Late-Order Effects

Economists refer to late-order effects directly. Market analysts, however, tend to be more indirect, suggesting trend analyses from which derives the default risk premium, which then determines the perception of what causes risk and the value derived from it. (This is the attributive value I write about.)

Covenant Paper

Equity values were down sharply again, suggesting a bear market. Energy and financials led the markets down because that’s where a lot of market rigging goes on.

Credit Default Swaps on TBTF banks have been increasing. CDSs are now at a significant, technical level to suggest a bearish financial trend, which has to do with covenant paper in the energy sector.

Just as Goldman Sachs predicted, oil prices keep falling because of cove-lite agreements. When the terms of a business loan have weak covenants to pay back the loan, TBTF banks buy credit derivatives, or covenant paper.

Like Goldman was saying, the debtors are obliged to the unforeseen triggers of cove-lite paper. These are so-called unanticipated events that trigger breaking the covenant and the bank simply liquidates the debtors assets (short out of the money), like when millions of homes went into default after the financial crisis in 2007 and 2008.

To avoid being left short, oil is still being produced against a long deflationary trend (the so-called long-tail recovery). Fundamental to this unanticipated problem is a well-known technical problem that has an ideological interpretation.

The problem is classic overproduction, but we don’t describe it that way anymore because it is identified with socialism.

Classical economists used the term “overproduction” to technically describe what naturally happens when the profit margin exceeds the capacity to pay it. The natural result is financial default, and today this same phenomenon is managed (in the TBTF gamma-risk dimension) with credit-risk derivatives, like unfunded Credit Default Swaps, which are risk-transfer vehicles (RTVs).

RTVs in the form of swaps and derivatives are governed by general agreement of the International Swaps and Derivatives Association.

The use of covenant paper is considered to be the best way to manage (determine) the risk–unexpected events that are fully expected to happen in late order (realizing the accidentally-on-purpose existence), technically yielding to an ideological identity.

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About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
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