From Fat to Flat

Following a massive accumulation of value, and an ensuing crisis of legitimacy, like we are experiencing now, the beneficiaries are busy protecting the accumulation from what they call a "confiscatory" political settlement.

The top income class has the legitimate right to keep private property (the accumulation) to the fullest extent and use it any way they see fit because (like Adam Smith said) they earned it--not the government (the king) or anybody else. A lot of time, effort, and technical expertise went into accumulating value, which resulted in the Great Recession.

On the one hand, the value accumulated is deliberately earned, and on the other, the recession is a cyclical, force-majeure ontology. No one can prevent the seasons from changing, and no one can prevent the best and the brightest from cyclically emerging at "the top." Being among the most high is empirically confirmed--measured--by income class, with all the rights and privileges legitimately earned therein by natural ability conferred by the sovereign power (the major force) of God.

Since, however, "We the People" are Constitutionally "The Sovereign" (i.e., the people rule legitimate rulers), the elite cannot claim power for themselves de jure, but de facto. They rule by accomplishment, and denying them what they have legitimately earned is unnatural and, thus, detrimental. So, when Eric Cantor says, "we cannot tax the very people we rely on to create jobs," he is not only saying it is unnatural, but the accumulated capital necessary to create full employment will be detrimentally expropriated by government (not allowing people to do as they see fit with what they earn, or accomplish...like employing people, or not). Thus, the capital will not be optimally available for job creation even though the reason it will be "confiscated" is because its accumulation is not being legitimately used to create jobs.

Discrepancy between the legitimate accumulation of capital and its use is the crisis we now face (it is the fully assumed risk of loss the power elite must avoid if it is to be the ruling "class"). If the capital is not being used to create jobs, but instead is being used to confirm income class by converting equity into debt (which results in the sovereign debt crisis we now face worldwide, for example), there is a benefit being derived by causing detriment.

(We have to keep in mind that the ruling class has an international dimension. Greek citizens, for example, are not stupid. They are politically astute and highly sophisticated. They know that the austerity plan is more the result of an international liquidity crisis than their so-called profligate lifestyle. Much of the debt was falsely valued, which derived a largely untaxed, internationally processed benefit from a detriment now being excised in the form of "needed" national austerity. Of course, Greeks question the legitimate distribution of the risk, with the reward supra-nationally derived from detriment devolved into sovereign debt.

Consumers, worldwide, also understand that "accommodative" monetary policy is driving up debt. On the one hand, rates are low and the dollar is weak because demand is slow, on the other, prices are high because demand is too high. The contradiction technically indicates manipulation supported by a bogus, exculpatory narrative. Consumers are paying a high price for food and fuel not because it is in short supply, but because it is being priced at the margin in unregulated, international, speculative markets. There is ample supply always available at a high, marginal price, and that margin turns equity into debt--it produces untaxed profits by causing a detriment--that consumers cannot pay without it being excised with the force and legitimacy of public authority.

Supposedly, according to the normative narrative, the weak dollar causes high oil prices, for example, but the dollar is weak because there is slow demand; and, keep in mind, we are not allowed to conclude that high oil prices cause a weak dollar because that, of course, would be illogical since a stronger dollar has the effect of lower prices. Notice, for example, that the IEA's decision to increase the supply of oil caused the dollar to strengthen, not the reverse. This contradiction--and the supporting hysteron proteron argumentation--results in a crisis of legitimacy, and the legitimacy of the austerity being excised--like cutting benefits for the infirm and the unemployed to pay the debt--is being questioned worldwide.

We are not in debt because grandma needs to buy food and medication, but because profligate profiteers--the people that benefit by causing detriment--are too greedy to pay it. The reason too-fat-to-fail interests should not sacrifice, but grandma should, is not, they say, because they are too greedy and selfish, but because it is a moral hazard. Greed is good because it keeps ample supply available by depriving us of what we need?

Arguing it is a moral hazard to take care of grandma is a thoroughly despiseable sentiment. It is retributively valued to the fullest point of probable risk redemption.

For politicians like Eric Cantor, the pressure is on to prevent redemption of the fully assumed risk ontology without sacrificing its detrimental proportion. A flat-tax is the probable political settlement to offset the accumulated gamma risk.

The probability of retributive-risk redemption is contained in analytical descriptions like, "high oil prices are like a tax." Yet, it is necessary, at the same time, to maintain the argument that high prices produce income that has been earned and not confiscated.

That high prices earn income, and taxes confiscate it, is a bogus argument if your income is being reduced by both, producing a largely untaxed, accumulated benefit at "the top" by causing detriment at the bottom. Ambivalent use of the values indicates a highly retributive valuation of the risk proportion.)

Causing detriment is not considered to be a noble, middle-class quality. Especially after the American Revolution, it is a quality considered characteristic of kings and an irrational--illegitimate--accumulation of power. For the post-Revolutionary elite, it is a measurable test of power, nevertheless. It is legitimate by the fact accomplished and cyclically verified in the normal course of "doing business" which, legitimately, is to expand the pie for everyone, not just your slice of it.

Doing business just to expand your slice of the pie is impolitic--it is what kings irrationally do, stealing from the hands that feed them, forcing the economy into subsistence and surplusing value only by expropriation and deprivation. The best way to increase your slice of the pie is to expand it for everyone, not confiscate it. It not only makes you unpopular, but it reduces the incentive to produce the pie--it's bad for business.

Government (the power to illegitimately confiscate value) is, according to conservatives, the problem and not the solution. Government (not the undistributed accumulation) has caused the sovereign debt crisis (the need to tax), and the crisis will only get worse until we accept what is natural by right--the rich get rich and the poor, naturally, get poorer, as God intended it. Our existence is determined by natural rights that are legitimately conferred by God, distributing wealth and power to those that have legitimately earned it; and taking that away is illegitimate--it is a crime against nature that results in a dead-weight loss (i.e., everybody loses).

In order to avoid the fully assumed loss, conservatives are now angling to reduce the inherent tax liability of an undistributed accumulation. Without sacrificing the natural, moral, economic imperative of being sure the most able to pay actually pay the least, a political compromise is sure to gain strength that appears legitimately equitable by increasing the tax burden of the elite while reducing the tax burden of the non-elite. To avoid the fully assumed risk without abandoning the Hamiltonian model, it is necessary to shape a policy that fits the model without appearing inequitable.

While being too fat is likely to result in a massive, coronary crisis, avoiding the crisis has to come from somewhere. Austerity is required. It is necessary to deprive yourself of what makes you fat--but in order to proverbially "have your cake and eat it too," it is necessary to get flat to stay fat.

With Republican policy we can go from fat to flat in no time! All we have to do is go on a strict diet that, combined with proper excising at a flat rate, will have our economy up and running with vim and vigor.

If achieving equity by means of assuring inequity does not seem exactly legitimate, the flat-tax fits the Hamiltonian model. It is a product of the anchoring effect. It is a psychological trick--the tax code is so inequitable that even a different form of the problem looks like a solution. The budget is so starved of needed revenue that anything, even an equally regressive tax burden, looks good. While the results will be the same, it at least appears we are losing the fat by going flat.

While it looks like we are all paying the same rate--paying the freight with each his own weight--the fat proportion of risk does not reduce, but maintains. Equity still turns into debt and though you may pay less tax on your reduced assets and income, the need increases, nevertheless, against the new, overall-lower, flat rate. The debate then again reduces to arguments of political philosophy (ideology) in which taxing the job creators is considered to be immoral (theft of property), which entails retributive value (sub-optimal capital investment and unemployment, like we have now).

Liberal ideology then becomes the practical alternative to a progressively reduced government influence against a progressively increasing need. Taxes then progressively rise with your income, and since taxing the job creators is counter-productive if not immoral, the debt rises due to insufficient income (like we have now).

The technical, non-partisan solution is to lower the tax rate on average incomes and progressively increase the rate on incomes above average. Revenues rise while the need for government spending, and debt, declines. Incomes rise from the bottom up rather than the top down, causing a distribution from the accumulation instead of more debt, and the risk of default, by borrowing from it.

From Fat to Flat--
It's no win
To lose the fat
By acting thin

Legitimacy of the Risk

No pain, no gain. If you endure the pain, you deserve the gain. The legitimate distribution of the risk proportion is simple, clear, and logically positive despite the negative value of having to endure pain; and in modern, civil society, much of the pain is in the form of anxiety.

If, for example, investors buy long and sell short, like many hedge funds do, the risk (the anxiety) is supposedly low because the investment tool (the long-short fund) controls the distribution of the risk. The pain is shifted (offset) to anyone positioned to "take" the risk (anyone not positioned long and short). The anxiety (the value derived from the offset) is shifted to the future.

So, when big banks put their money into commodity futures rather than lending to expand the economy, the fix is in for short selling the net worth (the assets) of the middle and lower classes, subsequently acquired (covered) by the wealthy to be resold long. The short position then gains value long as it is being covered (i.e., the recovery), converging the long risk with the reward which is reflected in strong "earnings" and high equity values. Strong earnings and equity values make it appear that the economy is healthy when it is really in pain--no pain, no gain.

The long position is falsely valued and will manifest in a crisis proportion of accumulated risk value in which the pain demands legitimate distribution of the gain. At this point, the crisis is one of legitimacy represented as the empirical value (debt-to-equity) that has been politically assigned. Despite political settlement, the ontological value of the risk will persist--demanding legitimately proper assignment, shifting the anxiety back to its source (i.e., the value has become fully retributive because the risk of loss cannot be avoided, it is fully assumed in priority). Retribution (re-attribution of the value) is not to be avoided because it is categorically imperative (it is ontologically determined, and resisting the ontology is cause for high anxiety).

Big, consolidated, financial interests are in a state of high anxiety. For Wall Street, re-attribution is a disconfirmation of status and power. It represents a loss to Main Street that, according to the power elite, results in chaos--civil unrest, like we see in Greece, for example.

To resist what the power elite considers to be incivility, it is necessary to consolidate power even more to exact the austerity (the pain) we need to avert the impending crisis (i.e., by properly assigning the risk--the anxiety--to the non-elite by organized means). Consolidation, therefore, despite it being the cause of the problem, is categorically imperative, both liberals and conservatives contend, for maintaining civil society. So, in the U.S., for example, we see the political will for deregulation rather than deconsolidation, and what regulation there is should be only to advance consolidation and control uncivil, retributive behavior. (Keep in mind that regulated consolidation occurs by political settlement. That is, consolidation is politically organized with reliable, economic effects, making it appear that consolidation is an economic ontology when it is really a political de-ontology that assigns the risk to the non-elite through what appears to be pluralistic processes. So, analyses that use a pluralistic model will fail--crises will not be averted, but encouraged. All the risk will not be accounted for, but its attribution will be ontologically demanded.)

Demanding re-attribution of the risk value is a manifestation of high anxiety: Wall Street sees overwhelming demand (need) for higher, marginal tax rates; Main Street a demonstration of raw power (beyond what is considered good or evil) that literally means extreme economic distress.

Budget cutbacks on the heels of the Great Recession will cause a depressionary trend...the Greeks know it...we all know it! Doing the wrong thing is not categorically imperative, it's just stupid!

Near-Zero Interest

Interest in economic expansion is so low, interest rates are nearly zero. Rates have been low for a long time and Bernanke says the Fed will continue its "accommodative" monetary policy.

An accommodative policy is absolutely essential for averting a depressionary trend. It is a risk-averse assessment that, as previously discussed, is not necessarily pro-growth. That is, technically, the risk of massive economic failure is so high (so near a fully gamma proportion) that the interest rate is likely to remain accommodatively low to increase the rate of interest in growth rather than bidding up dwindling supplies (i.e., to control headline inflation).

Low interest rates, however, are being used to drive up headline inflation, which has a deflationary effect that in turn provides the incentive to keep rates low. The total effect tends to be a deflationary trend; and since the effect is high unemployment, which also supports the incentive to keep rates low and maintain a weak dollar, there is an ambivalent conflation of practical alternatives that only serves to make the problem worse (and seemingly unpredictable, which gives the outcome the exculpatory appearance of a legitimate force majeure). This anchors-in the need for austerity, which will support the deflationary trend by force of the inherent incentive (the entrepreneurial, "animal" spirit) to avoid the risk and maximize the return.

With unemployment high and incomes below the upper class being deflated (priced in the marketplace and accumulated into the upper class in zero-sum), non-headline inflaton is technically considered to be low. However, headline inflation is raging as the accumulation of money continues to drive up commodities as a class of financial assets rather than production factors, limiting growth and employment to near-zero interest.

Since inflation and unemployment is highly profitable, it only gets worse until it reaches the limit--and we have reached that limit. The wealth has become so consolidated (currently at pre-Depression levels) that the middle and lower classes have insufficient funds to pay the debt; and as we discussed in previous articles, insufficient funds results in default (a general economic crisis of liquidity, like the Great Depression). It is not that we don't have the money. There is plenty of money not being used to pay the debt. It will be deliberately withheld until it is assured little or no tax liability (by force majeure, of course, these deliberate actors contend, as market participants naturally limit risk to maximize reward, which accumulates the risk by offsetting it into an extensive, macro--arguably force-majeure--crisis proportion).

Factors that support the probability of an extensive crisis proportion also support equity valuations. Keep in mind that despite the current correction, low interest rates will support ("accommodate") equities along with low inflation (a high rate of sustained, structural unemployment and deflation of middle and lower class incomes--the "austerity" exacted to support equity valuations). Keep in mind, as well, the detriment exacted to support equity values yields negative, retributive value.

Since the means of pricing risk does not recognize the accumulation of retributive value, equity is falsely valued. The price does not fully reflect the value of the risk because it recognizes a liability attached to the economic reward derived from it, which is considered a political, rather than an economic, risk factor. This missing value will, nevertheless, be ontologically accounted for, force majeure, in an accumulative, crisis proportion. Despite the unavoidable ontology (remember that the risk of loss is fully assumed in priority), we must also keep in mind we are not necessarily determined to achieve complete, catastrophic failure in order to find success (having the freedom of self-determination in priority).

More interest in growth will reduce headline inflation and reverse the deflationary trend because there will be less money sitting on the bid in the commodities sector at a near-zero rate of interest. All that money we don't have being Dodd-Franked into increased reserves to protect us from catastrophic speculative demand instead of cultivating economic growth could be paying down the debt, and principle on lost equity, to prevent the impending crisis that Senator Dodd said, "will most assuredly occur." If all this "money we don't have" is reducing debt, it is not pushing commodity prices higher and deflating our economy. The probability for economic growth increases exponentially and reduces the false-positive valuation (the built-in anxiety) of equity shares.

With capital, however, anxious about weak demand because consumers are anxious about losing their jobs, the probability of an economic recovery from the private sector is nearly zero. (This is the "angst principle" I was telling you about in previous articles associated with accumulation of the risk proportion.) At the same time, keep in mind, discussion about why the level of anxiety is so high is also near zero.

Everything is nearly zero except, of course, the capital being gained from it. There is tremendous value being derived from the high anxiety, and since that high anxiety represents a high level of risk, the profit being gained is proportional to the present value of the risk. Technically, in fact, the high reward pefectly correlates inversely with the very low rate of interest, indicating a causal relationship that models as "making a profit by causing detriment" rather than economic growth. This is not "force majeure." It is a deliberate act of causing harm to make a profit and the result is debt, both public and private.

If, subsequently, we cut spending even further to pay down the debt, the result will be a depressionary trend--what the Fed is mandated to avoid at all cost because it is detrimental to elite and non-elite alike. Fed "accommodation" is literally to promote the general welfare and secure domestic tranquility. This is why the Fed is prescriptively an "independent" executive power, bureaucratically shaped to fit the working, elitist model and its set of false assumptions to the legitimacy of the general welfare.

Without being "free" to act independently through its "Open Market" Committee, the Fed would be less likely to conserve the risk and protect us from it at the same time. It would be less able to both conserve the value of the risk proportion (the profit being derived) and, at the same time, protect We The People from the general detriment that derives from the accumulation of the profit being derived. We see then, as discussed in the previous article, we are structured to be risk prone in the name of being risk averse which, frankly, is absolutely insane! It is a structural formula for high anxiety.

Remember that the Hamiltonian model is the working model. This model structurally assumes the benefit of public debt. It also assumes that people with wealth should not pay it. A progressive tax burden is a moral hazard because it "taxes the job creators." Taxing the rich inhibits the production of wealth that pays the wages and salaries needed to pay the debt. Thus, a progressive tax burden accumulates debt into a crisis proportion, but it will never result in default because the debt is secured by "the full faith and credit" of the Federal Government. Default is a moral hazard that is explicitly to be avoided by Constitutional authority.

While the Constitution provides for maintaining a public debt we all own, Hamiltonians maintain that rich people should not have to pay it. The more nearly zero the tax burden is for the rich, the better off everyone is because money (the capital) is then always free to produce the wealth of the nation. Just as important, according to Hamiltonians, a near-zero tax burden for the rich keeps money consolidated in the hands of those most capable to manage it in the public interest--a power elite.

From the beginning, Jeffersonians have strongly opposed the Hamiltonian hypothesis that keeping wealth consolidated in the hands of elite authority (like the king and his loyal, administrative aristocracy) secures the general welfare and ensures the domestic tranquility; and to this day, both parties claim to be more Jeffersonian (revolutionary) than the other by advocating and opposing the useful value of government. Although we cyclically disconfirm the Hamiltonian hypothesis, the assumptions of the model continue to be politically valid and in practical operation, accumulating fiscal and monetary errors that predictably present in a crisis proportion.

Currently, the crisis proportion is a near-zero rate of interest in economic expansion. It is more profitable to horde the capital and gross even more by borrowing at near-zero rates to bid up increasingly scarce supplies. Instead of accouchering economic expansion, the monetarist solution to liquidity crises (sufficient funding to pay the debt) is being used to rob us of the income we need to pay our debt (with one party claiming it is the problem and the other claiming it is the solution).

The crisis we face at this point is a crisis of legitimacy. Talking about that, however, is cause for some high anxiety. It is dangerously radical because it provides the political motive to change things by verifying, rather than validating, the legitimacy of power, like our founders did.

What's the Difference?

For the investment analyst, assessing the probable direction of the risk going forward will determine a winning position.

If you have been following the risk assessments on this web site, you were not surprised with the prospect of a depressionary trend. A depression is not impossible, it is just not very probable. Being favorably positioned is, then, as we explored in the previous article, a function of identifying the limit.

Not being stuck with all the risk--constantly being offset, or suddenly shifted, to unwitting, counter-party, market participants--is job one. The risk of loss is 100% (it is fully assumed). Remember that the benefit is modeled to derive from a detriment.

That financials ontologically operate through efficient markets to provide a non-zero-sum benefit is a false assumption of the working model. No, instead, we are looking at cutting entitlements, for example, which is a significant difference in the macro-risk assessment since the Great Depression.

Cutting entitlements is pro-deflationary, not pro-growth. Added to the current stagflationary trend, the probability of a depressionary trend increases dramatically--a probability that has been both fiscally and monetarily minimized since the Great Depression.

While financial assets will not sit for long in near-zero interest rate environments to avoid the probable risk, these assets will not be invested pro-growth either.

The difference is abandonment of the more "liberal" model for economic growth--like entitlements--that provides the demand necessary to resist a depressionary trend (and remember that a depressionary trend is detrimental to both the elite and non-elite alike).

Supporting a depressionary trend does not fit the benefit-derived-from-detriment (the zero-sum) model. We have thus reached the limit. Beyond this limit is where the benefit begins to accrue to the non-elite at the expense of the elite in a macro (Non-Pareto-Optimal) proportion. It is what led to the institution of entitlement programs that conservatives erroneously argue is causing the current, deflationary trend.

To prevent blinding greed and unenlightened self-interest from unwittingly positioning itself to take the offset-and-accumulated risk all at once in a crisis proportion, liberals have been there to save the capital from collapsing under the weight of its continuous consolidation. If a political realignment does not occur, a Non-Pareto-Optimal distribution will naturally occur from the accumulation. Thus, a political realignment will occur and a depression will be averted (consolidating order from the naturally occurring chaos that, according to liberals and conservatives alike, tends to deconsolidate the risk proportion into inefficient markets).

Liberalism, however, is a symptomatic treatment. Since it borrows the funds from the accumulation, errors continue to accumulate, supporting the problem to be solved with budget deficits, an increasing tax burden, and declining income. Just because the probability of a depression is next to none does not mean we will not get close, bouncing along the bottom with a persistent deflationary trend supported by political (ideological) compromise. The "effective" sum of the errors is conserved to fit (validate) the expected value (the fully assumed risk) of the working model.

It is a significant error to cut entitlements without reducing the need--that's why they are called entitlements, because they provide for public needs. Entitlements are the difference between a recession and a depression (the difference between assuming the macro-risk proportion and consuming it), and that's why the difference is highly improbable (politically unpopular among the elite and non-elite alike).

It is a significant error to think cutting entitlements will reverse the recessionary trend and put us on the path to prosperity. No! It will cause a depression.

Avoiding a depression has an anchoring effect. It allows the false assumptions of the model to ideologically operate despite empirical disconfirmation. Assuming the non-zero-sum ontology of efficient-market theory, for example, forces the losing, counter party to sue for relief by proving the intent to cause detriment. The derived benefit is affirmatively defended by arguing that complainants are out-competed into a legitimate loss, thus providing a non-zero-sum benefit in which markets ontologically maximize efficiency by putting the inefficient out of business (by causing detriment, but the loss, it is argued, is more than offset with the benefit of a more efficient market). So, for example, firms that fail (and the unemployment that results) due to the practices of too-big-to-fail financial firms and the Great Recession is really a corrective phase that strengthens our economy by virtue of efficient markets that ontologically exact detriment. Losers are the culpable party. They lose because they deserve it and society benefits from the loss in non-zero-sum.

Assuming financials operate in non-zero-sum by bankrupting us into market efficiency is a false ontology. It is a false assumption of the working model resulting in a Pareto Optimal, political settlement that deontologically conserves the consolidated value of the risk proportion. It anchors us to both the validation of disconfirmed, ideological hypotheses and to the risk-averse realpolitique of always preventing the worst possible scenario rather than pursuing the best.

It's easy to argue we are being risk-prone if we are not always averting a probable crisis. Bailing out too-big-to-fail firms is, for example, to avert a crisis of overwhelming proportion, which implies (validates) their consolidation is the best it can possibly be in priority. Thus, bailing out risk-prone firms in priority (with the risk of loss fully assumed) is being risk-averse by default. It then appears there is not much difference between being risk-averse and risk-prone, which is politically safe (Pareto Optimal).

It's just as easy to argue we are being risk-averse if we are always pursuing probable success rather than achieving the prospect of abject failure in a too-big-to-fail proportion.

By default, pursuing the best possible scenario in priority always confirms (rather than validates) the worst by its prevention, which makes all the difference.

Rather than continuously confirming the angst (the worst) of our economic existence with recessionary trends (like the Democratic-Republican "regime of re-action" is binomially apt to do), "We the People" demand leadership that makes all the difference.

The American Revolution took the risk of challenging the virtue of consolidated power, and "We" are still politically prone to confirm the virtue of its deconsolidation to provide for The Commonwealth.

What's the Limit?

In the previous article we discussed indicators that technically delimit the risk proportion. Having at this point exceeded the nation's debt limit, we can very clearly describe the factors that have led us to the current risk proportion rather than focus on extending it.

With the influence of a third-party element, we are testing the limit. The current risk proportion is default on the national debt, which technically means we have insufficient funds (insufficient income) to pay the debt. The Tea Party, rather than allow the debate to focus on the perils of not extending the risk proportion, is focused on a stop-and-reversal. Since SAR technically means identifying the factors that cause insufficient income (default on the debt), the focus will be on measures that can be truly attributed to causing debt--what Republicans explicitly delimit to government spending.

According to the Republican delegation, government spending is the determining variable. It causes the debt. Cutting government spending, therefore, reduces the debt. Despite the appeal this has for keeping it simple, this argument suffers fundamental attribution error that will accumulate into a catastrophic, risk proportion.

When hedge-funds use strategies to offset economic risk (with "Structured Investment Vehicles," for example), debt (the offset) accumulates into an economic crisis proportion (like the Great Recession). As the risk of default increases, simply cutting government spending to pay down the debt derived (offset) from the economic equity accumulates political risk as well. Added to the current, economic-risk proportion of the recession, both the political and economic risk factors converge into a fully gamma dimension in which the risk of loss is consumed (current) rather than assumed (offset to the future). If the economic risk is not transposed into political risk (monetized, for example), the converged proportion is fully gamma (critically retributive with current--ready to use--value).

With the risk no longer offset, but currently consumed, the probability that wealth will be transformed into working capital on terms typically favorable to its consolidation is nearly zero. Causing a distribution without all the regressive tax incentives and subsidies the accumulated capital otherwise commands is highly improbable; and as the tax code becomes more progressive, the debt is paid down without a deflationary effect. (Keep in mind that the deflationary effect is a net benefit for the consolidation of capital which relies on cyclical trending to ontologically justify its continuous, organized consolidation into an economy-of-scale efficiency--which, of course, accumulates debt into a deflationary trend--in the name of securing the general welfare).

Redemption of the risk value is highly destabilizing, and for the power elite, detrimental. It is a catalyst for a more pluralistic, organized deconsolidation of power (Senator Schumer suggesting to deconsolidate oil companies, for example, to produce a more competitive, free-market price for fuel). Avoiding the detriment (the probability of deconsolidation) means redemption of the risk value (which is fully assumed in priority) will be resisted. The risk will be monetized (accumulated) rather than redeemed (distributed) in the form of austerity in a gamma proportion.

Structured Investment Vehicles (SIV's) are still being used, supposedly to finance the recovery. While Dodd-Frank is supposed to regulate their use, they tend, nevertheless, by design, to have a deflationary effect (high yield/low growth to, supposedly, form the capital for investment by providing minimal risk). SIV's create debt from equity and accumulate political-economic risk, consuming what is otherwise its assumed, offset value (the divergent, minimal risk on the high return). When the risk converges with the reward (the crisis proportion created by offsetting risk and thereby accumulating it), the risk is not being offset, it is being consumed, creating a falsely positive valuation of the risk.

(It is important to understand that SIV's are an arcane and highly adaptable technology for risk avoidance. It easily adapts to avoid changing regulatory authority intended to control it because, remember, risk is not actually avoided--it is fully assumed. Avoided risk accumulates, and when it gets to a critical, crisis proportion it tends to transform into political--"gamma"--risk.

Being settled by means of public authority, risk then "assumes" the status of a public good--and if the risk is not assumed, it will be consumed. Even though there were no laws in place to bail out our troubled financial system in 2008, for example, government acted ad-hoc, and therefore illegally it can be argued, to avoid consumption of the risk proportion.

The risk was successfully avoided in 2008 and consolidation of the risk did not suffer a deconsolidation. Instead, "the risk" continues to be organized to fit an economy-of-scale modeling that conserves the value "derived" from cyclical trending. It is allowed--determined by political process--to be even more consolidated to solve the problem of over-consolidation. Since the risk--what is too big to fail--cannot be avoided, we now face the possibility of default on our sovereign debt; and if allowed to accumulate unassumed--like we see with a populist demand for reducing debt with a legal limit--the risk will go fully gamma to achieve an unavoidable, SAR proportion.

Since econometric modeling tends to consider risk an avoidable quantity, and once avoided should not be accounted for, being ideologically verboten because it suggests a political liability, it tends to be spurious and confounding. Schumpeter, for example, described this as the influence of "exogenous variables." Hence, the term "gamma-risk" is used in my analysis to describe and explain a determining variable that is otherwise modeled to be deliberately spurious and confounding. It delimits a risk proportion that is not ignored, but is deliberately organized and cyclically trended, in a seemingly spurious and confounding way, to reliably accumulate predictable value through false attributions...otherwise known as fraudulent means, which entails a prosecutable liability.)

The accumulated risk means that equity valuations, for example, are overvalued (not "irrationally" valued, but "falsely" valued). Financials generally are not valued to reflect the risk proportion...so don't be surprised when it presents with a so-called "unexpected" value (a sudden SAR). Keep in mind, as well, that "we should not be surprised" does not relieve the perpetration of fraud (falsely valued assets, for example) of liability. That it is knowingly and willingly perpetrated with the intent to gain value by means of fraud and deceit is enough to prosecute. Since the most cost-effective and efficient means of prosecution is through free-market sanction, it is critical then to ensure a highly consolidated corporate body that is too big to fail (immune to direct, democratic accountability that a free market provides), and then organize, or capture, public processes within the corporate to limit the liability (but remember, limiting the liability does not avoid the risk--it allows it to unaccountably accumulate with critical errors, as Schumpeter described it, into an econometric crisis proportion).

An unexpected SAR is caused by errors of fundamental attribution, systematically modeled to present with unexpected risk. It produces a "surprise," risk-value premium to be consumed in the form of debt--the insufficient income that is subsequently offset as public debt to avoid general economic crises, like the Great Depression. Government spending does not cause "the debt." Insufficient income in the form of capital gained (with a Non-Pareto-Optimal, zero-sum detriment) is the source of the risk. This zero-sum risk, subsequently avoided, accumulates (assumes) the sum of the errors into the form of public debt for political settlement (to be monetized or cut from the budget), exacting austerity indirectly with the force and legitimacy of public authority. The attribution error, and the risk proportion it represents, is then reinforced--legitimized--by validation rather than verification, which means it is allowed to accumulate into an impulsive rather than a corrective wave. The demand for government, rather than being reduced, impulsively increases with all manner of political-rhetorical artifice employed to technically resist the impulse (typically by invoking the moral hazard argument).

Keep in mind that if we cut spending to increase revenues, we will not reduce the demand for debt because government spending is not the cause of the debt, it is the effect. Rand Paul argues, however, that government spending causes government debt, and the demand for spending (reliance on government) is the effect.

Nevertheless, despite the traditional, libertarian argument to the contrary, government spending occurs because there is demand for it. Government does not cause itself, there is a demand for it, and transposing the cause (the need) with the effect (government) vitiates the argument, making the problem worse by irrationally, or falsely, turning the problem into the solution.

The transposition of cause and effect indicates an error accumulation that continues without limit until it is politically stopped and reversed. It is a function the Tea Party is actively pursuing despite being a primary exponent of the error to be corrected.

By resisting counter-cyclical deficit spending, which is the effect, not the cause, of a persistent recessionary trend, the Tea Party is actually supporting the trend by transposition, which clearly indicates technical error (discovering the truth in spite of belief). The accumulation of error accumulates risk to be bourne by the Party's membership, empirically delimiting the source of the risk.

Since reducing government spending will not reduce the debt (the accumulative error) because it does not cause it, the error will be ideologically transposed into private debt bourne by the Party's middle-class membership, effectively turning their equity into debt. The burden (the error--the cognitive dissonance--of self-imposed detriment) will be pragmatically transposed back into public debt by popular demand to offset the risk.

Political settlement of the risk is demanded to offset the probability of general default (a depressionary trend) with an unlimited debt ceiling, conserving (causing) its accumulative value (the ongoing, cyclical detriment) in an ever-larger, crisis proportion.

The debt and the interest on the debt is the effect. Political demand to reduce spending without reducing the economic demand will proportionally increase the need for it both politically and economically. The risk proportion is neither politically avoided or economically reduced, but increased into an even larger, unavoidable proportion.

When Republicans say they want to reduce our dependancy on government, they are really saying there should be no demand made when there is the need. Thus, for example, the Ryan-budget plan contends that after trillions of dollars spent to bail out Wall Street, we cannot afford the luxury of taking care of the needy and the elderly! Essentially, what this means, if implemented, the rich will get richer by not caring for the needy and the elderly, but this detriment will be offset, conservatives say, by reducing the detrimental dependancy on government and, thus, the debt burden it causes.

Whatever makes the rich richer--like Alexander Hamilton prescribed (and the political-economic, Hamiltonian model both parties still use to shape public policy)--is the public good. Even when Democrats have their way, the rich get richer, do they not? Look at the income distribution data throughout the Clinton Administration, for example. The rich got richer than ever before.

Was it not the purpose of bailing out rich bankers in 2008 to ensure WE HAVE, rather than HAVE NOT, the economic means to care for our needs?

The apparent purpose of the bailout was not to have, but to have not. The austerity being exacted--insufficient economic demand that has been deliberately accumulated into the upper class--causes the demand for public debt. We can, then, "not" afford to pay the debt without making the rich less rich which, Hamiltonians contend, threatens the safety and soundness of our economy with slow growth and inflation (stagflation resulting from high debt to equity).

The stagflation we have now is falsely referred to as "the paradox of thrift" which is really a deliberate deflation of value that turns equity into debt. It makes the rich richer and the poor poorer, causing the demand for public debt, rather than a distribution, to prevent a macro crisis of fundamental, SAR proportion (i.e, to avoid the fully assumed "systemic risk" that our technical, bureaucratic elite are still clamoring to arrest in the "public interest").

Hence, the demand for debt is systematically monetized to provide the needed distribution from the accumulation (which technically admits it has been accumulated in error). Monetized distribution (monetizing the debt) occurs, however, not to satisfy the demand and provide for the public's need, but to limit the liability and conserve the accumulated value of the risk without actually sacrificing its accumulated effect (which is the public need that technically accumulates in error and measurably admits by monetized means).

Monetarism is the measurable effect of the accumulated error, it is not the error--that is, it does not cause the problem (a high debt-equity ratio) to be solved. Reducing it, therefore, will not reduce the demand for debt but will act to turn even more equity into debt.

Redistribution of wealth into the upper class by cyclical means that appear to be ontological (and thus exculpatory) creates the public need for debt. By putting pluralistic distribution of wealth (expansion) at risk of consolidation (contraction), equity is cycled to systematically (i.e., predictably) turn into debt.

Since predictably turning equity into debt infers a liability associated with gaining a benefit by deliberately causing detriment (i.e., knowing the value of the risk and thus timing market positions to predictably capture that value--the reward--without risk), the derived risk value is monetized to politically manage this "derivative" (gamma) risk proportion. The needed distribution is borrowed from the accumulation--it is monetized, inflating the debt (and the risk) proportion to indirectly exact the austerity needed to support the accumulation.

Effectively, monetizing the debt, rather than growth, is a tax on the middle class, and the poor, in the form of inflation. It is the stagflationary trend we are in now--rising prices conflated with falling demand; and without a more progressive tax burden is sure to keep us in a recessionary trend with over-exacted middle and lower-class incomes, and lower tax revenues, that accumulates the debt.

The over-accumulated debt technically indicates over-accumulated wealth in the upper class, which over-extends the proportion of debt to equity. Technically, in order to correct for this, a distribution must occur from the accumulation. A distribution will do what a debt limit will not do--stop and reverse the accumulation of debt without liquidating the net worth (the equity) of the middle class into the upper class any further. A debt limit will deepen the deflationary trend, not reverse it, increasing, not reducing, the demand for debt. A distribution must occur from the accumulation, not borrowed from it.

Just like we did for Wall Street, an interest-free bailout for Main Street needs to occur. Quantitative easing is supposed to bail out Main Street at rates next to nothing. QE, however, has operated to fuel inflation (energy prices, for example), keeping growth next to nothing; and now that QE is coming to an end, Wall Street is telling us we can expect higher interest rates and, thus, even slower growth! (What an absolutely terrible job provided by our so-called "best and brightest" Ivy Leaguers. Yes, they certainly are in a class by themselves!)

Monetizing the debt finances the detriment exacted and the over-accumulated benefit provided. Spread out over time, being cyclically trended, the detriment--the error--is slowly exacted and accumulated, assuming the risk of loss ad infinitum.

So, what's the limit? Theoretically, since numbers are infinitely large, or small, the risk can be considered to have an absolute, unmeasurable value and accumulative proportion. However, this erroneously assumes that the risk can be infinitely offset to constantly increase value in zero-sum (like Wall Street's "quants" did, engineering the Great Recession), with the rich getting richer and all other incomes infinitesimally smaller (insufficient) in the form of debt. The Tea Party, for example, technically indicates the limitation of this risk proportion, indicating that it is fully valued and assumed (determined) in priority.

While the distribution of the value is ultimately a function of political self-determination, the current, economic value of the risk can be politically manipulated into cyclical and counter-cyclical trends that conserves the retributive value (the risk of loss fully assumed) without being consumed or redeemed. This occurs by means of tax and subsidy that demands debt be regressively paid in zero-sum to conserve (save) rather than consume (spend) the capital for investment, but results in insufficient funds and the risk of default. (The zero-sum is indicated by a persistent, false dichotomy: save and pay down debt, or spend and run up debt. In either case, we encounter the risk of default; but this is in error, and the error is directly attributable to consolidation of the risk. Consumption of savings--the capital--is supposed to come in the form of investment, which expands supply to be consumed with low inflation and low unemployment, which reduces the risk of default by providing adequate income to pay a declining burden of debt. Instead, the capital is organized--consolidated--into an economy-of-scale, yielding the zero-sum and the false dichotomy known as "the paradox of thrift." Instead of being invested, a person's savings is liquidated...it is spent...consumed--it is systematically consolidated to supposedly reduce the risk it causes, increasing the burden of debt and the need to tax to cover, or monetize, the debt.) While big oil companies, for example, do not have to give up their tax breaks and subsidies to technically ensure adequate supply and reduce prices, rising prices, technically due to reduced supplies, reduces the income needed to pay the debt and prevent default without raising the debt ceiling.

Since the tax code is set up to allow for minimum tax to allow for maximum investment and, therefore, maximum income, why do we have insufficient funds? According to Republicans, and the Tea Party delegation, the insufficiency of funds (the budget deficit) causes insufficient income (unemployment, for example) and the budget deficit. Therefore, to stop-and-reverse the default, it is necessary to stop spending, which will reverse the recessionary trend that is causing the insufficient income. This argument is made to form this hypothesis to be tested: reducing government spending will increase income and, thus, reduce the debt because it reduces the need for government and its regulatory authority.

The argument conservatives present is called a tautology. It is a circular argument that masquerades its conclusion as the empirical truth of a verifiable hypothesis. It is a deliberate deceit, substituting a deductive process for an inductive empirical process that tests the truth of the premise, in this case being, "reducing government spending reduces the need for government."

Deceit is required when the test has failed to verify, or confirm, the hypothesis. In this case, the premise has undergone extensive testing; and after having undergone the process of verification, the premise is found to be false--it is disconfirmed. In order to conserve the value (the stakes) the deceit represents, it is necessary to falsely induce the verifiable value of the argument by deductive process. The tautology is extended to conserve the value of the risk by organized means, resulting in organizational tautologies, like economy-of-scale efficiencies, that tautologically cause the risk it is organized, on an ever-larger scale, to diminish.

Government is a part of this fractile tautology of accumulated risk proportion, which has led us to the question--the hypothesis to be tested: What's the Limit?

The question, stubbornly applied by the Tea Party, is in the process of being politically settled, which means it will not be answered by verifiable means, but by ideological dogma that intellectually throws us back to the Middle Ages. Nevertheless, it presents the opportunity for an Enlightenment favored by a bunch of revolutionaries willing to test the political limits in an exceptionally American way--by verifiable means organized into the empirical confirmation (the popular consent) of the governed.

Building an ever-larger organizational tautology defeats the quest for freedom through verifiable means--it makes us slaves to truth validated by the ambitions of power rather than verified by the measure of our own existence. What makes Americans exceptional is that we tend, by democratic, pluralistic means, not to allow power to validate, but to verify its legitimate truth.

This is where science converges with philosophy...where politics intersects with the will to self-determine.

Power is not determined by the strength of its exercise but by virtue of limitations verified by the intellect of a moral existence naturally endowed and pursued by pluralistic means to which "We the People" popularly consent.

The Tea Party, whether we all agree on its intended purpose, has forced us to find the limit by verifiable means rather than the authored validations of a technical regime.

Tea is served and everyone is invited to the party!

When Risk Converges with Reward

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

War and Welfare

The Dictates of Our Natural Existence


By observation, human history reveals an organizational utility (analytically described as political-economy) that mitigates between war and welfare.

War and welfare is a dominant feature of the human, historical record. Proceeding from what we anthropologically know, based on the evidence, humans have organized from tribal to more complex, civil societies. Although warfare is considered to be categorically evil, it is often considered by civil society to be a necessary condition to secure the general welfare (the public good).

In the same way, the welfare state has emerged as a product of modern, civil society that is categorically evil (inherently dependent and unproductive) yet considered to be a necessary condition to prevent war and revolution.

Both political-economic dimensions provide public goods despite the perception of being inherently dysfunctional and unproductive. War distributes capital and provides employment despite the destructive loss of blood and treasure, and the subsequent, post-war recovery is an economic boom (a corrective trend of the K-Wave, long-cycle distribution).

War is an impulsive wave of the long cycle, and despite its inherently evil aspect, it yields benefits from the associated costs. It is a form of welfare with both economically physical and politically psychological effects. It provides for economic expansion from the destruction and psychologically anchors the benefit to a relative public good measured by the impulsive, destructive wave of the cycle. "Happy days are here again."

Since war perennially erupts form "happy days" of relative peace and prosperity, entropy appears to rule our fate (and absolve us of liability). It appears that we are cyclically bound to a recurrent, algorithmic, dialectical determinism. To trump entropy (detecting logarithmic measures representing the increment value taken in against the absolute value at which it is absorbed) and assert our freedom (assuming some liability), reaction to the K-Wave recurrence of the risk proportion tends to produce a new priority.

The impulse to war is resisted by providing public goods, and the welfare state emerges with the risk of loss fully assumed in that recognized, and systematically reorganized, priority. Capital held in accumulation tends to be distributed by means of public authority, confirming the need for political-economy in the form of progressive tax and subsidy (the risk of loss fully assumed--or the absolute value at which the risk is absorbed) to secure the general welfare and the domestic tranquility (that tends to a global dimension).

Government (whether a republic or a monarchy), instead of acting only to support economic expansion in priority (which will always grow to a global dimension in order to share the wealth non-zero-sum and avoid a retributive value--the absolute value at which the risk is absorbed, and tends to be ignored, by technical means like monetizing debt), gains a legitimate utility (whether by war or welfare) for reducing the accumulated surplus. (Government, then, assumes the liability; and since there is no higher authority, as Ayn Rand points out, for example, the risk rises in proportion to suffer the tragedy of the commons. If everybody owns it, then nobody owns it and, therefore, no one is liable. Collective assumption of the risk means there is little incentive to reduce the risk and every incentive to accumulate it in an ever-larger, unavoidable, entropic, gamma-risk proportion.) Government, rather than the private sector, by means of its public authority gains a determining economic role, securing the general welfare by providing public goods and services from the surplus, which supports economic expansion and free-market innovation in posteriori.

Although the expanding need for public finance (the recent bailout of the financial and auto sectors, for example) disconfirms "government does not create jobs" and "government is the problem and not the solution," these hypotheses are nevertheless ideologically conserved. Dogma is fused with pragmatism, deliberately conflated with the exigencies of adaptive, practical modeling without ever conceding its practical legitimacy. So we see, for example, the Obama administration being pragmatically bi-partisan and, thus, extending policies and programs that caused the Great Recession. While his administration did not cause the crisis proportion, it is acting to extend it. His policies and programs are pragmatically designed to stabilize the system, thus conserving the exigencies. By accommodating partisan opposition through a compromised, political settlement, the problem is pragmatically conflated with the solution (providing the entropic value that presents as an absolute, risk ontology, appearing to be a product of our probable, natural existence).

Despite the confirmed need for practical modeling adapted to accommodate unavoidable, entropic value, the exigencies are pragmatically operationalized with political dogma. Exigent policies and programs are pragmatically replete with ideological, evaluative measures to absorb the retributive value of the absolute risk proportion.

Mostly in the form of moral hazards and imperatives, dogmatic evaluative measures narrate a normative expectation of loss by misattribution of the cause. These fundamental misattributions (like saying high fuel prices are fundamentally derived, or that the Obama administration--"liberalism"--has wrecked our economy, for example) keeps the measures in a state of constant adaption and distraction. This allows the value of the risk proportion (the benefit derived from the cost--the increment value taken in against the absolute value at which it is absorbed) to accumulate with a pragmatic, exigent but dogmatic narrative. Facts are systematically operationalized (absorbed) into the symptomatic treatment of accumulated errors, ideologically argued post-hoc within the narrative to manage the absolute proportion of value to be retributed (probable by the value economically taken in against the total value actually consumed in a political, entropic proportion).

The risk of loss is fully assumed, being operationalized with a dependency that is politically determined. What can be given can be taken away, and that which has been bestowed rather than earned is always insecure, politically anxious and subject to ideological patronage.

Welfare reduces the risk of war (including "class war"), but does not eliminate it. Private wealth and power transformed into public goods provided by public authority is strongly resisted. The result is, for example, the emergence of a global, power elite.

As capitalism matures, and the welfare state emerges to mitigate its distributive deficiency (which correlates more with the accumulated power to deprive than the diminished capacity to provide), a power elite emerges to "globalize" the economy. While claiming to relieve the world of chronic poverty and shortages (having won the Cold War), the new elite endeavors to expand its power worldwide, not only accumulating great rewards but also accumulating the value (the risk) of capitalism's distributive deficiency, mitigating welfare with general instability.

The distributive deficiency, and the risk it accumulates, is much less the problem to be solved against the immediate and constant threat of international terrorism. The case of Osama Bin Laden, for example--a wealthy Saudi who endeavored to exercise power on a global scale. Literally--strategically--a man without a country, he built a transnational, organizational network that caused a capital distribution of approximately two-trillion dollars to counter his exploits of militant, high adventure fueled with ideological, dogmatic inspiration.

Accumulating riches is not enough. There is a point at which it is just the same old thing. Systematically accumulating profits by organized economies of scale is boring. It is a lot more exciting, if not more self-agrandizing, to exact detriment and get away with it, like being king.

Berny Madoff, for example, didn't execute a ponsy scheme because he needed the money. It was a high-stakes adventure full of detrimental value. When the systematic means of accumulating wealth matures, it becomes less a function to provide than the power, the self-satisfaction, to deprive with impunity. In order to counter the terror of consolidated wealth and risk, it is necessary to keep it deconsolidated (thus the American Revolution).

Keeping wealth, and power, distributed in priority--preventing economy-of-scale accumulations and detrimental debtor-distributions of an equal risk-proportion--keeps us pluralistically peaceful and prosperous. It keeps us on a path of innovatively sustainable economic growth--a low debt-to-equity ratio--that mitigates against a zero-sum, crisis proportion.

Sustainable economic expansion is necessary to mitigate the zero-sum, retributive value of the risk/reward proportion. Securing high reward by assignment of the risk--by transferring it rather than actually taking it--accumulates retributive value (like hedge-funds and banks do when, for example, distributions are made from deposits that are net-long on commodity futures and, thus, net-short on the economy, effectively rigging the market to make a profit by causing general detriment, making the rich richer and the poor poorer). Its accumulation results in the probable, entropic value accounted for and managed with fundamental misattributions (like supply disruptions), requiring a technically skilled, managerial elite employed to operationalize the interests of the power elite with public authority. Detriments that benefit the elite and make them powerful (like determining prices and thus non-elite incomes) are technically rationalized with the public good (like the incentive to add supply, reduce prices and unemployment by increasing prices and reducing employment--so-called "supply-side" economics, for example).

Achieving a distribution without actually sharing wealth (and power) requires constant expansion to absorb the value to be retributed. The value is efficiently organized into an economy of scale, networking the externalities, absorbing the endogenous risk into organized technologies that characteristically rely on a power elite to manage its accumulated, exogenous proportion. The accumulation inexorably extends into a global dimension, the externalities networked to avoid the unavoidable risk of retributive value, relying on the diplomatic skill of a global, power elite to manage the value accumulated to the brink of redemption (war or welfare).

Most notable among today's power elite is the neo-conservative element who advance a strong military-industrial complex and a global, military-diplomatic program that stresses the budget and provides distraction as pressure mounts to mitigate the emergence of the welfare state.

The elite, being traditionally best-equipped for diplomatic endeavors, are protecting us from the threats to "our" freedom (the angst that undistributed accumulations of wealth and power are sure to cause). International politics cannot be left to the passions of the masses always in flux and, by nature ignorant and unsophisticated, anxious about the future. Thus, it is up to the power elite to preserve freedom by conserving the accumulated value of the risk (reducing the welfare state--reducing debt and exacting austerity--to provide for the public good).

War and welfare are mitigated against each other, binomially determined by political settlement of the risk proportion. A conflation of costs and benefits are carefully calculated and applied by the elite to exercise power. Public process is utilized for a system of realignment and compromise deliberatively organized to secure elite benefits by distributing the costs to the non-elite in the name of the general welfare. (All of this, keep in mind, largely plays off the angst inherent to the perceived risk of loss fully assumed by both the rulers and the ruled in priority--an Ayn Randian dystopia of so-called "rational" self-interest in which everyone irrationally believes gaining a benefit by causing detriment in zero-sum is in everyone's self-interest. Eventually, of course, we come to realize the entropic risk proportion. War and welfare is the natural result of mitigating the inherent anxiety of not knowing what is rational and what the empirical measure of self-interest is. While neo-conservatives, for example, fully embraced Ayn Rand's natural philosophy, keep in mind that the result was the Commodity Futures Trade Act, the Great Recession and a monumental debt proportion that empirically indicates an irrational, but deliberate, accumulation of risk. According to neo-conservatives, the outcome is both rational and empirically confirmed by the distribution of income. The benefit accrues to the natural winners at the expense of the natural losers; and with both parties anxiously anticipating what nature rationally confirms our objective, self-interest to really be in its total, risk proportion, angst is confirmed as the common divisor of our natural existence. War dystopically mitigates against the probable risk of welfare, elevating the risk of loss, against the probable gain, to the principle of a moral existence.)

It is important to note that neo-conservatism is not limited to global expansion of capital to consolidate value in emerging markets and to engage in worldwide military diplomacy. Neo-cons emerged into the 21st Century to conserve the value of the risk proportion by also monetizing the debt. Chaney's famous words that "deficits don't matter" is an essential part of a successful, neo-conservative program that includes the distribution of capital globally.

Global distribution of capital not only serves to bust the labor unions of developed nations, but also diminishes the political sentiments of a growing, non-elite, middle-class population. Losing its sense of elite status, having lost income and net worth to the upper class, and with more losses to come, we have a middle class that now fully expects welfare to be the permanent alternative to what Seymore Mellman, for example, in the Cold War era referred to as "The Permanent War Economy".

While the welfare state is preferable to the warfare state, both, especially in America, are considered to be negative externalities of a civil society. They are necessary evils in which the risk of one is mitigated against the other to form a macro-risk proportion, and today Americans politically and economically mitigate these two variables on a global scale.

Spending trillions of dollars on military-diplomatic operations worldwide, for example, allows America's allies to expend more of their budgets on welfare. The record, to date, suggests a natural coefficiency between war and welfare that is a dictate of our natural existence, suggesting an inherent, economically endogenous tendency to organize for existential angst (thus economics being the "dismal science" of mitigating the endogenous risk proportion with exogenous, politically organized means). Instead of organizing for utopia, we tend to organize to avoid dystopia (the risk of loss fully assumed). For analytical purposes, we will call this tendency the "angst-principle" which is essentially derived from intentionally organized tautologies that seem to be ontologically determined and largely beyond our control.

The current call to "root out any evidence of fraud and market manipulation" to control the price of gasoline, for example, provides a current case for exploring the angst-principle built into the modern landscape of political-economy.

Current market volatility is premised on both the prospect of war in the east and the prospective extent of welfare states in the west. In the middle ages, before what we now call capitalism, it was a high crime to "gross" commodities because it is highly destabilizing. Grossing (cornering the market and driving up prices, today accomplished by grossing futures contracts with a massive accumulation of capital, made possible by the Commodity Futures Trade Act) could result in being hung or beheaded by order of the king. It not only robbed the sovereign of his god-given wealth but the divinely (or naturally) endowed power to control We the People who, by natural right (law) of revolution (war), became the sovereign power to determine our self-interest (welfare). It was clear then, as it is now, that the economic dimension can and will determine our natural, political existence. It is also apparent that the level of angst associated with it demonstrates (measures) the extent of power (the ability to morally self-determine).

To prevent sharing power, the king had to make sure the wealth was consolidated into his control, much like today as we see the corporate, collective body evermore consolidated to exercise power as the de facto, if not de jure ("Citizens United"), sovereign body. In terms of the American, revolutionary spirit, however, (the intellectual promise of The Enlightenment and the realpolitique of "American exceptionalism"), consolidation of power is the measurable risk--the evil--to be avoided.

As the corporate increasingly gains the natural right of the sovereign, the political and economic dimensions of power have fully converged. The productivity of capitalism is successfully conflated with the angst of its distributive demonstration of power. Society is relieved of chronic shortages by adding the productive incentive of its systematic overaccumulation. High productivity is conflated with its systematic deprivation, resulting in a cyclical crisis proportion in which war mitigates with welfare.

The emergence of capitalism and the modern, corporate body allows for legal engrossment of economic value. What was once a high crime that shared the divine-right power of the sovereign has become the means for consolidating it to limit the power of the natural sovereign--We the People.

Consolidation of power by natural right serves to delimit a legitimate ascendancy to power among equals. The elite, having the tested capability of competitive processes, ascend to power, and keep it, "by natural right." A power elite emerges endowed by nature to organize and command the natural, pluralistic tendencies of power. Order is rationally organized (in self-interest) from irrational chaos by consolidating the capital (which otherwise tends to a natural distribution).

Consolidation, the elite explain, achieves the utilitarian ideal (providing the greatest good for the greatest number of people). As John D. Rockefeller once explained, "competition is wasteful and inefficient." The mergers and acquisitions that occur following cyclical events, like the Great Recession, are regarded as a natural tendency achieving an economy-of-scale efficiency that naturally ensures repetition of the cycle. The efficiency thus algorithmically (predictably) accumulates, derived from the detriment (the austerity, the deprivation) that "naturally" occurs. The detriment forms the capital (the reward) to reinvest, add supply, and achieve the general welfare. All of the speculative manipulations, like the high commodity prices we have now, accoucheurs the efficiency, deliberately ensuring cyclical trending that delivers consolidation of the capital.

Speculation is considered to be self-interest rationally pursued. It naturally achieves the greatest social value without the need for government intervention which tends to diminish the effect of cyclical trending and the efficiency of markets to provide the greatest good for the greatest number of people. Each recurrent cycle (continuous consolidation that affords an increasing command-and-control, economy-of-scale efficiency rationally derived from self-interest) naturally brings us closer to the utilitarian ideal (what the classical critique of capitalism called communism).

(Keep in mind that the "efficient-markets theory" used to support the argument for unregulated speculative demand is supposed to provide optimum liquidity and avoid liquidity crises. Despite the Commodity Futures Trade Act, however, we experienced the greatest liquidity crisis since the Great Depression. Although the efficiency thesis has been disconfirmed in every case, it is nevertheless continuously validated by arguing the utility of the derived benefit: Each recurrent crisis of insufficient liquidity--consolidation of the capital--forces us to consolidate industry and markets into more efficient enterprises, producing the highest productive value at the lowest possible labor cost. Describing the problem as the solution, of course, is why the thesis relies on tautological validation rather than empirical verification.)

Classical economists not only predicted Rockefeller's description, but according to the classical critique, consolidated management of the risk would, naturally, become the preferred means of distribution over warfare. Classical economists also accurately predicted the emergence of "stateism."

Capitalism survives with a complex regulatory regime--anti-trust laws, for example--and an extensive bureaucratic authority to control the risk. The value accumulated from the risk is conserved (protected) by administering both a war machine (a military-industrial complex) and a welfare system. Both (war and welfare) are maintained with an always-expanding debt proportion monetized by the state. Instead of developing into communism, capitalism is maintained by the state. Thus, we have "state capitalism."

(Remember that communist theory postulates a classless society. Equitable distribution of wealth and power ideally renders government authority obsolete. It is the same ideal of avowed capitalists--government governs best by governing least; but without having to maintain the risk proportion of overproduction, equitable distribution renders obsolete the need for public debt--war and welfare. It is also important to note that the shared, common element of both is an absolute value which, according to natural observation, tends to an entropic probability of the risk. Free-market economics ontologically fits management of this probable risk proportion, but should not be confused with "efficient-markets theory" that advances continuous consolidation, rather than deconsolidation, of the risk, overaccumulating value and surplusing it into a crisis proportion.)

Since capitalism surpluses value by overproducing it, it is necessary to manage and maintain the surplus without distributing its value (which would distribute its power). It is necessary then to organize toward a stable, political settlement of its constant accumulation into a retributive-risk proportion (i.e., the angst principle in which the risk of loss is fully assumed in priority to prevent dystopia rather than achieve utopia).

Our founders recognized that where once the accumulation of economic value resulted in political power, economic value can also be derived by organized political process. The democratic-republic then emerged and much of what we argue about today is over deriving economic value through political rather than economic process, mitigating the risk of war with welfare.

Although welfare is derived from surplused value that otherwise exists in a crisis proportion, there is still the vestige of measuring who is and is not powerful, and this is manifest by applying systematic means of deprivation (for the general welfare, of course). These means are largely an argument for conserving the middle-class values of revolutionaries who removed the barriers to wealth and power by natural right and self-determination. (If we are all pursuing what makes us happy in our self-interest, we are not likely determined to wage war, thus the utlility--the welfare--of being self-interested. If we are consumed with acquiring wealth, and that enterprise consumes the amount of wealth that can be divisibly acquired without expanding it, we never have the opportunity to acquire power and deprive wealth, which requires political conquest--merging and acquiring--rather than economic expansion.)

Monarchies (as well as elite, post-industrial, merging-and-acquiring plutocrats) stand between the middle class and "the pursuit of happiness" (the utilitarian pursuit of wealth and power). If we are always in debt to monarchs by extension of property rented from the crown (the ruling class), we can never be wealthy or happy; and with little productive incentive we are plagued with chronic shortages (which likely leads to war to secure the general welfare). The cure for chronic shortages is to allow everyone the opportunity to be wealthy and happy in the free pursuit of one's self-interest.

Individual pursuit of self-interest is supposed to crowd out the probability of war until, of course, by the "naturally endowed" right to pursue it, wealth becomes so consolidated that welfare is reduced to the angst-principle. The endowed ability to surplus value by determining its deprivation demonstrates power and determines status. Angst dominates our existence and leaves us vulnerable to elite power and authority; and with more wealth accumulated than needed, there is ample opportunity to demonstrate power.

In the struggle for dominion, welfare is easily sacrificed for warfare, distributing wealth that was efficiently consolidated to achieve the greater good for the greatest number of people. For "The People," the greater good is horribly bad, and the angst reduces to a profound sense of hopelessness. Moral sentiments are reduced to raw demonstrations of power and your very being is reduced to a sense of self naturally determined only by the endowments of others; and since you have only yourself to blame for a fate that is largely out of your control, being devolves into a profound sense of nothingness, confined to the dictates of a natural existence that is anything but self-determined.

World War I, for example, following the industrial revolution, presented the first modern case of a classic, worldwide distribution on the accumulation. While it retained the value of classic distribution by means of war (the process of creative-destruction Schumpeter described, for example), it also marked a philosophical, existential, humanistic leap into the concept of "being and nothingness."

Even with all the productive capacity of capitalism, it seemed we still had to go to war to cause a distribution. So much for the utopian promise of capitalism as the product of the Enilghtenment and 18th Century utilitarianism. Individual pursuit of happiness always reduces to the angst-principle rather than the general welfare. The only salvation for classical economics would then be its classical criticism--communism--which evolved into an even higher level of classic distribution we called the "Cold War" with an even higher (literally MAD) level of existential angst (Mutually Assured Destruction).

Following "the war to end all wars," President Wilson established the Federal Reserve Bank system to control the means of distribution and end all wars. Central banking and the League of Nations would be the controlling authority to mitigate the accumulated risk and the probable, unavoidable, catastrophic distribution of the reward (what I refer to as the fully assumed, gamma-risk proportion).

Despite the obvious need to control the over-extension of the risk proportion, and strong union sentiment within the industrialized world to avoid its accumulation, World War II erupts within the depths of The Great Depression. The fear of communism had been fused with the promise of capitalism to form the new rich--the new, modern elite to alleviate us of our angst and lead us into a new millennium of peace and orderly prosperity, achieving unsurpassable welfare that can only be described as utopian, but not without waging war first, of course. Utopia, once again, is reduced to risk fully assumed in priority--unavoidable, untranscendable, in the gamma-risk proportion. The fate of humanity once again reduced to the angst of preventing dystopia--with the risk of loss fully assumed--as the measure of a meaningful existence, and the general welfare as best can be derived by the dictates of nature.

What dictates our natural existence ponders what is good and what is evil. War is evil, yet WWII is considered a good war to destroy evil. It also caused the distribution on the accumulation necessary to bring us out of the Great Depression.

Subsequently, we emerge into the 21st Century with a huge military budget, and a burden of debt, that secures the welfare of our allies mitigated with the angst of their devalued currencies and downgraded government debt. It appears, no matter what we do, we cannot avoid the angst of a natural tendency to default on the debt.

As America grapples with the call to be austere or default, making us not so exceptional, but more like our allies, we feel the angst of the risk of loss fully assumed. We detect the limits of our natural existence fully appraised by the founders of this great nation and firmly established as the natural, inalienable rights of man. The angst-principle indicates having reached the limit--the fullest extent of the risk proportion in which liability is to be fully assumed.

The current call to "root out any evidence of fraud and market manipulation" to control prices (and the distribution of income), combined with the call to balance the budget (or risk default), delimits an historical inflexion of the angst-principle. It not only provides a good example of the principle built into the modern political-economy, but serves to indicate the probable risk going forward in the gamma dimension of war and welfare.

What appears to be apocalyptic vision is merely a convergence of technical indicators with expected values of impulsive and corrective waves. These technicals indicate the extent of our "animal spirit" as Schumpeter would describe it, delimiting the impulse to power with the corrective tendency of our natural, pluralistic existence.

The unrest in the Middle-East region is a naturally expected value of the angst-principle. Monarchies impulsively give way to pluralistic tendencies. While it is being used as an excuse to raise fuel prices and support the recessionary trend, pressure to reduce the proportion of debt at the same time will tend to have a depressionary effect, and that tendency does not favor the welfare side of the equation.

We see then how economy-of-scale consolidation of the risk proportion enables a self-fulfilled prophecy. Analyzing this, rather than apocalyptic vision, is a critique of pure and practical reason that delimits our moral intelligence to the imperatives of our natural existence.

Close, philosophical examination does not reveal angst to be the entropic value of our natural existence. The elusive, entropic value that plagues natural existence and that we anxiously anticipate in the form of fully assumed loss is but the moral value missing from the Randian-Sartyrian self-concept of the universe. Reducing our being to nothingness leaves an empty, self-interested receptacle prepared to receive the MAD moral imperatives of mindless monocrats!

The unavoidable, entropic value of our natural, probable existence is the equivalent of our moral existence.

We can choose what is categorically good, or we can choose what is categorically bad, like war.

We can choose freedom, or we can choose the tragic chains, the angst, of a constantly changing elite authority.

It's time for the change "We the People" really need!

Let's choose freedom for a change...it is our natural right...it is the moral imperative--the dictate of our natural existence.

Like Jefferson said, "the Revolution isn't over yet."

We fought the war. Now it is time for the welfare.