(Options and Futures to Believe In)
Let’s say you have a lot of money on loan. You have to loan it because you own most of it.
Since the objective is to get more back than you put in, “making” a profit, which is what “the makers” naturally do, you know that default is inevitable. You need protection–from yourself! No one is to blame for the harm done (the demand destruction) but you. You are liable for the “probable risk” of default.
Mathematically, you know the way risk is being applied is unsustainable (destructive by default). Deriving value from the risk can’t go on without assuming all the liability. You need to have a way to shift “realisation” of the “default risk premium” now in the futures. Effectively, the liability is unfunded using a counterparty identity.
Debt is created to pay the old debt (the good after bad game). It gets so big that it is a threat to everybody (the TBTF identity). If the risk can be pushed into the future, effectively unfunded until it is due (the due date), then the risk is safely managed, held in reserve (the Federal Reserve Bank).
(The CEO of AIG, keep in mind, for example, sued the government for forcing it into a liability he helped to create. Mr. Greenberg is still a very wealthy man. What is a billion here or there to people that have, together, trillions to lose? In a too-big-to-fail proportion, absolutely nothing! Where’s the gamble?)
Central banks then manipulate the prime rate of interest to indicate the probable risk of default in the future (mathematically, fully assumed in priority). Derived from the value of the risk stored (surplussed) in reserve (capital reserves the Fed requires its member banks to hold to cover the risk in the futures) the fully assumed liability remains unfunded until it reaches a crisis proportion (the gamma-risk dimension), which is described by regulators as the value of “attainment.”
(Greenburg, for example, was identified as having directed his credit-protection insurance company into attainment. He fully intended to do harm, what the marketplace was demanding, with limited liability.
AIG provides insurance products that rich people buy to protect themselves from the fully assumed risk of loss by default. Using unfunded credit derivatives, credit protection transacts between bilateral counterparties. In other words, buying and selling the risk to themselves, which naturally assumes no liability, being self-contained, right?)
When attainment is reached, there is a price to be paid. Austerity measures are then called for, in late order, to reduce the amount of debt-to-equity, which is an unfunded liability that has been deliberately derived from the risk (delivered to the future). At this point, Marxists say that the real value has been alienated from the actualized value. That can’t be right, however, because the risk (the real price to be paid–the economic rent) has actually been delivered to the future (unfunded!), held in reserve.
Demanding austerity naturally draws big crowds! It’s about THE LAW of large numbers–the natural utility that “obtains” on demand, no matter what, naturally derived from the numbers, fully funded in priority, delivered on demand.
Democracy aggresses a passive resistance. If it is deliberately organized politically and economically to resist the aggression (described as “mob rule” or majoritarianism), then it becomes a destructive force to be contained. The passive dimension becomes a weakness to be exploited, intending to realize the objective reality of the nihilists who say nature is devoid of moral dimension and the only thing that really matters is absolutely nothing!
Aggressing the democratic form, both politically and economically, gets progressively closer to a more perfect union (existing with utility in priority) without sacrificing individual identity (the marginal product).
What is good about massive movements can go bad. Improperly organized it can be massively destructive. Yielding to the method, it is only as good as the method intended to be used (the associative property).
Options and futures are intended to manage aggregated risk. It’s hard to believe in it, however, if it intends to cause the problem to be solved, effectively modeled to transact the elite interpretation of the objective, described as reality.