Monday, August 17, 2009

Beans and accounting thereof

Moral: Where we continuing talking money and will go into securities soon. But, first there needs to be a reminder that we're talking beans (ours, to boot) when we talking economy.


Well, we have to track our beans which is the role of accounting. But, accounting consists of a set of rules, some of them seemingly arbitrary (as opposed to the axiomatic, and natural, flavor found in mathematics). We hear about the shenanigans of Mac and Mae (you know, oodles have lost money with these two?); there is the issue of a recent rule relaxation that resulted in 'golden sacks' of money going to some banks.

Now, 'accounting' can be used several ways. In the context of a household, which might be the most simple sense, there can even be issues. Just look at the differences between income, say median for an individual compared to that of a household. In terms of the latter, how many individuals are involved is a major factor. Even with the most careful household, there will be things that are heavily influenced by outside factors (to wit, how many have lost expected retirement income through no fault of their own?).

In the context of business, one might have a particular view which deals with value related to a specific entity. Yet, these entities interrelate. Therein, arises some problems. Take the markets, for instance, which imply an economy, though it is by no means limited to just one political entity bringing up issues of foreign exchange.

Given all this, how can there be any strict accounting at any time? SOX, and its dream, doesn't really help. We do need to wake up to the fact that we need principles cognizant of relativity and uncertainty. Oh yes, risk management reigns there, as does the arbitrage crowd.

Perhaps, a big piece is missing. Why? On top of this, we have put gaming (casino capitalism) and extracting manipulators. That latter set sucks from the pockets of the hapless into their own. Example: high-frequency trading (sheer idiocy, on the face of it).

So, accounting will get more attention as we weave our way through all things touched by economics.


01/15/2015 -- This week, this post is getting read. Great! Nice little piece of work (kidding, in part) so many years ago. ... At last, a series that will establish the basis and extensions, as required. We are going to go back to some simple and come forward to the modern, complicated economy. Why? My long chain of ancestors (inherited via Prof. Lucio Arteaga) is one motivation.

10/29/2011 -- The OWS is partly about accounting. How was a vast accumulation accomplished? Given near-zero, obviously by unsustainable means.

03/22/2011 -- It's spring, and the garble uses gambling metaphors.

04/27/2010 -- Need to add the political set of truths, such as cat and mouse.

01/03/2010 -- More news on Goldman Sachs as the uber example of 'not on the behalf' comes to fore regularly. It'll need to be a separate subject at some point. Thanks to McClatchy: Nov 1, 2009 & Jan 3, 2010 (update). Goldman has to respond, of course.

10/05/2009 -- Ah, yes, on the behalf of.

08/25/2009 -- With structures favored by quants, accounting goes way off. Of course, it's a money issue, to boot.

08/21/2009 -- Some have more than others, by quite a lot as we're reminded by the NYT.

Modified: 01/15/2015

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