Now that the treasury secretary, Geitner has revealed details of rendering good the bad financial assets clogging the lines of credit, how will the revaluation of these bad assets lead to economic recovery when the fundament, their underlying value, is still losing value?
That will be by government subsidy.
The difference between what the return on one dollar of the public sector purchase will bring and what a private sector purchase will bring gives value to the bad assets by the public sector subsidizing the private sector. This defines the "partnership."
Given the distribution of the benefit and the possible detriment, the relationship of this public-private mix is better described as a hierarchical subordination of value.
The private sector's dollar is considered more valuable because the public sector has the power (the value) to change the rules ex-post-facto and apply bills of attainder that will require legal action to prevent or reverse. Keep in mind, however, that these possible public acts would likely be reaction to public detection of the private sector's usurpation of value and to replevin the value.
Since government is considered to be THE absoute power that needs to be contained and checked, the object of distrust, despite the constitutional limitations, its dollar is discounted to reflect the possible detriment to the value of the private sector's dollar. Thus, the subsidy is considered by the treasury to be a necessary condition for economic recovery, and it is the model of political economy that made the assets to be cured bad to begin with.
If the public sector cannot be considered trustworthy, and with the private sector proving untrustworthy without close government regulatory accountability, this partnership is doomed to a marriage of primal, fundamental discontent. It is the formula for volaility, not stability. For the trageur, it is an arranged marriage made in heaven. For the taxpayer, it is a marriage made in hell.
The positive valuation for financial equities will be short lived. The previous resistance of 7500 on the DOW is likely to hold, being overbought beyond that, because the treasury plan to subsidize the bad assets does not support the fundamental value of the assets directly, but is likely to be the stimulus for short term trage on the assets as the value trickles down. The dollar will lose value and the price of commodities will rise to support the deflationary trend.
Monday, March 23, 2009
Gaming With Too Big to Fail
We will see the oversized financial firms being compensated by the public sector for wrecking the economy bargain to have it all their way with the threat of not participating in the government programs, or threatening to wreck it even more. That is what organizing to be too big to fail is for--to have it all your way. To be a tyrant.
Considering that "too big to fail" means they are indispensable, it is nothing but extortion. The fraud and abuse we have come to expect from these unexpendable economic entities is apparently not enough to demonstrate the extent of corporate hegemony.
Fascism is not the acceptable alternative to the threat of socialism.
What is too big to fail is easily cured with the public sector operating to ensure a free and unconsolidated marketplace in priority, the antithesis of "too big to fail." Fascism or socialism (another false binomial choice in which to toggle) is not the only alternative. The government action will not be ex-post-facto, it will not be a bill of attainder to punish corporates that have organized to get away with fraud, abuse and extortion. The progressive tax code needed to finance the third alternative will be to pluralize and destroy the tyranny that plagues The People.
The lack of action to progress the tax code renders the Obama administration's Keynesian stimulus plan equally unstimulating because it depreciates the value of the dollar. Energy and food prices will rise with a depreciating dollar, deflating the economy, what the stimulus spending is supposed to cure.
Understand that being able to dictate the cause-effect relationship of the dollar's value coupled with consumer prices is accomplished by organizing to be too big to fail, mainly by being able to restrict supply and thereby determine demand (deflation).
Being too big to fail does not suffer from deflation. It is a winner on the up cycle and the down cycle. It is being too small to survive that incurs all the detriment, and that detriment is consolidated into the benefit of being able to dictate the relationship, the ability to assess the value, control the bid, of commodities and currencies.
Ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority cures this organizational problem of being too big to fail. The economy is then dominated by small firms with highly adaptable and innovative efficiencies that are as much concerned with low prices, full employment and adding supply (a strong dollar) by default of the system than just making a profit and deflating the economy by default.
Large, too-big-to-fail corporates benefit from deflation. It is profitable. It strengthens the ability to tyrannize the marketplace. The favorable terms for the corporate to be offered by treasury secretary, Geitner to recapitalize the financial market is a demonstration of "success" of the business model that Federal Reserve chairman, Bernanke describes as inimical but inevitable. Tyranny is the efficiency that a consolidated and collusive corporate achieves (and that can be a socialist legitimacy as well) at the expense of all other efficiencies.
Arguing that the large size, and big profits, of the large corporate allows for risk taking that would not otherwise occur, providing productive and innovative efficiency that only organizing to be too big to fail can provide, is an empirically nulled hypothesis. Maintaining the argument at this point is just a lie intended to conserve the means of tyranny (the elitist model of power and political economy).
The treasury secretary's plan to recapitalize "too big to fail" (remember, huge profits were made and converted into private equity before big financial firms "failed" with the probability of global economic collapse, which means that they--what is inimical--really should be allowed to fail) will be a demonstration of the power of the corporate that will confirm by false induction the Hamiltonian model as the only possible alternative: the private sector's too-big-to-fail corporate structure trumps the value of government (the sovereignty of The People). The empirical measure of superior value will be the assessed value of return on investment for one private enterprise dollar over a government (The People's) dollar. According to Geitner's plan, "The Public-Private Investment Program," The People's dollar only has a fraction of the value a hedge-fund, private-equity dollar of the private sector. The value of the private sector's dollar is considered, and validated, as supra-sovereign, and in the same way, as Nietzsche describes it, the inexorable "will to power" that is "beyond good and evil."
The difference between the public and private sector's return on the investment is the reward, the vigorish, of the will to power (to organize to be too big to fail). The struggle for political-economic dominance, hegemony of power, is the reason for being and existence again being played out and verified by the gaming we see now in progress. If we want to be verified existential moral deficients, we buy into this philosophical construct and practical modeling of power.
If we want to ensure the good life (a moral existence), we should try the third alternative: ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority to cure the organizational problem of being too big to fail.
Considering that "too big to fail" means they are indispensable, it is nothing but extortion. The fraud and abuse we have come to expect from these unexpendable economic entities is apparently not enough to demonstrate the extent of corporate hegemony.
Fascism is not the acceptable alternative to the threat of socialism.
What is too big to fail is easily cured with the public sector operating to ensure a free and unconsolidated marketplace in priority, the antithesis of "too big to fail." Fascism or socialism (another false binomial choice in which to toggle) is not the only alternative. The government action will not be ex-post-facto, it will not be a bill of attainder to punish corporates that have organized to get away with fraud, abuse and extortion. The progressive tax code needed to finance the third alternative will be to pluralize and destroy the tyranny that plagues The People.
The lack of action to progress the tax code renders the Obama administration's Keynesian stimulus plan equally unstimulating because it depreciates the value of the dollar. Energy and food prices will rise with a depreciating dollar, deflating the economy, what the stimulus spending is supposed to cure.
Understand that being able to dictate the cause-effect relationship of the dollar's value coupled with consumer prices is accomplished by organizing to be too big to fail, mainly by being able to restrict supply and thereby determine demand (deflation).
Being too big to fail does not suffer from deflation. It is a winner on the up cycle and the down cycle. It is being too small to survive that incurs all the detriment, and that detriment is consolidated into the benefit of being able to dictate the relationship, the ability to assess the value, control the bid, of commodities and currencies.
Ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority cures this organizational problem of being too big to fail. The economy is then dominated by small firms with highly adaptable and innovative efficiencies that are as much concerned with low prices, full employment and adding supply (a strong dollar) by default of the system than just making a profit and deflating the economy by default.
Large, too-big-to-fail corporates benefit from deflation. It is profitable. It strengthens the ability to tyrannize the marketplace. The favorable terms for the corporate to be offered by treasury secretary, Geitner to recapitalize the financial market is a demonstration of "success" of the business model that Federal Reserve chairman, Bernanke describes as inimical but inevitable. Tyranny is the efficiency that a consolidated and collusive corporate achieves (and that can be a socialist legitimacy as well) at the expense of all other efficiencies.
Arguing that the large size, and big profits, of the large corporate allows for risk taking that would not otherwise occur, providing productive and innovative efficiency that only organizing to be too big to fail can provide, is an empirically nulled hypothesis. Maintaining the argument at this point is just a lie intended to conserve the means of tyranny (the elitist model of power and political economy).
The treasury secretary's plan to recapitalize "too big to fail" (remember, huge profits were made and converted into private equity before big financial firms "failed" with the probability of global economic collapse, which means that they--what is inimical--really should be allowed to fail) will be a demonstration of the power of the corporate that will confirm by false induction the Hamiltonian model as the only possible alternative: the private sector's too-big-to-fail corporate structure trumps the value of government (the sovereignty of The People). The empirical measure of superior value will be the assessed value of return on investment for one private enterprise dollar over a government (The People's) dollar. According to Geitner's plan, "The Public-Private Investment Program," The People's dollar only has a fraction of the value a hedge-fund, private-equity dollar of the private sector. The value of the private sector's dollar is considered, and validated, as supra-sovereign, and in the same way, as Nietzsche describes it, the inexorable "will to power" that is "beyond good and evil."
The difference between the public and private sector's return on the investment is the reward, the vigorish, of the will to power (to organize to be too big to fail). The struggle for political-economic dominance, hegemony of power, is the reason for being and existence again being played out and verified by the gaming we see now in progress. If we want to be verified existential moral deficients, we buy into this philosophical construct and practical modeling of power.
If we want to ensure the good life (a moral existence), we should try the third alternative: ensuring the competitive multiplicity of the marketplace, financed with a progressive tax code across all jurisdictions, in priority to cure the organizational problem of being too big to fail.
Federal Reserve and Treasury Action to Recapitalize Financials is Old School
What we need for economic recovery, reinvestment and stabilization is not what is now old school, status quo Keynesian economics that ensures the Hamiltonian model of political economy in priority.
Fed Chairman, Bernanke says it is not possible to have large financial institutions that are not too big to fail. While the chairman identifies the problem as an organizational one (and the chair of the nation's primary quasi-public/private financial institution admitting that is quite the coup), he nevertheless will not admit he is resorting to a passe' organizational model that needs to be thrown out.
The Hamiltonian model of political economy is an empirical failure. It always results in the volatile cyclical events that Bernanke decries as inimical to general economic health and social stability with the private sector causing economic crisis with support of the public sector, the tax authority, a quasi-public central banking system, and with the function to manage the effects (the negative externalitites: the retributive value) being neo-classically added. The model has evolved into a systematic complexity that is critical to its survival despite being an obvious empirical failure over and over again.
Bernanke alludes to the complexity of the system as both the problem and the solution, which is the first indication that change we need is not forthcoming. The complexity will be the medium in which to "manage" the system to fit the existing practical model that, while the means can be changed, determines conservation of the ends.
The system of banking, being critical to assessing value, for example, by who gets a loan and for what, is critical for the development of economic entities too big to fail and can, thus, control the value to be assessed and the assessment of the value. It is an absolute power that corrupts absolutely that decides, dictates, beyond having collateral or not, the success or failure of the non-elite with assessing the value of loyalty in service to the overlords, the owners, of the capital. It is an evolved form of feudalism that Thomas Jefferson argued was an unneccesary vestige of an evolving structure of power that the American Revolution and the new democratic-republican form of government was intended to prevent.
The American Revolution represented the expansion of sovereignty to prevent, according to Jefferson, what Hamilton wanted to ensure.
For Alexander Hamilton, the nation's first treasury secretary, the revolution represented an expansion of elite rule with a democratic legitimacy of power that would make the right to rule immune to revolution and beyond the claims of a sovereign, including The People. He set to bifurcating the power structure into public and private domains in which the private sector rules and the public sector supports and legitimizes, always having the support of the king (now The People), the sovereign, by default. It allows the legitimacy of power, the means justifying the ends, and the virtue of what is public or private, to be whatever the power elite say it is with their status or "class" being supra-sovereign.
The elite claim the vulgar status of sovereignty only when the means of power, the consolidation of the wealth, is threatened by action from the public sector, invoking constitutional prohibitions like ex-post-facto laws and bills of attainder that are argued as "punitive" measures designed to unjustly punish success in the private sector.
Hamilton's scheme of bifurcating the power structure, neither purely public or private, is intended to satisfy the element of democracy that verifies its existence, pluralism, with "two" elements of power that, operationalized with elitist control of the banking system and public finance (controlling the assessment of value), ensures the power structure always operates to conserve the collateral and the ability to distribute rewards and deprivations from the private sector based on loyalty to the values of the power elite. Those values extend specifically from the prime value of providing for the welfare of the rich in priority, like we have now. The two elements of power operate to provide a false pluralism acting as one system of power that defeats the distributive benefit of a democratic-republic while maintaining the democratic means (the pluralism) that justifies (verifies) the ends (the distribution) of power.
Hamilton's scheme of a verifiable pluralism in which the public sector (government) ensures the sovereignty of the individual private citizen ensures that some people are more equal than others. It provides the dynamic for crisis that Bernanke refers to as inimical to the general welfare, meaning that Hamiltonianism, despite his corrective measures being consistent with it, is unconstitutional since the general welfare is what the government is in business to provide; but, of course, Bernanke's technical status is "quasi" neither public or private. He is a tool of the private sector masquerading as a civil servant with the legitimacy of public service ensuring Constitutional outcomes with distributive value verified by the means justifying the ends.
While Alexander Hamilton provided us with an ingenious system for democratic means legitimizing the distributive benefit of unequal power so it may be defined as indivisible "with liberty and justice for all," two hundred years of boom and bust is quite enough evidence that the trickle-down model of public finance does not work if the goal is the general welfare. The Hamiltonian model is intended to ensure in priority the economic welfare of a small elite ruling from the private sector with the support and legitimacy of public (constitutional) authority through the cyclical process of boom and bust. The benefit, by definition, cannot be indivisible, and the application of Keynesian measures fits the model perfectly with a much needed element of adaptability to allow the status quo ante to appear as the means of change despite the divisibly distributive benefit.
Arguing that ensuring the welfare of the rich--ensuring the survival of an organizational technique that cannot be allowed to fail--is the general welfare is nonsense. It always has been. It is now! It dooms everyone but the elite to a tyranny of avarice, greed and all manner of stupidity, ignorance and amoral, if not deliberately immoral, behavior all for the "utility" of achieving the greatest good always to be announced with forever innovative means.
The next "ism" of a failed socio-political hypothesis is always lurking just below the horizon, reinvented to extract the economic value that supports the superior right to rule that is otherwise The Constitutional Right of The People.
Thomas Jefferson was right. The revolution is always "occurring." According to Jefferson, Alexander Hamilton's organizational technique of public/private finance that keeps a "reoccurring" debt obligation, with a regressive tax burden, will ensure it, and here we are.
The Fed's latest plan of action keeps the debt in a state of "reoccurrence." Keynesian economics is just an innovative means of recycling the debt, turning the economy into a perpetual-motion debt machine, politically and economically providing the highest return at the lowest possible risk.
Bernanke is not implying that technically organizing to be too big to fail needs to be deconsolidated into firms that are small enough to fail with investment from private equity. It is absurd to think private equity will invest without the no-risk/high return model of too big to fail fully in operation, and so treasury secretary Geitner's plan to "detox" the bad debt with a large leveraged return for private funds and a small simple return for public funds is purely representative of the Hamiltonian model.
It is in the best (divisible) interest of private capital to allow the Fed to inflate the economy with fresh capital (monetize the debt) to liquidate the leverage that became toxic and recycle that bad debt indirectly into the indebted economic rent that keeps the rich rich and the poor poor--Hamiltonianism.
No! It is clear. The Hamiltonian model needs to be junked!
The vast majority of Americans have a clear sense of ethical (indivisible) economic equity that has nothing to do with bills of attainder or ex-post-facto laws. These legal arguments, while appropriate for preventing the abusive power of kings, are being used as a ruse intended to discredit the call for equity and justice as mob rule (the political legitimacy of the Hamiltonian model to prevent the chaos of the ignorant masses). The People do not intend to persecute individuals, but to simply prosecute the systematically unjust, divisible distribution of wealth and power being falsely argued as an indivisible social benefit that prevents, rather than provides, a more perfect union.
The reinvestment to restructure the financial system must come from the existing capital that is consolidated. A progressive tax code is necessary to finance a safe, secure and easily accountable marketplace that is not dependant on the success or failure of any one firm, and is to be ensured by means of public finance in priority.
Fed Chairman, Bernanke says it is not possible to have large financial institutions that are not too big to fail. While the chairman identifies the problem as an organizational one (and the chair of the nation's primary quasi-public/private financial institution admitting that is quite the coup), he nevertheless will not admit he is resorting to a passe' organizational model that needs to be thrown out.
The Hamiltonian model of political economy is an empirical failure. It always results in the volatile cyclical events that Bernanke decries as inimical to general economic health and social stability with the private sector causing economic crisis with support of the public sector, the tax authority, a quasi-public central banking system, and with the function to manage the effects (the negative externalitites: the retributive value) being neo-classically added. The model has evolved into a systematic complexity that is critical to its survival despite being an obvious empirical failure over and over again.
Bernanke alludes to the complexity of the system as both the problem and the solution, which is the first indication that change we need is not forthcoming. The complexity will be the medium in which to "manage" the system to fit the existing practical model that, while the means can be changed, determines conservation of the ends.
The system of banking, being critical to assessing value, for example, by who gets a loan and for what, is critical for the development of economic entities too big to fail and can, thus, control the value to be assessed and the assessment of the value. It is an absolute power that corrupts absolutely that decides, dictates, beyond having collateral or not, the success or failure of the non-elite with assessing the value of loyalty in service to the overlords, the owners, of the capital. It is an evolved form of feudalism that Thomas Jefferson argued was an unneccesary vestige of an evolving structure of power that the American Revolution and the new democratic-republican form of government was intended to prevent.
The American Revolution represented the expansion of sovereignty to prevent, according to Jefferson, what Hamilton wanted to ensure.
For Alexander Hamilton, the nation's first treasury secretary, the revolution represented an expansion of elite rule with a democratic legitimacy of power that would make the right to rule immune to revolution and beyond the claims of a sovereign, including The People. He set to bifurcating the power structure into public and private domains in which the private sector rules and the public sector supports and legitimizes, always having the support of the king (now The People), the sovereign, by default. It allows the legitimacy of power, the means justifying the ends, and the virtue of what is public or private, to be whatever the power elite say it is with their status or "class" being supra-sovereign.
The elite claim the vulgar status of sovereignty only when the means of power, the consolidation of the wealth, is threatened by action from the public sector, invoking constitutional prohibitions like ex-post-facto laws and bills of attainder that are argued as "punitive" measures designed to unjustly punish success in the private sector.
Hamilton's scheme of bifurcating the power structure, neither purely public or private, is intended to satisfy the element of democracy that verifies its existence, pluralism, with "two" elements of power that, operationalized with elitist control of the banking system and public finance (controlling the assessment of value), ensures the power structure always operates to conserve the collateral and the ability to distribute rewards and deprivations from the private sector based on loyalty to the values of the power elite. Those values extend specifically from the prime value of providing for the welfare of the rich in priority, like we have now. The two elements of power operate to provide a false pluralism acting as one system of power that defeats the distributive benefit of a democratic-republic while maintaining the democratic means (the pluralism) that justifies (verifies) the ends (the distribution) of power.
Hamilton's scheme of a verifiable pluralism in which the public sector (government) ensures the sovereignty of the individual private citizen ensures that some people are more equal than others. It provides the dynamic for crisis that Bernanke refers to as inimical to the general welfare, meaning that Hamiltonianism, despite his corrective measures being consistent with it, is unconstitutional since the general welfare is what the government is in business to provide; but, of course, Bernanke's technical status is "quasi" neither public or private. He is a tool of the private sector masquerading as a civil servant with the legitimacy of public service ensuring Constitutional outcomes with distributive value verified by the means justifying the ends.
While Alexander Hamilton provided us with an ingenious system for democratic means legitimizing the distributive benefit of unequal power so it may be defined as indivisible "with liberty and justice for all," two hundred years of boom and bust is quite enough evidence that the trickle-down model of public finance does not work if the goal is the general welfare. The Hamiltonian model is intended to ensure in priority the economic welfare of a small elite ruling from the private sector with the support and legitimacy of public (constitutional) authority through the cyclical process of boom and bust. The benefit, by definition, cannot be indivisible, and the application of Keynesian measures fits the model perfectly with a much needed element of adaptability to allow the status quo ante to appear as the means of change despite the divisibly distributive benefit.
Arguing that ensuring the welfare of the rich--ensuring the survival of an organizational technique that cannot be allowed to fail--is the general welfare is nonsense. It always has been. It is now! It dooms everyone but the elite to a tyranny of avarice, greed and all manner of stupidity, ignorance and amoral, if not deliberately immoral, behavior all for the "utility" of achieving the greatest good always to be announced with forever innovative means.
The next "ism" of a failed socio-political hypothesis is always lurking just below the horizon, reinvented to extract the economic value that supports the superior right to rule that is otherwise The Constitutional Right of The People.
Thomas Jefferson was right. The revolution is always "occurring." According to Jefferson, Alexander Hamilton's organizational technique of public/private finance that keeps a "reoccurring" debt obligation, with a regressive tax burden, will ensure it, and here we are.
The Fed's latest plan of action keeps the debt in a state of "reoccurrence." Keynesian economics is just an innovative means of recycling the debt, turning the economy into a perpetual-motion debt machine, politically and economically providing the highest return at the lowest possible risk.
Bernanke is not implying that technically organizing to be too big to fail needs to be deconsolidated into firms that are small enough to fail with investment from private equity. It is absurd to think private equity will invest without the no-risk/high return model of too big to fail fully in operation, and so treasury secretary Geitner's plan to "detox" the bad debt with a large leveraged return for private funds and a small simple return for public funds is purely representative of the Hamiltonian model.
It is in the best (divisible) interest of private capital to allow the Fed to inflate the economy with fresh capital (monetize the debt) to liquidate the leverage that became toxic and recycle that bad debt indirectly into the indebted economic rent that keeps the rich rich and the poor poor--Hamiltonianism.
No! It is clear. The Hamiltonian model needs to be junked!
The vast majority of Americans have a clear sense of ethical (indivisible) economic equity that has nothing to do with bills of attainder or ex-post-facto laws. These legal arguments, while appropriate for preventing the abusive power of kings, are being used as a ruse intended to discredit the call for equity and justice as mob rule (the political legitimacy of the Hamiltonian model to prevent the chaos of the ignorant masses). The People do not intend to persecute individuals, but to simply prosecute the systematically unjust, divisible distribution of wealth and power being falsely argued as an indivisible social benefit that prevents, rather than provides, a more perfect union.
The reinvestment to restructure the financial system must come from the existing capital that is consolidated. A progressive tax code is necessary to finance a safe, secure and easily accountable marketplace that is not dependant on the success or failure of any one firm, and is to be ensured by means of public finance in priority.
An Organizational Problem
President Obama advised citizens not be seduced into becoming bankers because of the level of compensation, but to be productive in sectors that add real GDP and will be disinflationary (adding supply and adequate income) rather than deflationary (reducing income, or demand, to conserve supply).
The rhetoric incorrectly suggests a non-structural, non-organizational problem.
Citizens, of course, seek employment to maximize income in most cases independent of the structural dimension of the economy, largely out of their hands. The high compensation is available through organizational means that accumulates the capital to pay the high compensation, limiting the incentive to entrepreneurially compete for the profit and innovate quickly to market so that the means to disinflate the economy becomes the means to deflate the economy and reconsolidate the compensation paid, or the crisis we are in now.
The structural, organizational variable largely determines the decision to be a banker, i.e., organizing to accumulate and consolidate the capital causes the inefficiency that the president refers to.
Deconsolidate the capital and pluralize the marketplace. Both the efficiency and the freedom to pursue it will naturally appear as the fundament of a healthy economy with minimal volatility, less speculative risk and non-market distortions.
Deconsolidating the capital begins with a more progressive tax code, which not only satifies the sense of equity, but provides the means (the capital) to maximally innovate to add supply with an adequacy of income that renders catastrophic cyclical crisis an obsolete relic of the past.
The rhetoric incorrectly suggests a non-structural, non-organizational problem.
Citizens, of course, seek employment to maximize income in most cases independent of the structural dimension of the economy, largely out of their hands. The high compensation is available through organizational means that accumulates the capital to pay the high compensation, limiting the incentive to entrepreneurially compete for the profit and innovate quickly to market so that the means to disinflate the economy becomes the means to deflate the economy and reconsolidate the compensation paid, or the crisis we are in now.
The structural, organizational variable largely determines the decision to be a banker, i.e., organizing to accumulate and consolidate the capital causes the inefficiency that the president refers to.
Deconsolidate the capital and pluralize the marketplace. Both the efficiency and the freedom to pursue it will naturally appear as the fundament of a healthy economy with minimal volatility, less speculative risk and non-market distortions.
Deconsolidating the capital begins with a more progressive tax code, which not only satifies the sense of equity, but provides the means (the capital) to maximally innovate to add supply with an adequacy of income that renders catastrophic cyclical crisis an obsolete relic of the past.
Thursday, March 19, 2009
Punitive Taxation
The tax policy discussion surrounding the use of tax money and assessing the value of executive compensation schedules of TARP recipients is a micro case study in the theory of retributive value described in several articles at griffithlighton.blogspot.com.
The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).
Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.
Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.
A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.
The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.
It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.
It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).
The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).
The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.
Yes, we are smarter than that.
The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!
Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.
The value assessed by the public sector to be retributed to the taxpayer for the use of public financing, at this point, is 90 to 100 percent of the value assessed by the private sector with the "punitive" tax rate assessed proportionate to total income (a progressive tax rate).
Progression of this punitive rate is sensitive to the measure of fairness to retribute the value as discussed in the previous article, "Your Tax Money at Work," but it took a punctuated micro event for a progressive tax rate to gain serious credibility beyond mere rhetoric for a practical macro application. It indicates that the will to employ the best measure for recovery is to be a populist gaming event to be utilized at the micro level. It is political gaming that will continue to slow implementation of policy that will quickly and most effectively achieve economic recovery and reinvestment.
Notice that neither the executive or the legislature is expressing the efficacy of quickly progressing the tax code to most efficiently achieve the fairness the taxpayer is demanding, or to most efficiently retribute the value. While the president expresses the need to progress the tax code, the commitment appears to fade into the tactical designs and maneuvers of the legislative leadership to win a game. The needed measure and its full effect will be likely compromised.
A rapid recovery will most effectively occur from the bottom up facilitated by a progressive tax code, giving value to the currency now suffering depreciation (inflation) from the Fed's newly announced trillion dollar, Keynesian measure to finance the recovery from the top down by buying treasury bonds and expanding the debt obligation.
The latest Federal Reserve measure to give liquidity to the credit market expands the money supply. The expansion is not only anti-deflationary by making credit easier to increase purchasing power, but to give liquidity to the previously overleveraged assets to be trickled down, or what does not verifiably work.
It has been critical to quickly move forward with a progressive tax policy to avoid the Keynesian measures that will take us right from a deflationary to an inflationary trend. That will, in turn, sustain the recession as prices increase with no growth, regressing back into the stagflationary phase of the cycle. Not exactly progress.
It is not that economic policy is being poorly managed. It is being managed to fit the Hamiltonian model with economic recovery (expansion) being dependant on borrowing the capital from a small class of economic elits--the upper class (the accumulation phase of the macro cycle), to be paid largely by the non-elite (the distribution phase of the macro cycle).
The Fed's trillion dollar expansion of the money supply in the form of buying treasury bonds renders economic expansion dependant on a debt to be paid to the creditor from the wealth trickled down. Economic expansion is, then, a way to pay the debt, and not an economic recovery per se. Nor can the recovery be considered economic expansion since what is gained has to be repaid. It is the means to service the debt without the debtors suffering enough detriment to demand immediate and full retribution of the value (what is classically called the subsistence wage; neo-classically, Keynesian economics allows the retributive threshold to be mainatined at a much higher level without sacrificing the accumulation of value, expressed as the public debt instead of people starving in the streets).
The bonds the Fed is buying represent borrowed money, a debt, that has to be repaid to the people that have the money to lend--the upper class. The cycle is completed into recovery and is ready to be repeated. The cyclical change will not be the change We The People need, just the status-quo, cyclical trend in progress that will be argued as change.
Yes, we are smarter than that.
The first step to change the operational model in which technocrats are to confirmably operate to execute "the change We need" is to legislate a progressive tax code post haste!
Conservatives want a progressive tax code to be considered "punitive" like the taxation being levied on the executive compensation of TARP recipients to suggest it is a temporary change. Otherwise, it is the means for switching to a more pluralistic operational model of power, or the change we need. Both parties are part and parcel to preventing this change with a false pluralism of competing ideologies and practices. At this pint in our political-economic history, partisan politics is not fooling very many people very much of the time.
Your Tax Money at Work
When it was decided that tax money would be used to bail out financial firms too big to fail, I asked the question: what is the probability the money will be used to continue the practices that caused the financial crisis considering that causing the crisis is profitable?
The probability turns out to be, of course, 100 percent.
Your tax money has been, and will be, used to finance credit default swaps in a deflationary trend. The taxpayer directly pays, by default of the system, the profit to be had from a failing economy through bonded insurance derivatives that the interlocked firms receiving TARP funds--the network of integrated financials too big to fail--buy and sell. The direct payment of the profit is in addition to the indirect benefit that the deflationary trend produces in the form of consolidating capital and markets.
AIG (your tax money), for example, will be paying hedge fund operations within the integrated system that bet the economy will falter and credit (bonds) will default. Considering that allowing wealth to accumulate into the upper class (consolidation of the capital) always results in recession, there is virtually no risk to the CDS buyers who can be, and are, also CDS sellers (remember, it is an "integrated" system). The profit is systematically ensured with no risk and paid by the taxpayer, which is not the hedge funds since they are exempt (a regressive tax code). The systematic model is state capitalism, not socialism though both can be argued as the same thing with being "too big to fail" the determining (controlling) variable.
So, we see that the effect (the profit) is systematically caused by a circular and recycled accumulation of the effect organizationally integrated and paid largely by The "little" People (regressive taxation) so that the reward is always disproportionate to the risk to conserve the status quo of disproportionate (elitist) power, or Hamiltonianism.
This system of finance, this business model based on being too big to fail in order to dictate the marketplace and control the bid, literally has the victim taxpayers (the non-elite that suffer a regressive tax burden) paying the wrongdoer to do the wrong and finance the means to do it all at the same time. It is a system of finance that can hardly be anymore unjust and inequitable. It is the model of finance that Thomas Jefferson so strongly opposed (the Hamiltonian model), with the inequity having become evermore visible, disfunctionally passe' and a model of absurdity.
For the small class of people accepting public funds to stabilize the economy, using it to cause a profitable instability with a circular system of effects while telling the taxpayer we should fear socialism all at the same time, fascism is not the acceptable alternative!
Progress the tax code so that your tax money is working FOR YOU, and not against you!
Now is the time to do it!
The probability turns out to be, of course, 100 percent.
Your tax money has been, and will be, used to finance credit default swaps in a deflationary trend. The taxpayer directly pays, by default of the system, the profit to be had from a failing economy through bonded insurance derivatives that the interlocked firms receiving TARP funds--the network of integrated financials too big to fail--buy and sell. The direct payment of the profit is in addition to the indirect benefit that the deflationary trend produces in the form of consolidating capital and markets.
AIG (your tax money), for example, will be paying hedge fund operations within the integrated system that bet the economy will falter and credit (bonds) will default. Considering that allowing wealth to accumulate into the upper class (consolidation of the capital) always results in recession, there is virtually no risk to the CDS buyers who can be, and are, also CDS sellers (remember, it is an "integrated" system). The profit is systematically ensured with no risk and paid by the taxpayer, which is not the hedge funds since they are exempt (a regressive tax code). The systematic model is state capitalism, not socialism though both can be argued as the same thing with being "too big to fail" the determining (controlling) variable.
So, we see that the effect (the profit) is systematically caused by a circular and recycled accumulation of the effect organizationally integrated and paid largely by The "little" People (regressive taxation) so that the reward is always disproportionate to the risk to conserve the status quo of disproportionate (elitist) power, or Hamiltonianism.
This system of finance, this business model based on being too big to fail in order to dictate the marketplace and control the bid, literally has the victim taxpayers (the non-elite that suffer a regressive tax burden) paying the wrongdoer to do the wrong and finance the means to do it all at the same time. It is a system of finance that can hardly be anymore unjust and inequitable. It is the model of finance that Thomas Jefferson so strongly opposed (the Hamiltonian model), with the inequity having become evermore visible, disfunctionally passe' and a model of absurdity.
For the small class of people accepting public funds to stabilize the economy, using it to cause a profitable instability with a circular system of effects while telling the taxpayer we should fear socialism all at the same time, fascism is not the acceptable alternative!
Progress the tax code so that your tax money is working FOR YOU, and not against you!
Now is the time to do it!
The Economy is Job One
Warren Buffet, billionaire investor, says tending to the economic crisis is job one.
That it is, and for the most part, that is where taking advice from billionaires should end.
If we are to prioritize the action to be taken by the new administration and congress, with the economy being job one, progressing the tax code is the very first step to take in priority. Instead, however, action was immediately taken to finance healthcare with a regressive tax burden. The leadership was so concerned with winning a political game that the very measure to nourish economic health was abandoned to win it.
This kind of political gaming, to win at any cost, is not the model of pragmatism, but a self-satisfaction that is characteristic of a detached elite. The cost is that we do not have the benefit of a more progressive tax code any time soon to, for example, regain the multi-million dollar AIG executive compensation with at least some good measure of being both legal and properly equitable. Instead, it appears everything we are doing is frought with a good measure of inequity.
If the Obama administration is looking for advice, here it is: progress the tax code and do it now! Utilize the gamers and the gaming in the administration and congress to achieve the priority. Doing this will be Strong Pareto Optimal as opposed to what we have now being all of a sub-optimal benefit.
We need to recapitalize the economy from the accumulated benefit. That is accomplished through progressive taxation. The cyclical squeeze of illiquidity (deflation) is putting small businesses out of business and it is more difficult for start ups. The data is there to support the hypothesis that the classical effect of the cyclical trend is consolidating the capital and markets.
The capital needs to be deconsolidated and made available through the small business administration to provide a competitive multiplicity of the marketplace, and all of the Strong Pareto Optimality that comes with it. It can't be anymore expensive, certainly no more an onus, than bailing out what is "too big to fail." Quit alluding to it, gaming with those that are too big to fail, and just do it!
Pluralizing the marketplace with a progressive tax code, with no exemptions, renders the business model of "too big to fail" the model of inefficiency that it really is by providing an empirical comparison--an empirical measure of efficiency, continuous improvement and accountability, both micro and macro, that being too big to fail cannot, by definition, provide.
Everybody benefits (Strong Pareto Optimality), even a billionaire looking for accurate valuations and strong economic fundamentals, like Warren Buffet.
There it is, all the advice you need but are not likely to fully get.
That it is, and for the most part, that is where taking advice from billionaires should end.
If we are to prioritize the action to be taken by the new administration and congress, with the economy being job one, progressing the tax code is the very first step to take in priority. Instead, however, action was immediately taken to finance healthcare with a regressive tax burden. The leadership was so concerned with winning a political game that the very measure to nourish economic health was abandoned to win it.
This kind of political gaming, to win at any cost, is not the model of pragmatism, but a self-satisfaction that is characteristic of a detached elite. The cost is that we do not have the benefit of a more progressive tax code any time soon to, for example, regain the multi-million dollar AIG executive compensation with at least some good measure of being both legal and properly equitable. Instead, it appears everything we are doing is frought with a good measure of inequity.
If the Obama administration is looking for advice, here it is: progress the tax code and do it now! Utilize the gamers and the gaming in the administration and congress to achieve the priority. Doing this will be Strong Pareto Optimal as opposed to what we have now being all of a sub-optimal benefit.
We need to recapitalize the economy from the accumulated benefit. That is accomplished through progressive taxation. The cyclical squeeze of illiquidity (deflation) is putting small businesses out of business and it is more difficult for start ups. The data is there to support the hypothesis that the classical effect of the cyclical trend is consolidating the capital and markets.
The capital needs to be deconsolidated and made available through the small business administration to provide a competitive multiplicity of the marketplace, and all of the Strong Pareto Optimality that comes with it. It can't be anymore expensive, certainly no more an onus, than bailing out what is "too big to fail." Quit alluding to it, gaming with those that are too big to fail, and just do it!
Pluralizing the marketplace with a progressive tax code, with no exemptions, renders the business model of "too big to fail" the model of inefficiency that it really is by providing an empirical comparison--an empirical measure of efficiency, continuous improvement and accountability, both micro and macro, that being too big to fail cannot, by definition, provide.
Everybody benefits (Strong Pareto Optimality), even a billionaire looking for accurate valuations and strong economic fundamentals, like Warren Buffet.
There it is, all the advice you need but are not likely to fully get.
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