Yielding to the warning signs, bond rates are negative or nearly negative, with a yield curve going flat. Accounting for the difference, what is the course of action?
If the warning signs are inevitable, having the symmetry of natural law, trying to avoid them makes the system so complex it is hard to know the difference between cause and effect. That, of course, is why capitalism is steeped in complexity.
Derivatives markets are so complex and dark, hidden away, that the effects appear to be indirect. Application of the risk can then have an interpretation that attributes the risk, and limits the liability naturally associated with it, to conserve the risk-adjusted, real rate of return, or the risk-value. The appearance of a risk ontology then has the appearance of a random attribution, which means it actually has a purpose, directly applied on demand and fully culpable.
Association of the values yields to distributive properties (income, for example, which is the means to apply risk in the marketplace), depending on how the values are organized and transactionally interpreted.
Causal identity can be far away from the intended purpose. The spread affords a lot of space to interpret the transaction with the purpose of limiting the liability, yielding to a false symmetry–the warning signs, for example, that appear to be inevitable and thus having the absolute value of a natural-law identity, or symmetry.
FSOC confirmed yesterday that American banks are indeed too big to fail. They passed the stress test, but what is the source of the stress from which derives the need for the test? Is there some sort of natural law in operation that can’t be avoided (like the value of income distribution) that authors the moral imperative? If so, the comparative value that measures it (yielding to the signs) is what we have now (the moral comparative).
When Mondelez buys Hershey, for example, having made a bid for it last week, the effect is to buy back economic expansion. The effect is to deflate the economy, and the sign that indicates it is negative or nearly negative bonds, with a yield curve going flat.
Warren Buffet, CEO of Berkshire Hathaway, which owns Mondelez (a horizontally and vertically integrated food conglomerate), is the model of success, isn’t he? He’s a nice guy! He’s no psychopath, right? The effect of buying Hershey, however, will directly affect consumer income with higher prices, buying back economic expansion at the negative rate of interest, yielding to the risk-adjusted rate of return that conserves ownership of the capital, which just happens to be a distributive property (a function of income).
Negative rates have gained a causal attribution but are really indicating the course of action.
The negative rate of interest is not the problem but naturally associates with it–indicating the problem to be solved, which has a distributive value.