched and reinvested to conserve the accumulated value of the risk. It is a remarkable demonstration of real, raw power concentrated into the hands of an elite with the apparent popular consent of the governed. Given the obvious cause-effect relationship (the value of the benefit and the detriment being so obviously equivalent), it has to be an unprecedented exercise of power in both a quantitative and qualitative proportion.
The new normal is the natural extension of the Hamiltonian model that Jefferson warned We the People be especially wary of: knowingly and willingly consenting to the means of our exploitation. It used to be that The People were not altogether sure about the means, but now we are aware of being positioned for the counter-party risk. The iterative value of the means to ends confirms the legitimate value of the risk and its conservation as "the" expected value.
We must keep in mind, however, that nature, despite whatever delusion of power we may possess, will surely correct for such an egregious error in good judgment. The risk will be so overleveraged and out of proportion it will be catastrophic. It will implode into the gamma dimension and civility will once again become a thing of the past.
We should not allow ourselves to pass into the darkness of deliberate detriment. Whether dialectically determined or technically derived, We the People are, by Nature, the Sovereign.
Our fate, especially in the age of science, is evermore proprietary and, thereby, fully determined. We are but counter-parties to ourselves. To know thy self is to realize the risk of loss is always fully assumed: coefficiently constant, intellectually valued, and fatefully consumed with moral existence.
The more consolidated industry and markets become, the more ability acquired to make the market and position a counter-party to take the risk (and thus the need for government regulation to control the extent of the risk, or the externalities). In order for the beneficiary to gain and secure the entire extent of the profit, management of the risk also includes avoiding the liability of gaining profit by causing loss (the retributive value of the risk--a counter-risk--that cannot be avoided, only accumulated and distributed in a gamma, or political, proportion).
The propraetors of who win and lose in the province of finance have to be careful not to look like tyrants, especially if the legitimacy of the outcome is dependant on the lack of tyranny. In order to drive a distraction, attributions are created to suggest a cause-effect relationship--like when congressman Issa puts out a call for CEO's to contact his oversight committee regarding regulations that prevent them from creating jobs (instead of financing headline inflation, which puts jobs at risk).
Instead of creating jobs, the capital accumulated from middle-class net worth is being used to cause headline inflation. While demand is being reduced, the ability to command the price (which also determines the quantity that can be consumed without debt) increases. It gives the appearance of general prosperity (inflation), but is really an indication of general crisis (deflation). The value of counter-party risk is created, driving up stock and bond prices, for example, but at the expense, rather than the benefit, of middle-class net worth. The result is a middle class deliberately positioned to own more debt than equity. The demand for government then increases to consolidate the risk of default into the form of public, or sovereign, debt, which overleverages the counter-party risk into the persistent value of unemployment while the call is for cutting the public budget.
While cutting the public budget and paying down the debt is good for demonstrating power and verifying class distinction, it is exceedingly bad for the middle class. In fact, it is catastrophic, reducing the difference between the middle class and poor in the worst possible way--not by providing, but by depriving the American dream. We will blast back to the past when Henry Ford consoled unemployed Americans with the hope of having nowhere to look but forward. What happened going forward was world war and unprecedented government regulation of the private sector, especially the financial sector to prevent the ability to extend counter-party risk into the current crisis proportion.
While regulation can affect employment levels, it is a hefty intellectual strain to suggest, as congressman Issa does, that government causes unemployment. It is even more of a strain to suggest that government regulation of industry and markets has caused our currently high rate when the latest financial crisis occurred in the wake of a massive deregulation that congressman Issa is sure to suggest we desperately need to achieve full employment with low inflation. This policy, as we well know, positions the middle class to take the risk; and as we have seen, public policy is not based on what we know, but on what can be politically compromised into the legitimate public authority of the outcome--reduction of middle-class net worth (creation of the counter-party risk and reward).
Middle-class incomes did not gain from financial empowerment. Small, proprietary accounts have been easily positioned to take the risk. According to Ivy-League economists, the massive loss of net worth just evaporated, but small investors are too sophisticated to buy that, fully realizing that their wealth was consolidated into the upper class.
The liability of such a massive conversion and consolidation of wealth would reasonably result in the value being promptly retributed in the gamma proportion. Instead, there was a binomial, politically organized conservation of the risk. Populist sentiment was easily channeled into a conservative, ideological rhetoric that denies empirical valuation of public policy and programs by substitution, allowing continued overextension of the risk into a gamma proportion. The result is political compromise substituting for empirical truth, limiting progress to the dimension of an historical dialectic.
The political system is binomially organized to limit the liability of the risk. The two parties are counter-parties to the risk, safely limiting the liability to the authority of a political resolution. Ensuring an economic resolution would essentially mean deconsolidation of the risk into a more directly democratic (a more genuinely proprietary) resolution of conflicting interests.
While democrats have traditionally expressed the sentiment that the voice of the people is the voice of God, according to republicans, such a sentiment is inimical to brokering the compromises that are necessary for a civil society. Compromise, however, is no substitute for the empirical value (the self-governance) of direct popular consent through the proprietary means of a free-market accountability. Such an accountability (the measure of legitimate governance) only comes with ensuring full deconsolidation of the risk. It is not a rhetoric of hope. It is a practical philosophy that we need now in the fullest practical measure.
Without ensuring deconsolidation of the risk in priority, the probability of a protracted recessionary trend with high unemployment and inflation is politically confirmed. The retributive value has been successfully retrenched and reinvested to conserve the accumulated value of the risk. It is a remarkable demonstration of real, raw power concentrated into the hands of an elite with the apparent popular consent of the governed. Given the obvious cause-effect relationship (the value of the benefit and the detriment being so obviously equivalent), it has to be an unprecedented exercise of power in both a quantitative and qualitative proportion.
The new normal is the natural extension of the Hamiltonian model that Jefferson warned We the People be especially wary of: knowingly and willingly consenting to the means of our exploitation. It used to be that The People were not altogether sure about the means, but now we are aware of being positioned for the counter-party risk. The iterative value of the means to ends confirms the legitimate value of the risk and its conservation as "the" expected value.
We must keep in mind, however, that nature, despite whatever delusion of power we may possess, will surely correct for such an egregious error in good judgment. The risk will be so overleveraged and out of proportion it will be catastrophic. It will implode into the gamma dimension and civility will once again become a thing of the past.
We should not allow ourselves to pass into the darkness of deliberate detriment. Whether dialectically determined or technically derived, We the People are, by Nature, the Sovereign.
Our fate, especially in the age of science, is evermore proprietary and, thereby, fully determined. We are but counter-parties to ourselves. To know thy self is to realize the risk of loss is always fully assumed: coefficiently constant, intellectually valued, and fatefully consumed with moral existence.
Thursday, December 30, 2010
Proprietary Position
We tend to keep risk confined to a Cartesian geometric. There is, however, risk in a third dimension to time and pitch. It is the proprietary risk.
Proprietary risk is essentially who owns what when--or the extent of your proprietary position within the binary space of time and pitch. Within this space, your risk is either on or off (the risk of loss is fully assumed). The amount of risk owned (or assigned) appears to oscillate between 0 and 1 in two dimensions, but your proprietary position is correlatively constant. Proprietary risk, actually, is always either zero or one, which is why, for example, people that do not need credit are always able to get it (with the risk of loss to those that can't fully assumed, keeping the value in reserve).
With the business cycle, proprietary risk demonstrates its consolidation in the gamma proportion. So, when a distribution occurs from an accumulation, while the proportion of risk appears to change, it is actually conserved in the gamma proportion in the form of extended debt and the risk of default. Consolidation of the risk is reconfirmed in the accumulation phase of the cycle when the risk is off and the call is for debt reduction, like we have now.
Your position (how much economic rent you pay) is confirmed by cyclical oscillation, actuating the proprietary risk (the amount of risk you verifiably own) and the probability of default in the accumulation phase. Since the risk follows the reward, it actually consolidates with the wealth; and since the distribution occurs in the form of debt, not equity, the accumulation phase of the cycle leaves you with a debt you do not actually own. The risk was never proprietarily yours. It is consolidated, extended, and reclaimed with the reward--it is a liability that accumulates with the equity in a gamma-risk proportion to be politically distributed in the form of a public good.
According to Hamiltonians the power to distribute risk independent of reward is a public good because it provides productive incentive. It inspires a vibrant economy.
The non-elite aspire to elite power, which is the ability to extend proprietary risk without displacing the position of the reward and the power it assumes, managing the liability by renting it out. The rent puts the non-elite in the position they are in and the debt assumed is then called proprietary--it is their property, defining their status or class by extension of the risk, just like the king did.
Today, the extension of risk takes the form of positioning counter-party risk. Since we all have the equal right to pursue happiness like the king, it is assumed we all equally own the risk in priority like the king. It is a false assumption (with the risk of loss fully assumed).
Constitutionally, we are all equally empowered to manage the risk from a proprietary position. We all individually decide whether to take (assume) the risk extended to us or not. The Revolution ensures us all the right to take ownership of the risk, which means, just as it was with the king, the risk of loss is fully assumed.
According to the Hamiltonian model, the risk is what we are all entitled to. Hamiltonians make sure it is well extended, ensuring the risk of loss demonstrates and tests the extent of power (with the risk of loss fully assumed in the gamma proportion).
When Bank of America and Goldman Sachs leverage commodity prices from their proprietary desks at a 10-1 ratio--extending risk, demonstrating power--what position does that put you in?
Proprietary risk is essentially who owns what when--or the extent of your proprietary position within the binary space of time and pitch. Within this space, your risk is either on or off (the risk of loss is fully assumed). The amount of risk owned (or assigned) appears to oscillate between 0 and 1 in two dimensions, but your proprietary position is correlatively constant. Proprietary risk, actually, is always either zero or one, which is why, for example, people that do not need credit are always able to get it (with the risk of loss to those that can't fully assumed, keeping the value in reserve).
With the business cycle, proprietary risk demonstrates its consolidation in the gamma proportion. So, when a distribution occurs from an accumulation, while the proportion of risk appears to change, it is actually conserved in the gamma proportion in the form of extended debt and the risk of default. Consolidation of the risk is reconfirmed in the accumulation phase of the cycle when the risk is off and the call is for debt reduction, like we have now.
Your position (how much economic rent you pay) is confirmed by cyclical oscillation, actuating the proprietary risk (the amount of risk you verifiably own) and the probability of default in the accumulation phase. Since the risk follows the reward, it actually consolidates with the wealth; and since the distribution occurs in the form of debt, not equity, the accumulation phase of the cycle leaves you with a debt you do not actually own. The risk was never proprietarily yours. It is consolidated, extended, and reclaimed with the reward--it is a liability that accumulates with the equity in a gamma-risk proportion to be politically distributed in the form of a public good.
According to Hamiltonians the power to distribute risk independent of reward is a public good because it provides productive incentive. It inspires a vibrant economy.
The non-elite aspire to elite power, which is the ability to extend proprietary risk without displacing the position of the reward and the power it assumes, managing the liability by renting it out. The rent puts the non-elite in the position they are in and the debt assumed is then called proprietary--it is their property, defining their status or class by extension of the risk, just like the king did.
Today, the extension of risk takes the form of positioning counter-party risk. Since we all have the equal right to pursue happiness like the king, it is assumed we all equally own the risk in priority like the king. It is a false assumption (with the risk of loss fully assumed).
Constitutionally, we are all equally empowered to manage the risk from a proprietary position. We all individually decide whether to take (assume) the risk extended to us or not. The Revolution ensures us all the right to take ownership of the risk, which means, just as it was with the king, the risk of loss is fully assumed.
According to the Hamiltonian model, the risk is what we are all entitled to. Hamiltonians make sure it is well extended, ensuring the risk of loss demonstrates and tests the extent of power (with the risk of loss fully assumed in the gamma proportion).
When Bank of America and Goldman Sachs leverage commodity prices from their proprietary desks at a 10-1 ratio--extending risk, demonstrating power--what position does that put you in?
Tuesday, December 21, 2010
Value in Reserve
The U.S. dollar is our currency. It has "current" value held in reserve.
So that the currency has predictable, stable, present value, the value is stored (held in reserve) and represented in the form of Federal Reserve Notes. Held in reserve, the currency is not only more manageably stable, or unstable, but more portable, backed by the full faith and credit of the Federal government. In other words, the Federal Reserve provides credit instruments that are legally tendered for goods and services.
Business can be conducted (goods and services exchanged) with other currencies (scrip, for example), but the income it produces can only be valued, declared, and taxed in the dollar denomination (the rate of exchange), legally dependant on the value in reserve. While value can be exchanged in kind, for example, the income it produces is held in reserve--The Federal Reserve.
States can print their own money, but its "currency" is held in Federal reserve. A state would increase the value of its currency by increasing its reserves. Since a state cannot buy Reserve Notes with its currency, it can only buy its currency with Reserve Notes, the more scrip it prints the more debt it assumes against the value held in reserve (i.e., in an account credited to The Federal Reserve Bank).
The currency is uniplexed. Flowing from the reserve, the monoplexed value is directed to support an accumulation and achieve an expected valuation at the target with the least possible resistance. The latest political "compromise" on tax policy (deflation), for example, combined with the effect of QE (inflation) demonstrates a process that conserves the transmission of power to at least a one-to-one ratio. The value in reserve is conserved over time and policy space. At the same time, on the economic side, when Bank of America, for example, engages in predatory practices and fraud, it is an expected transmission of value (the extension of the risk) held in reserve (in the form of credit, or debt). Ninety-eight percent of the population incurs an economic detriment with little or no political recourse because it is an expected value reserved for the propertied class who deserve "the credit" (the currency) of being solvent.
So we see the power (the "currency" or credit) of consolidating economic value into reserves. It controls the extent of debt and the extension of the risk, which is why Thomas Jefferson was so strongly opposed to Alexander Hamilton's Federalist scheme to finance private property through credit extended (value iterated) from the top down (in reserve)--what we refer to as "trickle-down economics."
This struggle continues today. It is nothing new, but the means of managing the value in reserve (conserving the stakes since The Revolution) becomes evermore complex and fractal. A joint-stock company is now the modern corporation and the risk it consolidates (the externalities networked) is managed through the Federal Reserve system independent of the Treasury (as an economic entity--a banking entity--independent of political accountability, operating with proprietary accounts).
The modern corporate operates with virtually limited liability and unlimited political and economic influence. Its power far exceeds the power of any one individual that does not reside at the top of the Leviathan. The power of each and every individual is collectively incorporated, held in reserve and extended as the ruling class sees fit just like the king did and just like Jefferson warned us it would, making a mockery of democracy and the republic.
Remember that a democratic legitimacy of power is not supposed to be limited to the political space. A free and unconsolidated marketplace (free-market economics) is supposed to ensure a democratic self-governance (the power to choose on an individual basis) in priority. The republic is to support a democratic form of governance, not operate against it and limit the liberty of the Sovereign (We the People) to act in self-interest. It is to ensure a free and unconsolidated (a democratically proprietary) marketplace in priority with the force and legitimacy of public authority.
While the Federal Reserve operates as a quasi-proprietary entity to keep the markets "open" through the Federal Open Market Committee, the evidence, however, suggests it keeps markets proprietarily closed with enough "easing" and "accommodation" distributed from the reserve (in the form of debt) to suggest an exculpatory, free-market legitimacy.
The republic, operating with value in reserve, either ensures a genuine free market in priority (turning debt into equity) or prosecutes the criminal element that intends to profit by causing a detriment (rigging the market for default, or turning equity into debt).
No one wants to do business with anyone that can't be trusted--anyone that intends to do harm or deliberately cause a detriment. If we have to do business with malefactors, in the absence of a free market we want the liberty (the complete lack of resistance) to prosecute the criminal element. Instead, we have a corporate body that quickly consolidates value and reserves it for exclusive use (most likely to cause a detriment) in a too-big-to-fail, proprietary proportion. (Keep in mind that there is not much reason to be too big to fail unless there is some intended consequence that would otherwise make you fail, like Bank of America's practice of robosigning and dual-track fraud. As long as Bank of America keeps enough in reserve as a member of the reserve system, it will not fail, and would not be allowed to fail anyway because it is too big.)
In a free market, there is little need for prosecuting the criminal element because bad intent will not survive the marketplace without rigging the market. The criminal element will not survive without consolidating industry and markets into economies of scale to network the externalities, which includes limiting and co-opting the political risk (the risk of liability kept in reserve, or the retributive value of the risk that cannot be avoided, only proprietarily accumulated and distributed).
Being suspicious of wealthy interests that want to build economies of scale is characterized as a cynical paranoia--a droll psychosis typical of conspiracy theorists at the analytical margin. The Great Recession, however, is not the result of big government requiring banks to make bad loans. It is the result of overleveraging in a too-big-to-fail proportion, and with that value being held in reserve, it is not yet over. It is a legacy of the Federalists (the Hamiltonian Tories) who gained control of our financial system at the inception of our nation and have maintained it with the extension of debt, prompting Jefferson to declare that The Revolution is not yet over.
If you are disgusted with the federalist extent of power, Jefferson shared your sentiment. The purpose of The Revolution was to create a free people, not a "monocratic" monster with the sentiments of a loyalist.
So that the currency has predictable, stable, present value, the value is stored (held in reserve) and represented in the form of Federal Reserve Notes. Held in reserve, the currency is not only more manageably stable, or unstable, but more portable, backed by the full faith and credit of the Federal government. In other words, the Federal Reserve provides credit instruments that are legally tendered for goods and services.
Business can be conducted (goods and services exchanged) with other currencies (scrip, for example), but the income it produces can only be valued, declared, and taxed in the dollar denomination (the rate of exchange), legally dependant on the value in reserve. While value can be exchanged in kind, for example, the income it produces is held in reserve--The Federal Reserve.
States can print their own money, but its "currency" is held in Federal reserve. A state would increase the value of its currency by increasing its reserves. Since a state cannot buy Reserve Notes with its currency, it can only buy its currency with Reserve Notes, the more scrip it prints the more debt it assumes against the value held in reserve (i.e., in an account credited to The Federal Reserve Bank).
The currency is uniplexed. Flowing from the reserve, the monoplexed value is directed to support an accumulation and achieve an expected valuation at the target with the least possible resistance. The latest political "compromise" on tax policy (deflation), for example, combined with the effect of QE (inflation) demonstrates a process that conserves the transmission of power to at least a one-to-one ratio. The value in reserve is conserved over time and policy space. At the same time, on the economic side, when Bank of America, for example, engages in predatory practices and fraud, it is an expected transmission of value (the extension of the risk) held in reserve (in the form of credit, or debt). Ninety-eight percent of the population incurs an economic detriment with little or no political recourse because it is an expected value reserved for the propertied class who deserve "the credit" (the currency) of being solvent.
So we see the power (the "currency" or credit) of consolidating economic value into reserves. It controls the extent of debt and the extension of the risk, which is why Thomas Jefferson was so strongly opposed to Alexander Hamilton's Federalist scheme to finance private property through credit extended (value iterated) from the top down (in reserve)--what we refer to as "trickle-down economics."
This struggle continues today. It is nothing new, but the means of managing the value in reserve (conserving the stakes since The Revolution) becomes evermore complex and fractal. A joint-stock company is now the modern corporation and the risk it consolidates (the externalities networked) is managed through the Federal Reserve system independent of the Treasury (as an economic entity--a banking entity--independent of political accountability, operating with proprietary accounts).
The modern corporate operates with virtually limited liability and unlimited political and economic influence. Its power far exceeds the power of any one individual that does not reside at the top of the Leviathan. The power of each and every individual is collectively incorporated, held in reserve and extended as the ruling class sees fit just like the king did and just like Jefferson warned us it would, making a mockery of democracy and the republic.
Remember that a democratic legitimacy of power is not supposed to be limited to the political space. A free and unconsolidated marketplace (free-market economics) is supposed to ensure a democratic self-governance (the power to choose on an individual basis) in priority. The republic is to support a democratic form of governance, not operate against it and limit the liberty of the Sovereign (We the People) to act in self-interest. It is to ensure a free and unconsolidated (a democratically proprietary) marketplace in priority with the force and legitimacy of public authority.
While the Federal Reserve operates as a quasi-proprietary entity to keep the markets "open" through the Federal Open Market Committee, the evidence, however, suggests it keeps markets proprietarily closed with enough "easing" and "accommodation" distributed from the reserve (in the form of debt) to suggest an exculpatory, free-market legitimacy.
The republic, operating with value in reserve, either ensures a genuine free market in priority (turning debt into equity) or prosecutes the criminal element that intends to profit by causing a detriment (rigging the market for default, or turning equity into debt).
No one wants to do business with anyone that can't be trusted--anyone that intends to do harm or deliberately cause a detriment. If we have to do business with malefactors, in the absence of a free market we want the liberty (the complete lack of resistance) to prosecute the criminal element. Instead, we have a corporate body that quickly consolidates value and reserves it for exclusive use (most likely to cause a detriment) in a too-big-to-fail, proprietary proportion. (Keep in mind that there is not much reason to be too big to fail unless there is some intended consequence that would otherwise make you fail, like Bank of America's practice of robosigning and dual-track fraud. As long as Bank of America keeps enough in reserve as a member of the reserve system, it will not fail, and would not be allowed to fail anyway because it is too big.)
In a free market, there is little need for prosecuting the criminal element because bad intent will not survive the marketplace without rigging the market. The criminal element will not survive without consolidating industry and markets into economies of scale to network the externalities, which includes limiting and co-opting the political risk (the risk of liability kept in reserve, or the retributive value of the risk that cannot be avoided, only proprietarily accumulated and distributed).
Being suspicious of wealthy interests that want to build economies of scale is characterized as a cynical paranoia--a droll psychosis typical of conspiracy theorists at the analytical margin. The Great Recession, however, is not the result of big government requiring banks to make bad loans. It is the result of overleveraging in a too-big-to-fail proportion, and with that value being held in reserve, it is not yet over. It is a legacy of the Federalists (the Hamiltonian Tories) who gained control of our financial system at the inception of our nation and have maintained it with the extension of debt, prompting Jefferson to declare that The Revolution is not yet over.
If you are disgusted with the federalist extent of power, Jefferson shared your sentiment. The purpose of The Revolution was to create a free people, not a "monocratic" monster with the sentiments of a loyalist.
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