Assumed Risk in the Marketplace

In the marketplace, there is the reasonable assumption, or apprehension, of risk by both the buyer and the seller. Sometimes bad things “just happen.” If I buy shares of securitized debt rated as AAA I reasonably expect the value of reduced apprehension. However, if I understand macro-economics, and I know the debt I bought was “bundled” to misrepresent the whole package (which is the “synergy” capitalists use to consolidate assets and derive divisible benefit), then I can fully expect to have my assets looted.

Ideally, both the buyer and the seller have the same apprehension–comprehension–of risk. However, income, the capacity to make demands in the marketplace, can be very unequal. Due to intentional consolidation, manufactured on Wall Street for public consumption, inequality has a “tendency” to operate so that the risk of loss is more fully assumed for people that have less bargaining power–99% of us. Without the equal power to make demands and apprehend, or control, the probable risk, the victims–who conservatives refer to as “looters”–must sue for damages judicially or loot the treasury politically. Both are considered by conservatives to be legal theft of income earned by means of free enterprise, which is declared to legitimately exist on demand, but instead of being resolved on demand like it is supposed to, by consolidating it the risk yields to an aristocratic identity.

Look at a margin contract. When an investor goes on margin with a broker he assumes the broker has a responsibility to not adversely possess his account by using his assets against him (taking his stock and shorting it, for example), which is to identify a possible conflict of interest that has a legal liability. In addition to the assumption of possible risk, the investor must sign to the probability of “unanticipated triggers” that could possibly cause unilateral liquidation of the account by the broker “without notice.” Although liquidation may not be caused by either the client or the broker, there would be no risk assumed at all if the investor does not sign to terms (the method) that probably yields FROM it. Notice how the terms of the contract, like a math equation, determine the probable yield.

In a math equation the yield is predetermined. All the terms, whatever they may be, naturally yield TO the outcome. The liability is that you are not good at math and so you assume all the liability of being wrong and experiencing detriment. In any case, however, signing the contract (yielding to its terms) caused the detriment. The risk of loss is fully assumed.

(Also notice the missing variables to be solved for in the equation. The term “unanticipated triggers” makes the equation more than simple math. Undefined causal terms probably mean the detriment is well defined. Although the risk may be predetermined the predictors act with a naturally limited liability since the causal attributions are undetermined, defined as “unanticipated.”

When it comes to equity value, the risk of loss is fully assumed but the triggers are to be determined. Whether they are predetermined then becomes the question. Michael Lewis says it’s rigged. I see all the signs of it being rigged, and if it is, “suitability” is an empty term.

Suitability, like satisfaction guaranteed, is a missing value. Going for yield at a negative rate of interest is the known motive, but it is to be determined in the probable futures by a handful of people that have a whole lot more cards to play with than 99.9% of us, looking to trap us into the liquidity they so generously provide on demand.

If the causal factors of a suitable investment are to be fairly determined, then the money needed for investment needs to be less consolidated. Being able to apply the risk yourself is transparency. Otherwise, transparency just means you are more likely to see the looting take place, being left only with the alternative of negative yield.

This is a simple math problem.

Without deconsolidation of the risk, the market is not free to self-determine. Instead, it yields TO predetermination derived FROM methods that control for, and yield to, the probable risk on demand, which is the investor’s need for positive yield to financially survive.)

Legal liability depends on causation. Whether we think the distribution of risk and reward naturally yields “from” or “to” some objective reality “makes” all the difference. If the observers intend to affect the outcome, then clearly they are the predictors. If we want to change the outcome then we have to change the predictors–the method that yields to the outcome.

Financial advisers say, for example, that buying into stocks is the best value for retirement. The reason they say that is because it verifies. The reason it verifies is because it is intended to go up. Not only is this the incentive to buy stocks but it provides buyers for sellers long term. In other words, it supplies demand.

Demand is the primary predictor. To confirm it, try selling something nobody wants. In that case, capitalists create demand, and the best way to do that is to add disposable income.

Selling something nobody wants (detriment–latent risk–timed to the future) is Wall Street’s favorite game. Nobody is likely to buy something they don’t want without being coerced, and fraud is the best way to do that, timing the risk to maturity (“T-t”) on demand.

Fraud is a criminal activity, but if it can be made to look like you asked for it–not being able to account for the hidden risks, for example–then the liability is limited to the buyer on demand. The limited liability, notice, admits that demand (not the “job creators”) is the determining variable, which is why capitalists “make it” to “take it.”

While a person can labor to own property, in order to gain capital that person must sacrifice income, which results in debt, secured by property delivered to the future on demand, to demand the supply. What the makers make is debt, taking the income needed to demand the supply. Then, when the victims are in default, they are said to be “looters and slackers.”

The negative demand argument (the predictor) is not an ideological argument. It’s a simple math problem that any 1st grader can understand with complete satisfaction; and it is not difficult to understand that adding negative value (even more debt) to zero income yields a negative number. If you expect the value to be positive, then you must be bleep’n nuts–pathological!

Without existing on demand (asking for what you get), predicting the risk would be a liability. The liability is reduced over time by existing an exculpatory measure–the so called “disconnection” between Wall Street and Main Street we hear so much about in pop media. Being described as disconnected gives attribution to the risk-value, on demand, using disposable income that capitalists consider to be expendable, along with your job, which they work so hard to create by destroying it.

Despite being adamantly opposed to redistribution of income, conservatives admit that disposable income is necessary to create demand. That’s why Karl Marx described capitalists as being cognitively dissonant, and the dissonance resolves over time.

The dissonance has not resolved because the debt is monetized. Monetizing debt is the measure that exists over time to resist nothing; specifically, it resists a zero retrun on investment, which is the “big” problem of capitalism all classical economists, including Marx, described as “the declining rate of profit.”

The declining rate of profit is a support-resistance problem. It is what the Fed does when it uses technocratic tools to align the incentives in “the public interest.” This indivisible interest is the “rate of interest” (the rent) measured by what it costs to supply money, create demand, and provide utility to an otherwise dead-weight loss over time.

For capitalists, the interest rate is the primary predictor, which is a measure that exists over time to yield value. We have “the prime rate,” for example, which normally has a long-term rate higher than a short-term rate. Holding bonds a long time demands a higher yield (return on investment) or no one will buy them.

To resist zero ROI, there must be a control, a way of yielding to the return without risk (without an inverted yield in which short rates exceed long rates, which essentially means time has run out–the risk is fully matured or “assumed”). Since, however, yielding to a riskless return is the risk to be avoided (because the yield returns in the form of unemployment, and massive confiscation of property to satisfy a massive debt proportion “needed” to demand the supply, along with rioting in the streets!), there is a tendency to control for risk by distributing the detriment (military assets on Main Street) and consolidating the reward (asset values on Wall Street), which naturally yields the need for controlling authority to reasonably apprehend the assumption of risk.


About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
This entry was posted in Political-Economy and Philosophy and tagged , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s