Saturday, June 4, 2011

Real Bills One More Time (part II)

Posted by bionic mosquito on 06/04/11 09:38 PM

(In further reply to Bischoff)

You continue to argue that inflation is not inflation because of some legal distinction or some accounting principle, as if some legislation or FASB decree can change the economic nature of the event.

There certainly is a legal and contractual difference between credit and receivables. There is also an accounting difference - each has its own place in the balance sheet. There is different treatment in the case of bankruptcy.

But economically there is no difference. Both capture the deferment of final payment for goods received today, albeit under different legal/contractual principles. All of your goings on about standard accounting principles and the difference of governing law do not change this economic fact.

Now here is where you say "I don't understand the difference" and I say "I don't know how to explain it better." You are one who is convinced that legislative action can change economic reality. You likely will never understand the difference.

Now, in any form (credit or receivable), the economic issue is the same. As Wimpy would say "I will gladly pay you on Tuesday for a hamburger today." It matters not to Wimpy how the seller books the transaction.

Why is it inflationary? Because it is fractional reserve. Why is it fractional reserve? You answered the question yourself. You say there is not enough gold (if you recall, gold = money, money = gold) to support production. (Not enough gold: another false concept, but not important to this discussion).

Not enough money (gold), but somehow through the magic of pixie dust man create some. Just like Bernanke and B of A.

Don't tell me (but I know you will anyway) that it is backed by gold. If the gold was there, then there would be enough gold to support production. But you say there isn't enough gold to support production. There either is enough gold or there isn't. You cannot argue both to be true at the same time.

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