Energy Futures, Healthcare and Controlling Deflation: Recognizing Trend Indicators in the Gamma Risk

The stated primary mission of the new congress and administration is to control the deflationary trend. Control of macro trends requires command measures that produce a gamma risk. It is a risk that is purely political with economic consequences.

Not only are trends reliably indicated by identifying the gamma risk, but practical solutions to macro-economic problems are also indicated as the risk factor is created and managed with the public demand for resolution.

Americans need to fully recognize that the source of the nation's economic crisis is a massive redistribution of income into upper income classes. Deflation is the persistent, verifiable result.

Consolidation of capital, industry, markets, and income, always results in crisis. Unwillingness to accept this fact condemns us to suffering the effect of economic crisis both now and in the future.

Solutions that allow the capital to remain consolidated and managed by the determination of elits applies the problem as the solution.

Without treating the cause, the effect will persist. "Change we really need" will just be a perpetual mantra of self-inflicted suffering.

The redistribution of income that has resulted in a massive reduction of the average income and household net worth is by indirect, systemic means. No one came to your door and robbed you directly. No one's wealth was directly plundered by marauders of the moyenage.
The means of accumulation has evolved into the elegance of indirect systematic process--the systemic risk we hear so much about to be managed.

Using futures to control and plan our economy, oil futures mainly, is incurring a gamma risk as the CFTC begins shining light on this "dark" (unregulated) market.

The slope of the economic recovery is determined by the flow of a consolidation of capital of unprecedented proportion. The effect is the deflatonary trend that dominates the current economic landscape and that the public sector is to reverse without dictating the marketplace, or destroying the pluralistic legitimacy of free-market economics.

Since a high concentration of capital is a blatant indicator of the ability to command and control economic trends, the activity must be hidden, or dark, in order to maintain a free-market legitimacy.

The Obama administration has found taking control of the economy requires creating a gamma risk, forcing capital into pro-growth investment. The private sector is leading. The public sector is reacting, or following. The effect of a slow recovery will then be falsely blamed on government intervention "causing" (in reference to a time-series that is not a causal relationship) the long, slow slope of the trend, deflating the wages and salaries that make for a quick recovery.

While the CFTC's action appears to be adversarial (protecting the public in lieu of free-market economics), the gamma risk is really a complete organizational model operationalized to minimize that risk. It is the bureaucratic model of power and political ecnomy. It is a command and control (elitist) model, not a free-market (pluralist) model.

As the consolidated capital moves out of dark, defensive positions, it moves to support a cyclical trend. Private equity and hedge funds are now organizing holding companies for distressed properties, for example, that will complete the consolidation of property by means of classical capitalism and resell it to the dispossessed in economic recovery. The recovery is thus indicated.

Neo-classical measures, like Keynesian stimulus and regulatory reform, are props to secure a free-market legitimacy for the practical operation of an organized command and control. It is a fraud, a systematic tyranny that needs to see the light of day.

There is no distinction of public and private sectors. The gamma risk is created and operationalized to secure a legitimate means of command and control, and mired in complexity to shield the tyranny from the light of day.

The amorphous distinction between what is public and private naturally evolves into a practical recognition of non-distinction.

The tendency for public function to be operationalized with private enterprise is not necessarily adversarial.

Operating in priority, the public sector can operate to maximize economic efficiencies by ensuring a free and unconsolidated marketplace. It is just as well accomplished as conserving the inefficiencies and crises of consolidated capital, industry, and markets with technical corrections in posteriori.

While not difficult to administer, government that ensures a free and unconsolidated marketplace in priority is strongly resisted because it will maximize growth through a more equitable distribution of income and wealth rather than "conserving" supply by reducing demand.

The reduction of demand reduces growth by causing a surplus. The surplus is created through high prices. The result is high profit margins with slow-to-no growth. This stagflation is contrary to the legitimacy theory that high profits indicate the impending investment for growth (adding supply and controlling inflation).

In practice, the high-margin accumulation (the surplus that deflates growth) is invested in the organized means of achieving a high margin with little or no growth (consolidation of capital, industry and markets). CIT, if allowed to fail, for example, will not be rendered merely dissolute, its business will be consolidated.

The practice of organized consolidation is contrary to the theoretical economic efficiency (the legitimacy) it purports to maintain.

Allowing industry and markets to consolidate is supposed to achieve an economy of scale that promotes growth (investment) on a "scale" that would not be likely without it. Big profits, supposedly, minimize the risk and maximize return, thus causing investment.

Why, then, if consolidation of the capital is so efficient, is there so much systemic risk to be controlled? Why is there $4 trillion on the sidelines when the risk has been minimized by allowing the capital to consolidate for investment and economic growth? Why is the economy contracting and not expanding at a high rate of efficiency, and how can an investment bank have record profit (the measureable effect of growth) without economic expansion?

The result of consolidation, rather, is slow-to-no-growth, and the lack of economic expansion is the source (the cause) of the profit. The profit, then, is not the measure (the effect) of growth, and the profit without growth must be explained away as "a jobless recovery."

A jobless recovery is no recovery at all. It is a deliberate control of the deflationary trend (causing a risk that demands management and produces indicators), redistribiting wealth and income from the bottom to the top, indicative of a command, not a free-market, economy.

A gamma risk must be created to gain the legitimacy of "organized consolidation equals optimal growth." It is necessary to cause a distribution, the incentive, that produces growth. The profit may then function more like a measure of, as well as the incentive for, achieving growth rather than a means of restricting it to enhance the marginal profit. The profit will not merely be a measure of the efficiency to extract value without growth, or as Obama's chief economist describes it, "suffering the effects of an overleveraged economy for some time to come."

The "suffering" (the sacrifice) is the extraction of value without growth, consolidating the value into the upper class of incomes (an accumulated cost with an equal accumulated benefit). The current congress and administration has done nothing to relieve that inequitable burden, and everything to support it, with regressive tax and subsidy measures.

The proposal to fund healthcare with a progressive tax, for example, will do little if nothing to control costs, which will keep income consolidated in the upper income class. It is the problem offered as the solution. It is deflationary just like the SCHIP, redistributing income to the upper income class.

The legitimacy of the general, collective benefit--increased healthcare coverage--is more than offset by the increased cost due to more money being made available for price increases. It is a reliable means of delivering the price, and the profit, the healthcare system commands. It will be made so unaffordable that government finance is the only option.

The healthcare plan now being offered will force the market into the public option where the price, and lifestyle choices, are more in command and control of elite authority. It is a raketeering scheme: a means of rigging the market with the legitimacy of public (collective) process, gaining a false legitimacy, claiming the consolidation is by free market forces. The force is from the top down (by elite authority), however, not the bottom up (by The People).

The profit is forced into a gamma risk that must be politically managed, or determined; and within that elitist process of self-determination (the freedom of choice) will be complex schemes of tax and subsidy with a regressive burden--maintenance of the cost-benefit structure--largely conserved.

Talking about the total political-economic effect is taboo, not because healthcare professionals only have the good intention of providing for the public good, but because it provides a zero-sum gain to their income at the expense of the public good. It exposes a racketeering scheme of consolidating the means to command the price as well as dictate tastes and preferences (exactly the opposite of freedom and what a free market is) to accumulate a benefit that far exceeds the public good.

The benefit is extorted with the threat that healthcare, the public good, will not be adequately provided without the accumulation of the benefit (without supporting a deflationary trend that bankrupts the average income, making healthcare even more unaffordable, along with everything else).

We see then, for example, the unwillingness to cut payments to Medicare doctors despite the overwhelming public demand for reducing the cost of healthcare. Controlling the cost incurs a substantial gamma risk (a risk that is both political and economic).

The doctors will not deliver the healthcare without commanding the price which, of course, makes it less affordable unless it is paid by a third party payer--monetized by the government--in which the sky is the limit. The scheme is less to do with providing healthcare than to maximize the accumulation of income (the measure of success). It is an extortionist command and control that has nothing to do with a free market, but the distribution of costs and benefits by decree, successfully managing the gamma risk by operationalizing it with the concept of providing the public good.

The argument is that maximizing the accumulated benefit (and the associated cost, like a budget deficit) maximizes the public good. It is the Hamiltonian argument that policies and programs benefiting the accumulation of wealth and power in priority is the greatest good, or the general welfare.

The consolidation of power is for our own good, so the Hamiltonian argument goes. Healthcare that is so expensive to crowd out discretionary spending choices (which includes the effect of sin taxes), or in command of limiting other market, lifestyle choices in order to be affordable is nothing but an abject tyranny! It will not improve health, it will make life less affordable, be a restraint of economic activity (limiting the economic activity to black markets, facilitating a criminal element), and give a false legitimacy to tyrannical organizational tendencies inimical to a free society.

It creates a society of elite control in which freedom is less an inalienable right than the anachronistic privilege of a few self-satisfied autocrats to deliver the ignorant masses into the torment of their righteous ways and subject them to the means of ensuring the consolidation of their power.

The elegant means that has evolved to command and control is to support a deflationary economic tendency by allowing, with a false but plausible, pluralistic legitimacy, the accumulation of income in an upper class of incomes (like our healthcare system does and will, apparently, continue to do); by means of cyclical macro-economic trends to support the Hamiltonian model of power and political economy.

The allowable direction of healthcare policies and programs, combined with the scheme to manipulate the price of energy and other commodities through futures markets, clearly indicates a determination for a long, slow deflationary trend.

The healthcare plan offered by the new congress and administration is not the change we need. It is an innovative way to again offer the problem as the solution by clothing it with progressive taxation.

The progressive tax policy is specifically identified to fund healthcare, not reverse the deflationary trend. That would be to admit that a more progressive tax code can effectively reverse a deflationary trend.

The progressive tax to fund healthcare will, rather, support the deflationary trend by providing the funding for highly inflated costs. The cost is supported (monetized) by means of public finance and regressive tax burdens like the SCHIP, providing the funding for price increases, which is why the AMA endorsed the proposed plan.

With so much deflationary pressure, it is necessary to induce a gamma risk to temper the deflationary trend (the lack of purchasing power, or liquidity crisis).

Where a distribution on the accumulation of income in the upper income class does not sufficiently occur, it will be induced to "trickle down" by government intervention to control the depth and breadth of the crisis without defeating the effect of consolidating the wealth. The result will be the so-called "jobless recovery."

By inducing the gamma risk, the profit (the accumulation of income) is rendered more like an effect (the measure of effectiveness) rather than the cause of economic growth (like providing healthcare) in a positive or negative trend.

Inducing a regulatory reform like regulation of derivatives, or as in the case of healthcare, the public sector competing with the private sector in a duopoly (a dummy variable, a tyranny, not to be confused with a free-market pluralism), is intended to induce a free-market effect, or a credible legitimacy of the process.

Introduction of the gamma risk renders both the desired effect (the profit) and the interpretation of the effect (as a measure of effectiveness, or success) with the means-to-ends legitimacy required of a collective process be it deemed public, private, or both. It reconciles the cause with the effect by adjusting for the externalities (the retributive value) to maintain, or to conserve, the overall distributive value that causes the problem, the crisis, to be solved.

The proposed progressive tax to fund healthcare, then, for example, will not effect the provision of healthcare by increasing income and reducing costs, but by providing the funding through tax and subsidy. The gamma (political) risk is then shifted back to the consumer where the distribution of income (the determinant of the ability to pay) is converted into being dictated preferences and the distribution of costs and benefits by a not always easily visible and directly accountable ways and means (by command and not demand).

In the case of American healthcare, the way it is now, the profit is more a measure of accumulating wealth and power by maximizing the cost and securing the means to pay for it without sacrificing the accumulated income to lower income classes. It is organized to efficiently provide a profit (the measure of effectiveness), not necessarily to "effectively" deliver healthcare, which is what the profit margin is supposed to be effectively measuring.

The high cost and the number of Americans that are priced out of the market (rationing) or go bankrupt participating supports the pro-profit hypothesis of healthcare policies and programs. Nor is there any evidence to suggest it being nulled any time soon with the latest proposals designed to assure the maintenance of healthcare incomes at the expense of consumers, which supports the deflationary trend.

The reason the recession continues to track a broad and deep trend is not because of a technical error, a miscalculation of how bad it really is, but because the policies and programs of the congress and the administration have supported it, and that support is to continue.

With, for example, a general progressive tax burden on the consumer, rather than a specific value-added burden on providers, financing the healthcare system will continue to be deflationary because the income, the ability to pay, will be retained at the top, which requires a regressive scheme to keep it there. It will not satisfy the requirement for a more progressive tax code to reverse the deflationary trend any time soon and provide the distribution of income necessary for consumers to decide what they want, at what price, with the profit properly being the measure of that success or failure--more like what a free-market economic model really looks like.

Taxing the value (the increased price) as it is added, discourages the behavior that increases the cost, just like taxing tobacco reduces smoking.

A tax that increases with the unit of value added will collect revenue and control costs at the same time by directly taxing the accumulated benefit where it is added without any misdirection or misattribution--where the price is marginally increased as determined by the provider on command.

Even if an excess of value added is not discouraged by the tax, the value is nevertheless recycled to pay it. Even better, the value is redirected to the consumer (retributed) to reward or deprive as they see fit, in a free market fashion, so that the price (the cost) is demanded rather than merely commanded by the provider. This will provide the income necessary for free-market mechanics to occur with a disinflationary, rather than a deflationary, effect; increasing the income needed to control the cost rather than pulling it up at a high rate each year like we have now.

The way it is now, America's healthcare system reduces the income necessary for the consumer to demand cost control. Rather, the cost (the margin) is commanded by the provider and paid largely by government finance. Controlling the cost is a function of the gamma risk (a command function): providing the income--the value added--that is redistributed into upper income classes and deflates the economy.

Disinflation requires the value be credited the consumer, not retained by the government because the large pool of public money will be misdirected through political process, resulting in an indirect means of collecting the deflationary value added by operation of tax and subsidy.

Redirecting the value added to the consumer--giving the consumer the power to control (choose) the cost by increasing "discretionary" income--will be more in keeping with a free-market model, a direct democratic process, in which the legitimate collective outcome is directly supported (caused by) the choice of individual action, unlike the decision to tax tobacco.

Taxing tobacco use minimizes choice (income) to maximize the revenue. Like a "command" rather than a market "demand" price, it pays the cost to excess without any competitive incentive to reduce it. The result is a deflationary rather than a disinflationary, "discretionary" income effect that very clearly indicates (causes) stop and reversal of a recessionary trend.

With the consumer's dollar vote available to be used in any other sector (increasing income through the tax on the value added), the healthcare sector must compete for that dollar by reducing the cost; something healthcare will not do as long as the funding is readily available by means of tax and subsidy (public finance) and by rigging prices through the AMA's price schedules.

Mandating insurance just rigs the price. It acts to support the price because it eliminates the discretionary, disinflationary value of free-market choice, making it less affordable. There is nothing more efficient than redirecting (retributing) the value to the consumer.

The tobacco tax, for example, increases healthcare costs with evermore anticipation of more funds always being made available for price increases (the value added), which provides evermore power to finance political campaigns that will provide the regressive tax and subsidy schemes to finance it.

The tax and subsidy scheme to finance healthcare, even as it is now being shrewdly presented with the element of a progressive tax by the Obama game masters, is inflationary. The cost is pulled up with available funding, which in turn pushes the need to tax, allowing for a deflationary accumulation of income. The deflationary spiral is easily defeated by the tax on the value--the price increase--as it is added.

Without reversing the trend, the final result of the upward redistribution of income is stagflation. It is an economic condition that is also accompanied with a financial volatility caused by conflicting trends driven by short-term accumulations (deflation) and distributions (inflation) of a consolidated capital (stagflation). These are the short term oscillations that the CFTC is now identifying as excessive speculative demand that deflated the economy, and continues to control the trend.

While wealthy speculators (hedge and private equity funds) were engineering the deflationary trend, the CFTC attributed the cause to fundamentals. Now the CFTC says it was speculation in commodity futures, indicating a gamma risk that will vector the slope to a more positive trend, indicating a long, slow recovery.

As the accumulation of income is largely invested in speculative demand instruments, like commodity futures, a high return with a low risk is ensured, provided by the mere mass movement in and out of the markets. The dynamic is the means by which the net worth of the average income is consolidated, supporting the volatility and the ability to command the direction of the economy and duration of its cyclical trends. It is not a free-market dynamic and solicits the demand for a gamma risk to ensure a technical correction.

In the case of healthcare, the consumer is being offered a "healthcare exchange." Something that resembles a free market without relinquishing "control" of it, most importantly the distribution of income (the cost control) that determines the ability to command economic trends.

Since the demand for healthcare is relatively inelastic, like the demand for energy, allowing for its consolidation allows for the command and control of income distribution and, thereby, the means to command and control the economy.

The demand dimension (the need) determines the ability to command the supply, and thus the price and quality. Here, if a free market mechanism is not assured in priority, is where the demand for government intervention (the gamma risk) is the greatest. It is where there is the greatest potential for command and control by consolidated organizations instead of the individual in the marketplace.

The command and control is achieved with the ability to determine the flow of income, or the ability to pay. The means of rewards and deprivations is the determinng variable.

The ability to pay, the means test, is the typical criterion for participation in government programs with the biggest cost (and benefit). Income is the determining variable, and the demand, the need, is not limited to the needy. It also controls the slope of deflationary trends and protects the benefit (the income distribution) from the accumulation of a retributive value. Distribution of that value over time is the larger part of creating and managing the gamma risk.

In order to maintain the determining causal variable (income distribution), it is necessary to maintain it on the effect side of the equation. Programs tend to be reactive, providing relief without a cure.

A proactive measure requires a redistribution of income; what the conservative element says is inimical to a free and productive society and the new congress and administration apparently relucts, advancing largely remedial, relief-oriented measures.

Where the free market does not properly obtain there is a big demand for government, and we see a big demand for government intervention in the healthcare space.

Government intervention (the gamma risk) should be limited to providing what the demand for it indicates is fundamentally lacking--the free market mechanism. That will limit the risk to curative measures. Remedial measures provide relief, not solutions, and condemn us to an endless sea of reformative rhetoric that tends to anomie and skullduggery.

A more free-market model, with the profit being the measure of effective healthcare, provides the reward (the measure) of effectiveness as determined by the consumer. Otherwise, the price, preferences and distribution of rewards and sanctions (the profit measure of effectiveness and satisfaction) are dictated by elits in lieu of free-market mechanics.

The AMA argues, of course, that healthcare professionals must exercise a tyranny in the marketplace to secure the public health. The argument for an authoritarian, if not totalitarian, model is not to be mistaken for the adequate provision of public health or a necessary condition for the adequate provision of any public good!

With a gama-risk intervention, the profit is rendered more like the legitimate effect of a free-market, pluralistic model rather than the means of restricting growth or rigging prices. The profit margin (the distribution of costs and benefits, or income) seems less an act of deliberate deprivation, like pricing consumers out of the market or bankrupting them. Whether it is by the cost being solely determined by the provider/producer or a tax on lifestyle choices, or both, the benefit has a deflationary cost (a lack of purchasing power). Maintaining the benefit supports the deflationary trend and elicits the gamma risk.

According to the Obama administration's chief economic advisory, the lack of purchasing power (the over-accumulation of income in the upper class--the liquidity crisis) will result in a long deflationary trend because average income classes will be saving and paying down accumulated debt for some years to come (the paradox of thrift). Accordingly, the solution to this "problem" (the sacrifice, the deprivation) is to let it play out. Eventually the capital will be so over-accumulated that the only thing left for it to do is to be distributed to reverse the trend. It is the classic model of consolidated capitalism that elicits the risk.

If we were expecting something like "change we really need," the expectation is suffering a miserable failure.

Reversing the trend can be accomplished without waiting for the wealth to "trickle down," facilitated only by a gamma risk intervention that will keep the wealth consolidated and conserve the Hamiltonian model in Ivy League fashion.

Ensuring a free and unconsolidated marketplace in priority renders the paradox of thrift and liquidity crisis a public/private enterprise of capital formation that is not a function of dispossession, but possession; not of depriving, but providing; not as a means of a "natural," unavoidable tendency to inequality, but the deliberate ethic of a rationally righteous pursuit of liberty and happiness that is an easily verifiable General Welfare, Constitutionally endowed.

Unemlpoyment is a Lagging Indicator?

Identifying trend indicators, the independent, small investor-analyst "recognizes" that the unemployment measure is considered a lagging indicator.

Despite accounting for at least two-thirds of GDP, the consumer's job--the income that sustainably drives our economy from the bottom up, or the employment indicator--is curiously relegated the status of the most laggard among the regime of indicators. It is considered (learned) by mainsteam economists to indicate a recovery has occured after the capital infused has sufficiently "trickled down" to drive the economy.

Top-down capital infusion is also the strategy of the current administration and why it will fail as I pointed out when its experts proferred it as the primary means of recovery.

Unemployment continues to rise because it is a lagging indicator. In other words, employment is entirely dependant on the trickle-down "effect" of Keynesian monetary policy, which is the direct cause of the current economic crisis. It is the problem, not the solution, being falsely sold as "change we need."

The independent investor, however, is not constrained by mainstream analysis. The independent is "free" to "re-cognize" (re-think) the folly of monetizing the debt and trickling it down with a complex, regressive tax code.

Notice that the only direct and verifiable change the new congress and executive have made to the tax structure has been regressive. That, of course, just supports the deflationary trend. Both the means and, predictably, the ends (the effect) is neo-conservative (post-Keynesian).

The macro policy determines the micro trends. The large corporate that is too big to fail (largely free of the free-market regulatory function that limits the need for government--the problem) is being recapitalized. That is, the problem is being recapitalized. The too-big-to-fail banks will finance the large corporates that "command" a large return on investment with the minimal risk of being "too big to fail." The effect is to validate the legitimacy (the value) of "too big to fail" and confirm the empirical direction of the trend--stagflationary (sideways).

Employment is a lagging indicator because it is not a priority despite the income being the determining variable (the cause) of a healthy economy. Rather, it is considered the variable to be determined (the effect) by mainstream macro economic policy empirically confirmed to be the preferred practical model (Hamiltonianism). Thus, it is the necessary analytical model for predicitng trends, and thus considered to be the norm with any practical alternative deductively determined to be deviant.

Thus, financing a free and unconsolidated marketplace to ensure a competitive multiplicity of markets that minimizes the need for government regulatory authority and the distortions (the gama risk) it entails is as inimically deviant as any other alternative.

Free-market economics is being treated as highly undesireable because it competitively limits the return on investment (disinflation) and distributes that value to the consumer (the employed), avoiding the crisis that demands the command of elite authority and expertise.

Returning to a more perfect model of free-market economics by government acting to ensure it in priority, rather than correcting for the lack of it in posteriori like we do now, is considered even more inimical, dialectically deviant, than socialism because it does not fit the preferred conservative, elitist model of power that distributes income by command.

At least socialism distributes income more by command and can thus be manipulated to expropriate value with the secret knowledge and mechanisms of elitist expertise cloaked in the General Welfare and Will of The People held in public trust with an inscrutable accountability accessible only to the gnostic agents on the inside.

The graduated, hierarchical initiates of economic gnosticism, the priests of secular intercession, have access to the gods of fate determining the existence of the lesser masses who must sacrifice the quality of their existence, executed by the skillful initiates of furtively applied power, to secure the favorable determination of survival of the fittest (falsely suggesting a "natural" determinism by the hand of God). That would be the more fitting, the more naturally linear progression of capitalism than reverting to the passe, foolish notions of the value of the mechanics for direct democracy (free-market economics) that behavioral economists claim the crude masses are incapable of.

Hardly!

These behavioral economists are just the latest example of shamming the need for the eltist model with the scientific method. It is an incorrigiblity that only persists the human condition in error--of making the same mistakes over an over again, being condemned to the self-satisfied stupidity and ignorance of elitist power (conservatism).

The prophecy of behavioral economics is self-fulfilled, inducing the behavior (the inability to analyze complex relationships) by ensuring the complexity that causes the problem. It is a false induction that would be clearly confirmed by ensuring a free and unconsolidated marketplace (a less complex and more directly accountable analytical environment) in priority, or the change we really need.

Instead of organizing our economy for democracy (the pluralist model), it is being maintained for the application of tyranny (the elitist model). Our economy, the marketplace, is persistently being organized and conserved for command, and not demand.

We do not build bridges or split atoms based on failed (disconfirmed) deductive theories. Nor should we our economy!

What's the Difference?

Small investors need to recognize the differences between today's economics and the past. Identifying false indicators is key to successful investing and preservation of net worth.

The economy undergoes innovation to maintain control over the determinants (the indicators) of value and the distribution of the value. The innovation is largely driven by gamma risk--public sector intervention that affects value and its distribution (see the article, "Assessing the Value," and "Indications of Recovery" at griffithlighton.blogspot.com).

Gamma risk innovation occurs mainly to avoid and recapture payment of the retributive value (the distribution of capital that relieves liquidity crisis and reverses a deflationary trend). For example, the dip in the price of crude oil, oversold to nearly $30/bl signaled a recovery. The recent spike in the price, overbought over $50/bl reverses the trend.

The causal relationship between the price of the energy benchmark and the directional trend of the economy is quite clear. In spite of political measures to infuse liquidity to cause a sustained distribution that will stop and reverse the deflationary trend, the price of crude is being used to effect (command) the trend posteriori. The gamma risk is being effectively managed by the private sector.

As the retributive value is politically infused, energy prices increase, consolidating the infusion and reversing the trend. The portion of the capital infusion that does trickle down inches the economy toward recovery with a highly measured pace determined by the private sector.

The political element of the political economy can claim being in control to satisfy the demand for public action while, at the same time, the private sector commands the pace of recovery. The gamma risk has then been successfully managed and the distribution of value (the retributive value) legitimately conserved both publicly and privately. It is an ingenius application of the Hamiltonian model of power and political economy that maintains a strict class distinction as the result of the naturally endowed freedom of each individual to equally pursue life, liberty, and happiness without intervention of the sovereign (government).

Equal pursuit does not ensure equal results, thus the need to manage the retributive value and the gamma risk to the reward.

Self-determination of "The People" (the legal sovereign) obtains by a long and complex process of illusion in which both wealth and power are consolidated and conserved with the force and legitimacy of public authority.

The Hamiltonian model survives by innovative means. The main threat to its success is a progressive tax code that will not allow the capital infused to pluralize the economy to be consolidated and the elitist model conserved. Changing the model is not mere normative sentiment, but a descriptive analysis that accouchers the practical understanding of trend indicators and predictive utility.

Identifying what the difference is, the innovation, that gives meaning to the old adage, "past performance is no indication of future performance," and why economic data and trends are too often reported as "unexpected" by analysts, allows the small investor to manage the risk with the certainty of current means to ends that must predictably conform to old legitimacies (normative legal parameters).

Buying an oil futures contract is certainly not illegal, but if capital is allowed to consolidate and massively move into futures contracts, the effect determines the direction of the economy. The cause-effect relationship lacks the normative pluralistic legitimacy of free market economics. Technically correcting for it (the gamma risk) is where the innovation occurs and the predictive utility of the difference obtains.

Notice that the recent rise in the price of crude correlates with the "unexpected" trend back to deflation. It is a causal relationship that will keep the economy in a stagnant state (see the previous article, "Crude Indicator" at griffithlighton.blogspot.com).

Until there is a more progressive tax code in place, rising energy prices will falsely indicate a definitive SAR recovery point as long as it is a speculative means of directing it by reversing the trend.
A more progressive code will make pluralism more profitable. Energy prices will then rise on the health and wealth at the fundament (on demand and not command). The recovery phase will otherwise be weak and stagflationary with a strong deflationary tendency that will appear unexpectedly only by those that do not know the difference.

The precipitous drop in the price of crude late last year signaled the beginning of the recovery phase of the current business cycle. Recovery will be expressed with a positive, long and linear slope when the noise (the deflationary tendency: the short-term effect of the recovery indicator) is regressed from the oscillation.

At this point, falling energy prices is a means of controlling the depth and breadth of the deflationary trend and the amount of retributive value accrued, manageably spreading the gamma risk on that value over time. Each peak above or below $50/bl is a short term accumulation and distribution within a stagflationary macro model.

The cycle of boom and bust is innovated into more frequent, short-term events favorable for arbitrage and leverage finance that cultivates a take-the-money-and-run mentality. A more progressive tax code is a sure cure with a level of certainty that can be measured by the level of resistance to it if not the carefully deliberate ignorance of it.

Crude Indicator

With the current deflationary trend, oil is overbought above $50/bl.

Since the energy sector is a primary determinant of the current macro trend, the speculative volatility indicates that future trends will be strongly determined by this sector while pop analysts are focusing on the financial sector to indicate trends.

While the popular analysis is to focus on the probability of recovery, small investors need to keep in mind that this deflationary phase of the business cycle is a fully intended economic event that consolidates wealth and capital. It will be fully applied. Recovery will not occur until the capital is so consolidated that economic growth cannot occur without a distribution from the private sector. Public sector infusions tend to prolong the deflationary cycle with more capital to be consolidated, which will abate when the private sector supplies the liquidity with a return decided by the private sector alone.

Energy prices will indicate the intent to capitalize the recovery phase of the business cycle (a buy indicator). Financials will only serve to indicate a confirmation of the effect. Small investors will make more money and minimize the risk monitoring the causal factors rather than the effect indicators. That's why pop analytics tends to focus on the effects as leading indicators.

Rising energy prices dampens public sector infusions of capital to effect the recovery phase. Thus, the recent run up in crude prices. It allows the private sector ultimate command and control of cyclical timing. For the trageur, timing is everything, and on the macro scale, our economy is being shorted (classically arbitraged), setting it up to go long (see the article, "Shorting the Economy" at griffithlighton.blogspot.com).

Volatility of energy prices is a means of controlling the macro cycle. It also indicates the intent to keep the economy in a highly speculative, rather than a pro-growth, mode. Financials will profit and distribute the proceeds to shareholders. This "effect" will keep the economy in a stagflationary trend that analysts are currently identifying as indicating a protracted recovery phase. The long term effect will look like a long stagflationary period (high profit with low growth) on the long-term macro chart.

The buy-and-hold investor needs to realize that stagflationary economics will once again cycle to a deflation (consolidation) of accumulated value. The investor must be able to detect the macro indicators to sell and avoid once again being victim of a punctuated devaluation of net worth.

Chief among the macro indicators is energy prices..."crude" indications of classic economic modeling with highly predictable (low risk) results for those that can read the signs.

Indicators of Classical Economic Modeling

Independent investors need to determine the objective of current political-economic activity to protect their capital from the fully intended predations of classic economic modeling--to consolidate the capital (your savings and the value of your investments).

The intention to confirm practical application of the classical economic model well into the future is fully indicated by innovative political means that correlate directly with the innovations within the financial sector. Federal Reserve chairman, Bernanke recently refered to innovative financial instruments and practices as a healthy market efficiency that needs to be closely regulated to both prevent this deep recession from getting deeper and prevent innovation that is systemically destabilizing in the future.

Bernanke is confirming the intent to support the predatory results of allowing the capital to consolidate into innovative market mechanisms that are a function of massive money flows and momentum that CAUSE "bubbles" (extreme overbought conditions that lure investors into a false-positive with the valuation being speculative and not fundamental--like $135/bl for oil and eight years of false economic growth policies--only to burst the bubble and consolidate the monetized value). The next phase of the business cycle, neo-classically refered to as the "infusion" phase in which new capital is injected by monetary expansion (monetarism), is when the unconsolidated capital intended to restore liquidity with minimal redistribution from the consolidated value (the distribution phase of the cycle) is carefully regulated to that end and allowed to be innovatively consolidated later in the accumulation phase of the cycle. (Buy-and-hold is a good strategy at this point of the cycle when the Dow dips below 7500 which has become a false support beyond which the market is overvalued in the next six to twelve months).

Bernanke is applying the Hamiltonian model of ensuring the welfare of the rich in priority (what is too big to be allowed to fail) that CAUSES the systemic crisis, ensuring the organization and operation of the systemic risk in order to prevent it (?). Capital is allowed to consolidate, antithetical to the legitimate means of a free-market (pluralist) mechanics. Expert (elitist) adjustment of the negative externalities occurs at the end of the process since financials will innovate to avoid non-market regulation. The result is an ends-justifies-the-means legitimacy of a command economy with a false free-market legitimacy.

Causing crisis, and the systematic mechanism of predation, in the name of innovative technical management of the systemic risk by operation of careful regulatory authority (state capitalism) administered by a professional class of MBA's is a confidence game intended to conserve the consolidation of the capital and a defeat of the free-market mechanism it pledges to ensure. This is where the political economy becomes so complex, so difficult to understand and confirm, that the machinations of the elite easily achieve the consolidation of power with a false pluralistic legitimacy.

That the political economy is being reinvented (innovated) to ensure the fair and equitably legitimate outcome of a free-market economics by public regulatory authority just indicates one thing: the market is being rigged so that the small investor will always be at a systematic disadvantage with a free-market legitimacy by operation and declaration of public authority.

The practical philosophy that we must replace the free-market mechanism with the operation of a public authority is not paradoxical, it is a contradiction. It indicates a fraud, not the operation of a genuine civil service acting in the public trust, but a bureaucratic political economy of elits entrusted to conserve the distribution of wealth and power in a continuous crisis proportion that always demands its elite management and the "bonus" compensation of a sub-elite class of loyalists to administer it.

The bonus payments to retain the elite talent to administer state capitalism (to administer a non-free-market organizational technology with a free market legitimacy, or to perpetrate the fraud) buys the loyalty of what is otherwise a tendency to be free and fair, rewarding the most corrupt and morally incompetent. For the investor, this affects the bottom line. It is not just an ethological and ethical consideration. It indicates what the macro-economic model will look like despite the recent political changes, and I am sorry to say it is a faux political change that will not ensure the cure for what ails us: a regulatory authority that ensures a free and unconsolidated marketplace in priority (pluralism).

Recent political change is an innovation that conserves the consolidation of wealth and power by systematic predation and a means of managing the retributive value (the full value to be distributed to recover from, and prevent, liquidity crisis) shammed as technocratic management of systemic risk and punctuated crisis that will ensure the probability of its recurrent accumulative and distributional macro-economic value. The classical economic model of capitalism in which the measure of success is to defeat free-market mechanics as a function of organizational size is conserved with the pluralistic legitimacy neo-classically administered, and carefully measured in posteriori, rather than ensuring its legitimate means, and the probability of fair and equitable results, in priority.

Ensuring an organized deconsolidation, and the plurality of opportunistic investment that will naturally occur, is a pragmatic priority easily set to be accomplished in the first 100 days. The Democratic party executive and legislative leadership, however, do not understand the economics well enough to effect the needed change even if they could see beyond the self-satisified dictates of their ideology and the thrill of politically gaming for it despite the president's penchant for pragmatism.

The change we really need (pluralism) is highly improbable. So, load up and hold on to equities of companies that are too big to fail the liquidity crisis they are organized to cause both now and in the future with the very highest probability being very clearly indicated.

The Economic Stimulus Legislation

There has not been a lot of confidence in the congressional delegation, and the president's pragmatism seems to have devolved to a partisan deference to the congressional leadership. He will find that, despite what Emanuel tells him, to be a mistake, already showing up as a waning popular support.

If we can fully embrace pragmatism over partisanship, The People will be much better served. The economic stimulus legislation is a monument to old-school Keynesian economics and monetizing the debt. Nothing new about that except the size of it.

Without a more progressive tax code, and all we have seen is a penchant for regressive tax measures, the middle class will be hammered with the debtor assignment on this colossal debt. If this is intended to be anti-recessionary legislation, we have not seen anything yet!

The speaker of the house says Democrats did not gain a majority to compromise The People's business. That would be meaningful if there was confidence in the ability to recognize what that is. It does not appear to be a confirmation of pragmatism over partisanship that avoids outmoded, Keynesian technical measures. Rather, it appears as typical tax and spend legislation that will leave the least able to pay holding the big bag of debt.

Does anyone really believe the speaker of the house and the congressional delegation is really interested in change We The People need?

What I see is an old-school stimulus program that will be highly inflationary, setting up the realignment toggle switch to the Republican Party. Demand-reduction measures (a highly regressive tax code with a rising rate of interest--Reaganomics) will be used to then control the inflationary trend. We will just be churning the problem.

So much for building a pragmatic coalition for change we need.

You don't have to be a Republican to be part of the neo-conservative coalition.

The Tyranny of Liberty

The conservative element, busily remaining relevant to the dialectic of cyclical economic crisis and the demand for change in a post-industrial society, argues that correcting for the detriment experienced by the vast majority of Americans in the current crisis is a tyranny of liberty that must be reversed in order to preserve the fundamental principles that our nation was founded, has made us strong and will keep us strong.

The conservative principles refered to by the conservative element as fundamental are derived from pre-industrial society when making a profit was the entrepreneurial adventure on the wild frontier. Society has since progressed into a post-industrial productive capacity that is even beyond the classical economic problem of crisis of overproduction being just a lack of demand caused by surplusing value, but sheer productive capacity.

Post-industrial capacity is far beyond the conditions that produced the American Revolution. At that time, the tyrant was the king preventing the businessperson (the bourgeoise, the middle class) the full market value of their work in the marketplace to achieve economic growth and a peaceful prosperity--the profit. The middle class fully intended to replace the king's inherited right to rule with their inherited right to rule, or the natural right to liberty that the tyrant was preventing.

Once the king's power was supplanted by the bourgeoise, a private propertied ruling "class" emerged, no longer middle class. The productive capacity of neo-classical capitalism monetizes the retributive value and allows for the extension of credit for a burgeoning middle class now demanding the retribution of value (the revolution) Keynesian innovations are designed to prevent.

The demand for equitable distribution of economic value by government authority (the sovereign people) in opposition to the old liberty to accumulate it and cause general economic crisis must be rendered a threat to the post-industrial middle class by the conservative element. Fear and loathing is the agendae--liberty is being destroyed by the tyranny of the plenary and complete, absolute power of government (the legal, constitutional sovereign).

For the conservative element, the legal sovereignty of The People is self-rule. The fate of The People is thus self-determined and, therefore, retributing the economic value accumulated can only be ex-post-facto and by bill of attainder, or by illegal, tyrannical means that are the antithesis of freedom. Choosing to retribute the value is tantamount to choosing tyranny and the Hamiltonian (elitist) form of government is thus confirmed as necessary to conserve the liberty the Revolution has confered.

If The People are inherently incapable of ruling, self-rule is naturally the function of, it is to be "attributed" to, the power elite--the "old" liberty that resulted in the accumulation of wealth and power by what was once the middle class.

This conservation of liberty renders the conservative element relevant to the current dynamic of power to redefine, realign, and finally, restructure the elements of the power structure as the value is naturally "retributed" to the middle class. The change that will occur is not to be feared and loathed. It will be a tyranny of liberty that replaces the liberty of tyranny.