(Subordination of the Risk–Or the TBTF Game)
TBTF is a racketeering scheme–a confidence game subordinated to the risk.
It’s a variation of the good-after-bad game, inducing the mark to keep good cash flowing to keep the old money from going bad. It’s a credit protection scheme.
The reason it is never described this way is because it invokes a criminal liability, deriving from intending to “induce” a financial liability, which financiers describe as using risk-transfer devices to protect its investors from “unanticipated triggers.” These unintended events are liabilities that exist on call, at the margin, and are described as a measurable “effects” derived from the fickle finger of fate (having cause without intended purpose, which can be described as having an objective, but causally determined, reality).
(Even when Newton, for example, was conceptualizing “laws” of physics, he could not avoid a metaphysical interpretation of “objective reality.” A fundamental philosophical question emerges–What is the causal attribution?–and Newton simply said it is unknown. It’s like trying to determine the real value of a transcendental number and then knowing that it is never fully reduced but actualized, on demand, with a measurable utility described as the margin of error.)
There is no better measure of success than to automatically get what you ask for, just like the king, right? This, of course, is a philosophy of life.
Objectivists say that wanting to be king–the object of self-determination–is a common objective. While we all have different objectives, and expectation of associated risks, being able to determine it (causing it) means everything. It has unqualified, imperative value, and we all naturally enterprise to make it “just happen” automatically, and doing that means developing
“what you ask for” into a stable, routine task, described as a bureaucratic structure, having a recognizable (and thus predictable) pattern of existence.
The pattern we see now is the one issue Senator Sanders focuses on, and naturally draws big crowds.
Mrs. Clinton keeps saying she will break up TBTF banks if they pose a systemic risk. It doesn’t draw much enthusiasm because the TBTF dimension, by its very nature, poses a systemic risk. That is what makes “the game” successful, making YOU the mark, subordinated to the debt, menaced with persistent financial risk that is TOO BIG to fail and thus automatically out of YOUR control.
Deconsolidation of the risk is how “We” fix that (with readily apparent results), turning credit protection into the means of actually paying debt rather than the means to actualize the need for protection, which is nothing but a racket!
In coming weeks we will see volatility in financial markets, buying and selling credit protection products. Not over the probable effects of negative interest rates, however, or that the Fed has not ruled it out, but because we are not doing anything to deconsolidate the risk.
Instead, we are doing everything to consolidate risk more and more. Even the Democratic frontrunner says it’s not a problem until it’s a problem (making the same mistakes over and over again).
Why is it we can’t do anything to protect ourselves until after the measurable harm has been done? (So that we can accurately determine how many pennies to pay on the dollar, being sure that not one penny too much is paid to “the takers?”)
It’s time to go with the imperative alternative.