Sliced, Diced, and Bundled

Derivatives dominate the realm of banking and have become more complex, deriving the method yield.

ETFs (Exchange Traded Funds), for example, have emerged as a way to diversify. This is fractional banking, using derivatives to hedge the fully assumed risk of loss.

(ETFs operate with “creation units.” A fractionalized asset can result in a liquidity crisis. If there is a panic, there is more interest derived than there is asset. This is the classic run on the bank– the short interest — that fractionalized banking must control for, deriving the method yield, and when it fails must be bailed out to avoid complete collapse of the system, having inflated the value of the asset to “make” — or derive — a profit on demand.)

Hedge funds slice and dice an underlying asset, like a stock, and resell it to investors. Since diversity hedges the risk, the method derived is to fractionalize a basket of assets, like the S&P ETF, or SPDR.

Bundling is a method derived to get consumers actually paying more for less. In the case of diversely hedging the risk, the ETF reformulates what the risk is since it cannot actually be reduced.

What you may think the risk really is now is more important than what the risk actually is. Risk-transfer products (derivatives) bank on that, methodically derived in a bundle of diversified securities, referred to as “securitizing the risk.”

Securitizing the credit risk, sliced and diced into bundles, if you remember, is what precipitated the 08-09 financial crisis and the Great Recession, resulting in massive consolidation of net worth (confiscation of private property), which has been driving the record run (inflation) of equity value without the “normal” correction.

Now, keep in mind, the Fed, if you remember, worked up a $4 trillion balance sheet of “toxic assets” (assets that were 100% worthless, which is the realization of the fully assumed risk). Using the same method, derived to securitize the risk, what does that probably mean for the popularity of ETFs to hedge the effect of being fully assumed?

(See other articles by griffithlighton on reformulation of the risk identity on demand.)

The new normal demands reformulation of applying the fully assumed risk (i.e., the zero-hedge effect).

What fully obtains, in priority, is the risk. That does not change. It is “objective reality.” What does change is the means to attain it, methodically derived, on demand, chasing the yield to its actualization (realization of the objective).

Attainment derives the method of regulating the risk allowed to accumulate into a catastrophic dimension. When attainment occurs, regulators step in to control for it with authority, which is then referred to as The Iron Law of Oligarchy.

Yielding to the Iron Law appears to be a command-and-control identity, but it derives from an on-demand attribution, naturally derived from the method being used. The attributive value, then, has ECV-symmetry — it obtains no matter what (with an Equivalent Coercive Value).

In the current environment, the chief executive, the President, is reducing regulatory authority to allow for a higher degree of freedom. (Degrees of freedom, remember, are integral to understanding “spooky action” in physics, controlling for causal identity.) If people are allowed more freedom we will be more prosperous; but that forgets what the authority to regulate actually derives from (having a spooky action), existing on demand, in priority.

Over the past week, the DOW has moved up and down the distance of 20,000 points. The accelerated occupation of space over time (the new normal) has a spooky feel to it; and many market participants are spooked as to what it actually means, having used ETFs, methodically derived (sliced, diced, and bundled) to cause the risk to be avoided (really having no change of identity — having CPT-symmetry — over time).


About griffithlighton

musician-composer, artist, writer, philosopher and political economist (M.A.)
This entry was posted in Political-Economy and Philosophy and tagged , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.