Hi Ian,

as far as I know all governments do something similar to cash accounting!

gr

Twan

So, all governments are 27 times more in debt than their cash accounts report, or something! That makes me feel better :-)

iang

Debt and cash accounting have a problem living together since the rationale for borrowing is that the money you borrow today will devalue in the future. Interest tries to make the scenario a win win for everyone. However the risk associated with governmental activity and its ability to revenue by taxing has been vastly under rated. So the dollar or currency they borrow today is base upon their ability to tax in an ever increasing base of economic activity. The assumption is fueled by monetarist who believe that monitoring and managing this economic growth by money supply is absurb. All that is happening is the lengthing of the curve of growth and decay of economic events. So having lots of balls in the air and lots of events in growth and decay they are really betting on one event creating the 80% of the growth ala Pareto. This level of activity is directed toward large capital bases like major corporate entities who have the ability to capitalize on a potential growth event. So the system appears to work however this paradigm runs counter to macro trends of geopolitcal decay and the systems that allow one nation to prosper in a competitive enviroment over another. So the larger national growth to decay model is something the governments are blinded to. The US is the best example of a decaying growth trend where the economic conditions after WWII assisted the US in its economic expansion the borrowing and inflation in prices made it impossible to sustain these levels of growth. So the cash accounting vrsus accural became meaningless since the assumption of growth and the governments ability to tax where not limitless and flexible. The labor and manufacturing base for this growth have been exported to newer growth trend Asia where returns warrant borrwing given the growth regardless of monetary management techniques. Cash accounting will allow us to know the certainty of our downfall while the assumptions of the borrowing are firmly grounded in the fairy tale land of accural accounting. It can be said that accural accounting is a means of lending money to the government since it assist the property taxes assesed on plant and capital expeditures, a defacto means of reducing the tax burden on the growth assumption models. We lack the ability to see the evolution of economic prison it is based on cheap commodities like oil enforced by the ability to project power. Cash accounting does not allow one to project power without planning and a discussion on its implications. Cash accounting if maintained in a real time sense does not allow for empires but rather well planned democratic processes. The US has no democratic process as such and is basically an oligarchy that is shifting their assets to newer growth trends at the expense of it citizens. Oil is jugular vein and the cash accounting on the spending is done with special treatment of reserves in an accural ffashion. So the cost of the inflationary commodity Oil evades our ability to tax it based on tax codes that allow transfer pricing and accural treatment of reserves to provide deflationary taxing regime which is counter to the inflationary trend on energy. the US spends in cash and taxes in accural which is insane since the tow must be linked in order to provide a flexible taxing regime that runs in concert with true economic conditions. Oil has become too expensive in term so lives paid for access to it. Iraq has 40% of the worlds oil reserves and we need it, Nigeria has a light sweet crude that we also require since our refineries are configured for light sweet crude the cost to retrofit would be large. So our people under the lie of bringing freedom will die because major corporate entities want to squeeze the last drop of asset from their investment whcih will be invested in Asia. Strangely enough Asia requires oil to sustain its new growth trend. So because we permit the priviledge to run our political process and run the economic activity of our nation we decay under a heavy tax burden and bleed in nations far far away. This is all done for one purpose to expand the fortunes of US elite. We the people buy the heros funeral and the bill to pay for it. Unraveling the lie of the oligarchy begins in accounting Cash accounting and its interplay with the 60,000 pages of tax code. It is important that the pareto effect on economic activity does not include a dwindling overall macro economic event. The assumptions are sold to the people under the concept that all aspects of the nation state can be influenced and success achieved. We can fall but so far and that all.

Hi James

Do you have any links that support the ideas in your note? (Would it be possible for you to re-write it as an article rather than a note?).