When prices rise, wages are lowered. If prices rise against falling wages (the “new normal” we have now that Senator Coburn says should exist on demand) then, by means of demand destruction, there is a strong tendency to the classical economic model of capitalism (not to be confused with the unconsolidated free-market model that Coburn, for example, must be referring to).
Tending to a subsistence wage, the only way to control low-wage inflation is to inflate the money supply and “accommodate” debt. Accommodation is currently referred to as quantitative easing, and the quantity being eased is risk, being expanded, and optioned, in the futures, or the container is busted, on demand.
Without monetizing the debt, capitalism dies from demand destruction. As the income to support it declines, the Fed is the only way to support margin expansion, resisting its demise, yielding to a riskless rate of return existing on demand in priority.
Most of the discussion about economic direction and probable risk-value revolves around the Federal Reserve. What exactly is being held in reserve is the risk-value.
A risk-value ratio has been accumulated and maintained since the dawn of “the capital” (essentially replacing the sovereign as the measurable means of power), contractually obligated, yielding over time to a sum certain. Growth is what is supposed to yield so that everybody benefits, but by that measure capitalism is prone to failure.
Oscillating between boom and bust there is always ample supply depending on the capacity to demand it. Although “We” no longer depend on feudal kings, lords, and nobles, which had no incentive to expand the margin except to conserve the value of serfdom, we now depend on the distribution of capital, which has a tendency to be consolidated and distributed on command.
We now exist with low-wage inflation to satisfy the apparent, objective reality of capitalism to cure chronic shortages. No longer do “The People” lack subsistence and become indebted to the sovereign and exist on command because “We” are sovereign.
Now the social contract is self-reliance. Anyone that is short what they need did not earn it and cannot demand it. If, by chance, you get caught in a macro detriment (the bust phase of the cycle, which does not always bust the same people but does tend to always benefit the same people), you are to blame. All a person has to do is work more for less (go out and get a job! the capitalist says) to cure the shortage and exist on demand rather than on command. The discrepancy between the on-demand and the on-command existence accumulates risk over time. That value has to be stored somewhere–it occupies space, and occupying space demands rent.
Despite how much power they think they have, Thomas Hobbes would say, if the capitalist does not pay the rent he will be evicted by the sovereign. That accumulative margin of risk is being held in reserve and is distributed in the form of federal reserve notes (private property in the form of assets) and not treasury notes (which is in the form of a public liability–debt–to be paid by assets held in reserve when needed “on demand”). When the rent comes due, the capitalist has plenty in reserve to pay it on demand, having prepared for the future, but intending to conserve the value of low-wage inflation.
Keep in mind that the Federal Reserve supports a global financial system that has leveraged debt far in excess of global GDP.
There is around $700 trillion of derivatives globally, compliments of Goldman Sachs and the Clinton administration. Yes, Bill Clinton balanced the budget with a more progressive tax code but ended it with an accumulative debt-detriment, and the means to consolidate power, that is so colossal the law of large numbers is destined to verify Hobbes’ hypothesis of intending to self-destruction.
Supposedly, the Federal Reserve exists to hedge the risk on demand. It is the model of consolidated power: it not only finances the risk but hedges it too.
The common critique of monetary expansion is its inflationary intendency despite the tendency to expand supply. It’s a way to attain the value of low-wage inflation while intending to prevent deflation. If markets lack liquidity (due to low wages) then simply add liquidity with the result being lower wages, which is better than deflation–no wages–and confirmation that capitalism, non-monetized, tends to slavery.
By holding the value in reserve, which measures the expected amount of risk in the futures, existing on demand–not accountable to any particular, standard measure, but to promote growth at the margin–the Fed exists to resist the law of large numbers with an ever-larger number. Sounds pluralistic but it yields to the intendency of consolidated power.
Debtor financed, there is a measure of pluralism–it is easier to become a millionaire. There is plenty of capital flowing from the fountainhead, but the ratio of debt to equity keeps rising and when it reaches attainment the ratio of rich to poor is conserved. All that hard work, and being among the best and the brightest, won’t be enough to prevent yielding it back, by occupation, to “The Fountainhead.”
Natural identity obtains.
Despite what we may intend, we always get what we ask for.