Cash is king, and what makes it king is its liquid (aggressive but passive), on-demand dimension (easily shaped and directed but having overwhelming force in the aggregate).
Formulation of the risk begins with a mathematical, elemental identity. This is the risk-free investment. Compared to this risk-free identity, which has the virtual, inexact truth of an irrational, transcendental number, the return on investment is the measurable difference between the ideal and the actual identity. While the difference can be described as alienated, its mathematical expression demonstrates that the real and actual value, like Kant observed, is imperative (having the quantifiable value of a naturally emergent property existing coincidentally in priority).
The risk-free identity is highly liquid. (It is really easy to shape and direct in discreet quantities on demand, but its measurable, passive existence is actually aggressively coercive in the aggregate; existing measure and, on demand, resisting nothing.) Existing measure and resisting nothing, on demand, the liquidity of a risk-free identity is aggressively full but passively empty at the same time. Its passive and aggressive qualities are quantifiably equivalent (having ECV-symmetry). The freedom to gain identity and the power of a forceful argument (or the force-majeure of a majority interest) exist at the same time (forming a natural-risk ontology) identified (formulated and emergent) by the numbers.
Formulation of the Risk Premium
Formulating the premium begins with a default identity. Although it is supposed to have an objective aspect and a Positivist tone, devoid of emotion and metaphysical ambiguity, the default condition derives from the ideal form that exists but does not exist (the being and nothingness, by no coincidence, of existential philosophy).
The default identity is derived by subtracting what is, from what would be, by default. Despite the Positivist aspect, it is, nevertheless, highly metaphysical, describing the ontologics of trying not to assume a moral, imperative purpose (or comparative dialectic) deriving from the conditions of a natural existence, having a neutral (but relative, differential) value (ECV-symmetry) identified in priority.
(The metaphysical problem of the derivative value is the criticism Pareto faced with his Optimality, for example. Mathematically, his optimality–yielding to the unemotional objectivity of the numbers–is easy to quantify. Integral to the value that emerges, however, is the fully assumed risk of loss, which is at a premium when it is not, in fact, lost. If the “yield” is considered to be then risk free, what is the real value of the risk now? What the premium actually is, reduces to an arbitrage argument “intending to” hedge for the fully assumed risk of loss by default–the natural condition that, whether by coincidence or not, exists in priority. Having a prior existence, by no coincidence, is nomological. It is obligated, like Kant suggested, with a strict, naturally intending, liability that is measurably imperative–categorical by the numbers and pragmatically efficient, obligated, on demand.)
The risk premium is calculated by subtracting the expected return on a risk-free investment now from the actual return on an investment. The “yield” (sigma) is then the real value of an investment (compared to–differentiated from–the return-value of a risk-free investment, which is naturally zero). Notice the existential (disambiguated) self-fulfilled value of “yielding to” the real value of an investment. Just because it can be mathematically (unemotionally) expressed does not mean it is not rigging the market.
Fixing the market is illegal because it does not “yield to” the risk-ontology (the Legitimate Coercive Value) of a natural, free-market identity.
To avoid yielding to the natural identity of economic value by default, there is the short interest.
Short sellers say they provide liquidity to the marketplace and, at the same time, correct for mispricing the real risk, which is an overvalued risk premium (i.e., identifying the inefficiency of how the risk–the real price to be paid in the futures–is actually being inefficiently managed in the name of “making the market more efficient” or “fixing” it).
The short interest is effectively how capitalists consolidate the wealth of nations, doing massive harm, and get away with it. Remember, for example, at the outset of the 2008 financial crisis, short selling (and Credit Default Swaps) were restricted until markets stabilized. This means that the short interest (in the money, which means it is greater than zero) not only identifies the inherent instability of the way we are doing things now, but that (like congressman Levin pointed out) the so-called natural correction (the hedge, using “derivative financial products” intended, with the repeal of Glass-Steagall, to make markets more efficient) is itself unstable. (It’s the picture of “The Scream!”)
Using the formula for the risk premium, and the effective use of the short interest to provide liquidity (in the money) yields to the risk premium by default, which is then referred to, by no coincidence, as the “default risk premium” (mathematically expressed, in the money, as “the actual return minus the real return on a risk-free investment”).
By no coincidence, now that the long-tail recovery, since the Great Recession, gets closer to really being a long deflationary trend, to resist the declining rate of profit (the default condition) capitalists are now (you see) closing out the equity interest (in the money). As more and more “little people” (including aspiring Wall Street executives) lose their jobs, the big banking interest (rich people) will be right there, providing liquidity (leaving you short against rising debt) in the money.
The natural result, by default, is more and more people feeling the Bern (measured by big jumps in the VIX) existing by the numbers (force majeure) in the money.
By force of the argument then (like I’ve been telling you), the money has to go somewhere. By no coincidence (being short your self-interest and long the probable accumulation of risk), the Fed will slow the return on the “risk-free investment” by default (described as normalization). The expected yield in the futures is then high for equities, naturally existing (formulated) by default at the “premium” risk-free rate.