Once upon a time, in the noble age of Camelot, the crown assumed all the risk and extended it to its subjects. As the wealth, and power, trickled down, the risk extended with a return on investment befitting a king who, as sovereign, assumed all the risk--meaning his subjects did not have to.
Safe within the walls of consolidated risk from the monsters that abide beyond the comprehension of the non-elite, fear and angst presents as speculative probability of the monsters conspiring from within (the task of the elite to manage popular sentiment with organized sophistication that today we call political-economy).
Managing the sentiment of the populace is to manage the perception of the risk. Disparity between the truth and the perception runs "the risk" of resolution, and managing that risk requires authority (gamma-risk consolidation requires a resolution authority).
There is a beneficial gestalt built into the macro-economic concept of elite authority, like the crown, that survives today. It survives in the form of the ruling class.
Since The People are the Sovereign, theoretically assuming the risk individually, there is now a supra-sovereign extension of the risk, and on a global economy of scale.
For example, when too-big-to-fail banks open every morning to unwind the derivative transactions (about $600 trillion in total value) of counter-parties the night before, not only has the risk been extended to an economy-of-scale crisis proportion, but on a global economic scale.
It is the size of too-big firms that makes them "too important" to fail. The measure of success is not by reducing the alpha risk ontology (the fundamentally diffused risk of free-market mechanics), but their size and the ability to extend the risk into a gamma proportion. It is a deliberate function of their size to "avoid" (not reduce) the alpha risk, allowing it to accumulate into systemic (extended) risk.
It used to be that a big banker, like J.P. Morgan, would bail out the economy to prevent the declining rate of profit (deflation)--preventing over-extension of the risk. It was not enough this time, requiring a government bailout (authoritative resolve) to manage risk that went exponentially gamma--consolidating the risk (making the market) into a ($600 trillion) crisis proportion.
Paradoxically, the so-called supply-side, laissez-faire economics of the Bush administration that lead to the Great Recession resulted in the need to regulate firms that are TOO BIG to fail. If we continue to ignore the obvious and do not deliberately resolve the paradox, nature deliberately will in the form of crises. Avoiding this constancy of risk just makes the valence of crises more intense.
A $1 trillion bailout for a $600 trillion extension of the problem is obviously a necessary-but-not-sufficient measure that, as the authors of financial reform pointed out, will not avoid crises. We are so busy making the tools to mitigate the extent of crises, we are not using the wisdom to prevent it. Our homo-habilis approach to the problem is "overpowering" our homo-sapien capacity to resolve it.
The so-called elite are overpowering our pluralistic capacity to resolve our problems without a divine intervention of catastrophic, supra-sovereign proportion. Rather than presenting the ultimate model of political-economic sophistication, they re-present a failed model of our feudalistic past (affording protection from risk, consolidated and re-presented as value extended). There are just a few overlords among us determined we all suffer the fate of conservancy in the face of needed change.
Conserving the source of crises is not only bad for the angry mob, it's also bad for conservatives who are too complacent to recognize the over-extended risk of supra-sovereign power.
Although we now live in a post-modern age of scientific inquiry, testing hypotheses to guide us into the good life, we fail nevertheless to recognize that "too big to fail" (consolidation of the risk) is a disconfirmed hypothesis. This organized, economic gestalt of "bigger is better" (the measure of success) is the source of tremendous, and unnecessary, angst and suffering.
The bi-partisan Financial Crisis Inquiry Commission (FCIC), for example, is merely there to legitimize a disconfirmed hypothesis with a public process substituting for free-market mechanics. The inquiry is there to conserve the problem and extend the risk, on a bi-partisan basis.
The Fed's general legal counsel testified before the FCIC that consolidation of the financial sector prior to the crisis under inquiry is generally beneficial despite the systemic risk. Both the inquirer and the cognizant agreed that global, economy-of-scale corporations want banks big enough to finance global (inorganic) growth.
The course of the crisis inquiry formulates this hypothesis: what is too big to fail requires financing that is too big to fail, therefore, it is a risk to be extended, and perhaps regulated, but not to be prevented or avoided. The organizational gestalt, syllogistically validated, is represented as the truth of a dis-confirmed hypothesis (the null hypothesis that bigger is NOT better) etiologically derived, which of course is supposed to prove that bigger is better (not a moral hazard and a prudential risk to be tolerated).
A feedback loop syllogistically derived indicates an ideological bias and a practical/analytical modeling of prudential risk that predicts the macro trend. The modeling assumes and accurately predicts the current value of the risk to be, paradoxically, maintained in a crisis proportion to prevent it.
What do you say we have a scientific inquiry that discovers the truth on a non-partisan basis for a change! It's either that or wait for nature's Divine intervention that retributes the truth, exacting the risk in a non-paradoxical proportion.
It is time to rely on the prudential value of hypotheses tested with the fundamental legitimacy of a free and unconsolidated marketplace. It is time we reduce the etiology of fear and anxiety to the modulated emotion of moral value based on the known, rather than the perceived value of the risk--the assumptions--directed by the self-fulfilled hypotheses of elite authority.
Thursday, September 2, 2010
Tuesday, August 31, 2010
Over-Extension of the Risk (Bubble Bonds)
The Fed has managed to keep money cheap and readily available. So how come it has downgraded the economy?
Low yields (high bond prices) indicate a deflationary trend (a declining rate of profit). Since the rate of profit indicates the probability of growth (investment that exceeds the low yield), the Fed sees a low probability for organic growth.
Cash being horded by large, economy-of-scale firms will be used for inorganic growth, which causes a further extension of the risk. Over-extension of the risk not only consolidates market share (alpha risk), but renders small firms less creditworthy.
While inorganic growth reduces risk for big firms (rendering them "too big to fail"), it extends the risk to the rest of the economy. Anything not too big to fail is stuck with maximum risk and minimal reward. Conversely, the reward is maximized by big economy-of-scale firms over-extending the risk.
The extent of the risk is measured by the rate of interest. The risk is scored against the ability to pay (creditworthiness). The less creditworthy, the more interest paid, if you can get it.
When credit extends to match the over-extension of risk, a bubble forms. Thus, the bond rally (the so-called flight to security) is a bubble.
Bubble bonds are secure only because they are backed by the federal government (The Federal Reserve). It measures the risk over-extended into a gamma (crisis) proportion.
In order to avoid the crisis dimension, risk cannot be allowed to extend without the full measure of the reward; and budget deficits, rather than filling the deficit of reward, just extends the risk and bonds it into a bubble that cannot be repaid without the extension of credit--over-extending the risk.
Low yields (high bond prices) indicate a deflationary trend (a declining rate of profit). Since the rate of profit indicates the probability of growth (investment that exceeds the low yield), the Fed sees a low probability for organic growth.
Cash being horded by large, economy-of-scale firms will be used for inorganic growth, which causes a further extension of the risk. Over-extension of the risk not only consolidates market share (alpha risk), but renders small firms less creditworthy.
While inorganic growth reduces risk for big firms (rendering them "too big to fail"), it extends the risk to the rest of the economy. Anything not too big to fail is stuck with maximum risk and minimal reward. Conversely, the reward is maximized by big economy-of-scale firms over-extending the risk.
The extent of the risk is measured by the rate of interest. The risk is scored against the ability to pay (creditworthiness). The less creditworthy, the more interest paid, if you can get it.
When credit extends to match the over-extension of risk, a bubble forms. Thus, the bond rally (the so-called flight to security) is a bubble.
Bubble bonds are secure only because they are backed by the federal government (The Federal Reserve). It measures the risk over-extended into a gamma (crisis) proportion.
In order to avoid the crisis dimension, risk cannot be allowed to extend without the full measure of the reward; and budget deficits, rather than filling the deficit of reward, just extends the risk and bonds it into a bubble that cannot be repaid without the extension of credit--over-extending the risk.
Extension of Credit
Credit extends with the risk. A person that contracts for credit is scored according to the extension of the risk--your net worth.
The empirical valuation is dismally economic. Reducing human value to the probability of the risk is something expected of a self-interested application of power, and the deliberate application of a detriment does not suggest a compassion verified by the active moral strength of an elitist hypothesis.
If The People are to find security under the protection of a well-educated, well-financed elite (like being subjected to the crown), and the verifiable hypothesis in operation largely relies on one's credit score (the extent of the risk), then the application of the means is a dismal failure.
Prospects are dismal if we continue to ignore the detrimental value of consolidating the risk, interpreting it to be the inviolable application (the absolute value) of self-interest. The detriment is rationalized as always beneficial in some form, adding empirical value to the measure of risk whether those detrimented recognize the value added or not.
If the credit score measures the extent of your risk (and the value you can add), a high score means you are willing to sacrifice for the benefit of the crown (the ruling economic elite who do not have to extend you credit, and do so only in their self-interest), or maybe it means you are unwilling to take the risk of rebellion (exercising your right of self-determination) in your self-interest. "Your" self-interest is paradoxical, and nature abhors (it will resolve) a paradox.
If we are to embrace the moral value, the virtue (the strength), for example, of Ayn Rand's self-interest constant of power, victims of systemic risk should always be glad that self-interest is always being applied for the greater good--the extension of the risk in which we are to be scored.
The score of power (successful application and preservation of self-interest), according to the Rand moral constant, is verified by the distribution of reward and deprivation. The empirical, moral measure is always, unavoidably, "what should be" and "is" therefore. Self-interest "is" therefore, an inevitable moral ontology that resolves in spite of any altruistic sentiment we may score it to.
Keep in mind that if your credit score is zero, the risk does not extend to you...nor will the credit without paying a high rate coefficient with a low score representing the extent of the risk.
We live in a credit economy, even people who do not need credit use it to magnify their profits; and the profit, magnified, has to come from somewhere, magnified (reduction of the credit score which increases the extent of the risk and access to credit delimited to the ability to lend, not the need to borrow). The result is the extension of risk (extension of credit, or leveraging) to a crisis (gamma risk) proportion (securitized debt, collateralized debt obligations, and credit default swaps).
According to Ayn Rand's reduction of the argument, for example, magnifying the need for credit is the virtue of self-interest, motivating people to sacrifice for the greater good (reducing demand, increasing supply) with a high order of deliberate intent (productive self preservation). It is government sheltering and pampering the less credit worthy that is the cause of our problems. Eliminating government (without eliminating the need) liberates The People from the only active element of tyranny that rewards and deprives by fiat. Self-interest provides, government deprives according to the Ayn Rand, classically conservative hypothesis.
Rand's hypothesis does fit a post-modern, neo-classical, credit economy if we ignore the extension of the risk. Neither the king or plutocrats intend to deconsolidate the risk and finance the competition, however, and acceptance of the Rand hypothesis, with all things remaining equal, suggests a self-interest that is anything but enlightened.
Consolidating all the risk into a single entity, like the crown or the state, arguably affords the social benefit of relieving individuals of the burden of power, leaving its subjects free to live the good life (applying self-interest as Rand points out). Individuals find out what their self-interest really is with the guidance and protection of the state.
The agents of the American revolution--our rebellious founders, however, acted to establish the individual as the singular quantum of sovereign power in the pluralist form. The state exists to protect and defend the natural rights of the sovereign power (individuals) from tyranny, rejecting the argument that consolidation of risk, and its extension (tyranny), protects and defends the right of individuals to act in their self-interest.
There was no reason to believe the extension of risk and credit from the crown and its agents was in our self-interest at the time of The Revolution, any more than it is now extending from a ruling class elite.
Being a slave to one's credit score is just the latest extension of tyranny shammed with the false benefit of consolidating the risk.
The empirical valuation is dismally economic. Reducing human value to the probability of the risk is something expected of a self-interested application of power, and the deliberate application of a detriment does not suggest a compassion verified by the active moral strength of an elitist hypothesis.
If The People are to find security under the protection of a well-educated, well-financed elite (like being subjected to the crown), and the verifiable hypothesis in operation largely relies on one's credit score (the extent of the risk), then the application of the means is a dismal failure.
Prospects are dismal if we continue to ignore the detrimental value of consolidating the risk, interpreting it to be the inviolable application (the absolute value) of self-interest. The detriment is rationalized as always beneficial in some form, adding empirical value to the measure of risk whether those detrimented recognize the value added or not.
If the credit score measures the extent of your risk (and the value you can add), a high score means you are willing to sacrifice for the benefit of the crown (the ruling economic elite who do not have to extend you credit, and do so only in their self-interest), or maybe it means you are unwilling to take the risk of rebellion (exercising your right of self-determination) in your self-interest. "Your" self-interest is paradoxical, and nature abhors (it will resolve) a paradox.
If we are to embrace the moral value, the virtue (the strength), for example, of Ayn Rand's self-interest constant of power, victims of systemic risk should always be glad that self-interest is always being applied for the greater good--the extension of the risk in which we are to be scored.
The score of power (successful application and preservation of self-interest), according to the Rand moral constant, is verified by the distribution of reward and deprivation. The empirical, moral measure is always, unavoidably, "what should be" and "is" therefore. Self-interest "is" therefore, an inevitable moral ontology that resolves in spite of any altruistic sentiment we may score it to.
Keep in mind that if your credit score is zero, the risk does not extend to you...nor will the credit without paying a high rate coefficient with a low score representing the extent of the risk.
We live in a credit economy, even people who do not need credit use it to magnify their profits; and the profit, magnified, has to come from somewhere, magnified (reduction of the credit score which increases the extent of the risk and access to credit delimited to the ability to lend, not the need to borrow). The result is the extension of risk (extension of credit, or leveraging) to a crisis (gamma risk) proportion (securitized debt, collateralized debt obligations, and credit default swaps).
According to Ayn Rand's reduction of the argument, for example, magnifying the need for credit is the virtue of self-interest, motivating people to sacrifice for the greater good (reducing demand, increasing supply) with a high order of deliberate intent (productive self preservation). It is government sheltering and pampering the less credit worthy that is the cause of our problems. Eliminating government (without eliminating the need) liberates The People from the only active element of tyranny that rewards and deprives by fiat. Self-interest provides, government deprives according to the Ayn Rand, classically conservative hypothesis.
Rand's hypothesis does fit a post-modern, neo-classical, credit economy if we ignore the extension of the risk. Neither the king or plutocrats intend to deconsolidate the risk and finance the competition, however, and acceptance of the Rand hypothesis, with all things remaining equal, suggests a self-interest that is anything but enlightened.
Consolidating all the risk into a single entity, like the crown or the state, arguably affords the social benefit of relieving individuals of the burden of power, leaving its subjects free to live the good life (applying self-interest as Rand points out). Individuals find out what their self-interest really is with the guidance and protection of the state.
The agents of the American revolution--our rebellious founders, however, acted to establish the individual as the singular quantum of sovereign power in the pluralist form. The state exists to protect and defend the natural rights of the sovereign power (individuals) from tyranny, rejecting the argument that consolidation of risk, and its extension (tyranny), protects and defends the right of individuals to act in their self-interest.
There was no reason to believe the extension of risk and credit from the crown and its agents was in our self-interest at the time of The Revolution, any more than it is now extending from a ruling class elite.
Being a slave to one's credit score is just the latest extension of tyranny shammed with the false benefit of consolidating the risk.
Monday, August 30, 2010
Big Government
Managing the extent of the risk, especially on a global scale, requires a political-economic organization on a scale so massive it cannot fail, and we all know the risk ontology associated with "too big to fail."
A world in which there is no risk left to take would be revolutionary, but not ideal. It would be catastrophic with a tendency to completely consolidate the risk into the gamma dimension (like with the king, relying on the extension of risk into a crisis--revolutionary--proportion). It is the risk to be avoided, not nurtured by continuous consolidation into an economy of scale to expand the margin of profit with minimal innovation and growth, extending the risk into a crisis proportion.
Global, economy-of-scale extension of the risk will reduce individuals to an organized epitaxy of the consolidated risk. It will etiolate the productive and innovative capacity of individuals on a massive scale, subjecting The People to a massive extension of power that is supra-sovereign.
While a so-called "ideal" consolidation and extension of the risk may provide a measure of predictability, acting to shelter and pamper its subjects into a sense of secure health and wealth, it will, at the same time, deprive natural vigor and potential growth (the income to provide it for yourself). The profit (the distribution of reward and deprivation) has to come from somewhere.
The People will be deprived not by innovative productive capacity (technological obsolescence), but by over-extension of the risk, producing a persistent deflationary tendency on a global scale that requires "big" government to control and mainatin the extension of risk in the gamma proportion.
The extension is not to be conserved, it is to be liberated from the economy-of-scale constructions of would-be tyrants who delimit the natural rights of the Sovereign--The People--to the extent of elitist power (just like the crown did to an unnatural extent).
The "natural" thing to do is for government to exist for the primary purpose of ensuring the liberty of The People rather than providing a useful tool for tyrants. Government is then the natural extension of The People, extending the risk only to those who would deprive anyone from taking it.
A world in which there is no risk left to take would be revolutionary, but not ideal. It would be catastrophic with a tendency to completely consolidate the risk into the gamma dimension (like with the king, relying on the extension of risk into a crisis--revolutionary--proportion). It is the risk to be avoided, not nurtured by continuous consolidation into an economy of scale to expand the margin of profit with minimal innovation and growth, extending the risk into a crisis proportion.
Global, economy-of-scale extension of the risk will reduce individuals to an organized epitaxy of the consolidated risk. It will etiolate the productive and innovative capacity of individuals on a massive scale, subjecting The People to a massive extension of power that is supra-sovereign.
While a so-called "ideal" consolidation and extension of the risk may provide a measure of predictability, acting to shelter and pamper its subjects into a sense of secure health and wealth, it will, at the same time, deprive natural vigor and potential growth (the income to provide it for yourself). The profit (the distribution of reward and deprivation) has to come from somewhere.
The People will be deprived not by innovative productive capacity (technological obsolescence), but by over-extension of the risk, producing a persistent deflationary tendency on a global scale that requires "big" government to control and mainatin the extension of risk in the gamma proportion.
The extension is not to be conserved, it is to be liberated from the economy-of-scale constructions of would-be tyrants who delimit the natural rights of the Sovereign--The People--to the extent of elitist power (just like the crown did to an unnatural extent).
The "natural" thing to do is for government to exist for the primary purpose of ensuring the liberty of The People rather than providing a useful tool for tyrants. Government is then the natural extension of The People, extending the risk only to those who would deprive anyone from taking it.
Sunday, August 29, 2010
Deflationary Risk
When the risk is too consolidated, there is deflationary risk. Without a distribution (deconsolidation), the risk becomes extensive, or systemic. An extension of the risk occurs, distributing risk without the reward. The economy is in a defensive (crisis) mode with no one willing to "take the risk" simply because there is no risk to take--it is consolidated.
Entrepreneurs seek protection from the detriment extending from the consolidation instead of seeking growth: cutting costs, hording cash and labor, which makes the risk more extensive. Thus the old saying, "you can cut your way to a profit but not growth," meaning a distribution is in demand but accumulation is being supplied (commanded to apply, extended from the consolidation of the risk).
The oversupply of risk meant trouble for the king who wanted to know the extent of the risk (the assessment of value). Since the risk is consolidated into the sovereign power of the crown, the king not only owns the assets, but the liabilities--and to what extent.
Hedging the systemic risk caused by the crown (the accumulation) meant distributing reward with the risk. The market value then determined whether entrepreneurs would take the risk (implying consent of its source being from the crown's authority), which then delimited the extent of systemic risk (the king's liability).
American colonists took a big risk to challenge the crown's legitimacy to rule, to command, the distributional coefficiency of risk and reward. The crisis that occurred was a critique of sovereign power--it was more than deflationary (economically defensive), it was revolutionary (politically offensive). Thus was born the political-economic extension of the risk in a consolidated form.
We now face the spectre of global consolidation where the market is free from the sovereign power--the natural laws--of The People, providing an operational gestalt of supra-sovereignty, and global extension of the risk.
Without deconsolidation of the risk, the need for government just gets "bigger" from here in order to control the over-extension of risk.
Entrepreneurs seek protection from the detriment extending from the consolidation instead of seeking growth: cutting costs, hording cash and labor, which makes the risk more extensive. Thus the old saying, "you can cut your way to a profit but not growth," meaning a distribution is in demand but accumulation is being supplied (commanded to apply, extended from the consolidation of the risk).
The oversupply of risk meant trouble for the king who wanted to know the extent of the risk (the assessment of value). Since the risk is consolidated into the sovereign power of the crown, the king not only owns the assets, but the liabilities--and to what extent.
Hedging the systemic risk caused by the crown (the accumulation) meant distributing reward with the risk. The market value then determined whether entrepreneurs would take the risk (implying consent of its source being from the crown's authority), which then delimited the extent of systemic risk (the king's liability).
American colonists took a big risk to challenge the crown's legitimacy to rule, to command, the distributional coefficiency of risk and reward. The crisis that occurred was a critique of sovereign power--it was more than deflationary (economically defensive), it was revolutionary (politically offensive). Thus was born the political-economic extension of the risk in a consolidated form.
We now face the spectre of global consolidation where the market is free from the sovereign power--the natural laws--of The People, providing an operational gestalt of supra-sovereignty, and global extension of the risk.
Without deconsolidation of the risk, the need for government just gets "bigger" from here in order to control the over-extension of risk.
Saturday, August 28, 2010
Extent of Risk
In a defensive mode (having value to protect from loss), analysts assess the extent of the risk. It is both a function of keeping accounts and retributing the value to its source (including the value of any liability to the risk).
The chairman of the Federal Reserve says, for example, he will extend the extended policy of monetary easing. Bernanke says resisting deflation is job one.
Deflation presents the highest degree of risk, extending to every aspect of the economy, especially the accumulation of gamma risk that is already over-accumulated.
Our concept of risk incunabulates from the accumulated wealth of royalty. They also accumulated risk with the reward, and it was necessary to measure the extent of the risk in order to keep the wealth accumulated without discouraging the incentive to produce it, much like we do today, trading reduced risk for distribution of the reward. The trick, of course, is to reduce the extent of the risk without a proportional distribution which, of course, as the king found out, does not happen without certain, inevitable, risk.
Gamma reduction of the risk (reducing the risk of losing the ability to command and control it) is job one. It has priority or the power will be lost to a lower class (like progressives) just like the king had to share power with the bourgeoisie--a process in which the king's wealth was transformed into capital, which was transformed into the wealth of nations, displacing the rights of the king with a ruling class empowered with the natural right of The People (its subjects) to sovereign power, effectively reducing the liability of the risk.
The volume of risk, however, remains the same irrespective of the shape of the vessel that contains it and manages it to a current value.
It is necessary, then, to evaluate and delimit the extent of the risk--to keep account of assets and probable liability of their accumulation, which is largely a statistical function.
Statistical learning is fundamental to cognition, and in the human species, measuring the probability of the risk--delimiting permanence, identifying the enduring elements of generalized risk--becomes an epistemic gestalt. The objective of "taking the risk" is more than just the sum of its parts. The gestalt has to be structured into a system of rules and boundaries to delimit the objective to the reward. It must fit the level of risk, which if consolidated, clearly defines the reward (class) for all to see (the empirical measure, and the current value, of the risk) in the midst of an otherwise infinite number of probable outcomes (the interpretive property of cognition).
When the needed distribution does not occur to reduce the risk, there is an extension of the risk, increasing the number of probable outcomes (interpretations of the risk). The amount and distributional proportion of risk remains the same. It is the interpretation of the risk that changes with a resulting volatility of its current value, referred to as market sentiment, falsely inferring a popular consent, accumulating value arbitrated from the risk when a distribution is what is needed.
English royalty utilized a device called a "writ of extent" which ordered an assessment of property in payment of debt to the crown. Vestige of that writ survives in the form of defaults and foreclosures, securitized debt, collateralized debt obligations and credit default swaps. Just today, for example, CDS's on treasury securities increased to thirty percent which, of course, is perfect nonsense. While the value of the securities is elastic, the probability of default, unlike the king, is zero. The measure is an interpretation of the extent of the risk that gives it valuable volatility--value arbitraged, or derived, from the interpretation of the risk. If it measures anything, it indicates the willingness of a consolidated capital to remain illiquid.
The illiquidity extends the real value of the risk, just as it did for the king--keeping the source of the value subjected to the current interpretation of its value.
Illiquidity is a crisis mode of capitalism. It is being deliberately extended to derive current value to the point of liability. The amount of accumulated liability is being regulated by the Fed which will continue to resist deflation with inflationary policy.
While a depression will not occur (avoiding a critique of social value--delimiting solutions to the generalized interpretation of the risk), the effect is extended to dissipate the risk of liability without deconsolidating the risk from the gamma proportion. It is the Fed's job to manage the proportion of this risk, "accommodating" an interpretation that produces value without risk of liability--a privilege enjoyed by the king, accounting for the extent of the risk.
The chairman of the Federal Reserve says, for example, he will extend the extended policy of monetary easing. Bernanke says resisting deflation is job one.
Deflation presents the highest degree of risk, extending to every aspect of the economy, especially the accumulation of gamma risk that is already over-accumulated.
Our concept of risk incunabulates from the accumulated wealth of royalty. They also accumulated risk with the reward, and it was necessary to measure the extent of the risk in order to keep the wealth accumulated without discouraging the incentive to produce it, much like we do today, trading reduced risk for distribution of the reward. The trick, of course, is to reduce the extent of the risk without a proportional distribution which, of course, as the king found out, does not happen without certain, inevitable, risk.
Gamma reduction of the risk (reducing the risk of losing the ability to command and control it) is job one. It has priority or the power will be lost to a lower class (like progressives) just like the king had to share power with the bourgeoisie--a process in which the king's wealth was transformed into capital, which was transformed into the wealth of nations, displacing the rights of the king with a ruling class empowered with the natural right of The People (its subjects) to sovereign power, effectively reducing the liability of the risk.
The volume of risk, however, remains the same irrespective of the shape of the vessel that contains it and manages it to a current value.
It is necessary, then, to evaluate and delimit the extent of the risk--to keep account of assets and probable liability of their accumulation, which is largely a statistical function.
Statistical learning is fundamental to cognition, and in the human species, measuring the probability of the risk--delimiting permanence, identifying the enduring elements of generalized risk--becomes an epistemic gestalt. The objective of "taking the risk" is more than just the sum of its parts. The gestalt has to be structured into a system of rules and boundaries to delimit the objective to the reward. It must fit the level of risk, which if consolidated, clearly defines the reward (class) for all to see (the empirical measure, and the current value, of the risk) in the midst of an otherwise infinite number of probable outcomes (the interpretive property of cognition).
When the needed distribution does not occur to reduce the risk, there is an extension of the risk, increasing the number of probable outcomes (interpretations of the risk). The amount and distributional proportion of risk remains the same. It is the interpretation of the risk that changes with a resulting volatility of its current value, referred to as market sentiment, falsely inferring a popular consent, accumulating value arbitrated from the risk when a distribution is what is needed.
English royalty utilized a device called a "writ of extent" which ordered an assessment of property in payment of debt to the crown. Vestige of that writ survives in the form of defaults and foreclosures, securitized debt, collateralized debt obligations and credit default swaps. Just today, for example, CDS's on treasury securities increased to thirty percent which, of course, is perfect nonsense. While the value of the securities is elastic, the probability of default, unlike the king, is zero. The measure is an interpretation of the extent of the risk that gives it valuable volatility--value arbitraged, or derived, from the interpretation of the risk. If it measures anything, it indicates the willingness of a consolidated capital to remain illiquid.
The illiquidity extends the real value of the risk, just as it did for the king--keeping the source of the value subjected to the current interpretation of its value.
Illiquidity is a crisis mode of capitalism. It is being deliberately extended to derive current value to the point of liability. The amount of accumulated liability is being regulated by the Fed which will continue to resist deflation with inflationary policy.
While a depression will not occur (avoiding a critique of social value--delimiting solutions to the generalized interpretation of the risk), the effect is extended to dissipate the risk of liability without deconsolidating the risk from the gamma proportion. It is the Fed's job to manage the proportion of this risk, "accommodating" an interpretation that produces value without risk of liability--a privilege enjoyed by the king, accounting for the extent of the risk.
Thursday, August 26, 2010
Economic Gestalt
Few hedge-fund firms that relied on technical patterns to predict behavioral trends are left standing. They have been bowled over by the fiats of consolidated risk management that can easily reverse, if not eliminate, expected coefficients, rendering what appear to be stochastic events that yield the "value" of surprise.
Obviously, the value of the surprise-premium is based solely on perception of the risk. That perception is conceived, or modeled, from experience of past events. If the events were ontologically derived, the stochastic models would predict the current value of the risk based on the probability of future events, but only "if."
A nearly trillion-dollar stimulus and next-to-nothing interest rates should be plenty counter-cyclical, for example, but...surprise!
All you have to do to fake-out the Fibonaccis is act with a high order of accumulated capital, consolidated risk, and order of intention. Without deconsolidation of the capital, and risk, the golden ratios are so much gooey glop with as much inelasticity as tapioca pudding.
Keynesian management of the risk is supposed to render a depressionary cycle obsolete. Surprise! The capital has become so consolidated that all it takes is a high order of intention to force our economy all the way back to a time when a "writ of extent" was financially fashionable.
All that has to be done to force the economy into a depression is to keep hording cash at the top, like the king could, leaving his "subjects" with nothing but the bare essentials, if that, and all the wealth, and risk, consolidated into the empirical sovereignty of the crown.
This economic gestalt is built into the perception of accumulated wealth, and the fiat distribution of risk, as a right or privilege not apparent by the sum of individual parts into a whole.
Something has value if the king commands it. Currently, the king (the gestalt of wealth and power) says employment does not have value. It is not worth spending his money on, which produces value for the king at his subject's expense. So, the sheriff is busy about, assessing the extent of the risk.
The king is so intoxicated with his power--his divine, providential right--that he does not realize what the sheriff's assessment is actually measuring. It is the gamma risk--the economic gestalt that at the time of mercantilism converged divine right with the natural rights of man, and diverged the coefficiency of power into a more pluralistic "extension" of the risk.
This process of convergence and divergence is still in procession, but with highly organized, technical means to slow its progress. The order of intent is highly sophisticated, making it appear that free society has reached the pinnacle of organizational efficiency by consolidation of its power (and the risk that comes with it).
The more latently gestalt the risk becomes, the more it accumulates until it breaks. Crisis, however, does not have to be at the pinnacle of operant conditioning, but a precognition that measures the extent of the risk with the highest order of intent.
The successful management of risk is the ability to predict and effect the behavior of others. It is a fundamental human endeavor that is defined, measured and delimited by the organized accumulation and distribution of power.
The gestalt is a delimiter of risk management, limiting problems to their appropriate solutions by delimiting the generalized concept of what the risk is. It compels a cognitive species to mirror the success accomplished by the freedom to choose, structured into a currency of value for all to see, indivisibly appreciating what is a divisibly immeasurable source of value.
Obviously, the value of the surprise-premium is based solely on perception of the risk. That perception is conceived, or modeled, from experience of past events. If the events were ontologically derived, the stochastic models would predict the current value of the risk based on the probability of future events, but only "if."
A nearly trillion-dollar stimulus and next-to-nothing interest rates should be plenty counter-cyclical, for example, but...surprise!
All you have to do to fake-out the Fibonaccis is act with a high order of accumulated capital, consolidated risk, and order of intention. Without deconsolidation of the capital, and risk, the golden ratios are so much gooey glop with as much inelasticity as tapioca pudding.
Keynesian management of the risk is supposed to render a depressionary cycle obsolete. Surprise! The capital has become so consolidated that all it takes is a high order of intention to force our economy all the way back to a time when a "writ of extent" was financially fashionable.
All that has to be done to force the economy into a depression is to keep hording cash at the top, like the king could, leaving his "subjects" with nothing but the bare essentials, if that, and all the wealth, and risk, consolidated into the empirical sovereignty of the crown.
This economic gestalt is built into the perception of accumulated wealth, and the fiat distribution of risk, as a right or privilege not apparent by the sum of individual parts into a whole.
Something has value if the king commands it. Currently, the king (the gestalt of wealth and power) says employment does not have value. It is not worth spending his money on, which produces value for the king at his subject's expense. So, the sheriff is busy about, assessing the extent of the risk.
The king is so intoxicated with his power--his divine, providential right--that he does not realize what the sheriff's assessment is actually measuring. It is the gamma risk--the economic gestalt that at the time of mercantilism converged divine right with the natural rights of man, and diverged the coefficiency of power into a more pluralistic "extension" of the risk.
This process of convergence and divergence is still in procession, but with highly organized, technical means to slow its progress. The order of intent is highly sophisticated, making it appear that free society has reached the pinnacle of organizational efficiency by consolidation of its power (and the risk that comes with it).
The more latently gestalt the risk becomes, the more it accumulates until it breaks. Crisis, however, does not have to be at the pinnacle of operant conditioning, but a precognition that measures the extent of the risk with the highest order of intent.
The successful management of risk is the ability to predict and effect the behavior of others. It is a fundamental human endeavor that is defined, measured and delimited by the organized accumulation and distribution of power.
The gestalt is a delimiter of risk management, limiting problems to their appropriate solutions by delimiting the generalized concept of what the risk is. It compels a cognitive species to mirror the success accomplished by the freedom to choose, structured into a currency of value for all to see, indivisibly appreciating what is a divisibly immeasurable source of value.
Subscribe to:
Posts (Atom)