Managing the Risk of Default by Default
Conservatives focus on the supply side because demand is the determining variable.
When equities move down on good economic news, what is the attributive value on demand?
We often hear that the stock market is not a measure of macro, political-economic risk, but it is. Technical trends (which time the risk to maturity) indicate the probable default condition on demand. How it relates to “the social contract” is not readily apparent, but let’s give it a try.
If you are a big, corporate conglomerate with a big multiplier effect (in other words, having the power to pluralize the marketplace and determine the “extent” of demand, which is the “extension” of rents that determines the direction of risk), then most everybody is dependent on you. The “natural” result, on demand, is a social contract.
The multiplier effect multiplies the risk (it times it) to maturity–the default condition. The rent (the price to be paid–the attributive value) then reflects how close you are to the probable risk (the retributive value of its on-demand determination). When the interest rate is zero or negative, for example, a trend (the direction of the risk on demand) is being reversed, resisting the value of a riskless return.
(Articles on attributive and retributive value by griffithlighton can be found on the World Wide Web.)
Being a big, consolidated, corporate conglomerate “makes” money. Money (demand) is so consolidated that the Fed has to make more to keep from realizing the default condition. (The “natural” result, according to any classical economist I know of, form Marx to Milton Friedman, is demand inflation.) By default, this condition is called an “objective reality.” It establishes the terms of the contract described as a “natural identity” that apparently is not good because we have to constantly avoid it by making more money, and making more money makes people (the corporate, which “are people too,” remember) happy.
Even after the recession, the corporate person is making money (making demands, which are the terms of the social contract by default). Instead of distributing risk by pluralizing the marketplace (which would, like in a free market, demand labor work less for more, or have a more equitable share of the profits, which reverses the terms of the contract), money the Fed makes is used to buy back stock.
Buying back equity interest makes it look like what you are doing is profitable (outperforming the risk by reducing it) when what you are doing is consolidating the risk (demand). It looks like you are successfully distributing demand (indicated by the marginal profit) when you are really consolidating it, which is a fundamental misattribution of your identity.
If the natural identity of the contract is a material fraud, how legitimate are its terms and conditions, on demand, by extension, bonded to authority?
To resist the answer to this question being zero, the roles (the direction of the risk) will reverse over time, existing measure, resisting the value of nothing.
Like the technical analyst says, the riskless return will be arbitraged away, timed to maturity, obtaining the natural attribution of the risk identity.
Like Thomas Hobbes told the king, the social contract is an on-demand existence by default, bonded to the authority of a natural identity.