To conserve the attributive value of the risk, the critical method must be contained. Control of content and access to information is not sufficient. There are plenty of expert analysts to disclose the relative, attributive value of the truth that forms the way things just happen to be.
Derivative financial products are used to contain the risk. Not to prevent financial failure (“attainment” of a public nuisance), however, but to conserve the distribution of its value over time.
Containment is accomplished by the fact of the crisis dimension known as “the big risk.” Stress tests are used to academically simulate the risk, and this is the critical method used to approximate the timing of the fact accomplished.
Knowing that the risk will occur, assumed to be an inevitable, redounding, objective reality, we can always be ready for it. The critique is thus contained by the fact of its continuous attainment, continuously reforming the problem in the form of the solution.
Currently, for example, the US economy now has tax cuts and repatriation, big banks that can get bigger, and the Fed reducing oversight of proprietary trading. All these elements of derivative banking are in place to manage the gaining risk proportion.
Big banks do not lend to proliferate small businesses. They prefer to Warren-Buffet the economy: attaining economies of scale in which the consumer pays more for less.
All the consumer staples Warren Buffet has consolidated, contained in Berkshire Hathaway, have doubled in price. There is little or no competition because big banks like the “pricing power” of consolidated industry and markets; and since small banks are more likely to lend for small businesses, big banks are now allowed to buy them up so they will lend more?
It is no coincidence that consolidation is now an efficiency factor, not a source of redounding risk, in a Too Big To Fail dimension. Banks can consolidate to manage it, and big banks do not have to report the propriety of trades used to manage the growing risk proportion because the risk of financial collapse can’t be allowed to happen in a TBTF (gamma-risk) dimension.
Since capitalism is better than the alternatives (critically, by force of the argument) it can not be allowed to fail. To keep us all socially secure, it is necessary (only natural) to make it too big to fail by default.
(See other articles on risk tautology and the attributive risk value.)
Despite all these factors proving to be detrimental in the past, especially when combined for the benefit of scale, it’s all good, isn’t it?