| Subject: | Re: [socialcredit] The Rabbit | | Date: | Thursday, April 21, 2005 16:54:22 (+1000) | | From: | Vic Bridger <socred @.......au>
|
Absolutely correct. Any Balance sheet of any business will show that Capital
is a Liability.
Vic Bridger
----- Original Message -----
From: "William B. Ryan" <w_b_ryan@yahoo.com>
To: <socialcredit@elistas.com>
Sent: Thursday, April 21, 2005 12:46 AM
Subject: Re: [socialcredit] The Rabbit
> 1. "liabilities = D + K" -- capital is conventionally
> regarded as an asset, not a liability.
> -------------------------
> --------------------------
>
> No, certainly not "conventionally." It is
> conventional to think of the firm's capital as being
> a liability owed to the firms owners.
>
> I'm more interested at the moment in resolving this
> formatting problem with Elistas than discussing the
> arcane details of accounting. I'll continue my
> criticism of your post later. If this problem is not
> resolved, the utility of the list is seriously
> truncated, as it was at Topica.
>
> :- What did you do differently between this message
> and the one you sent earlier, which couldn't get
> through? You apparently made some change in format.
> What?
> -
>
>
>
> --- John Hermann <hermann@picknowl.com.au> wrote:
> > At 04:38 AM 19/04/2005 -0700, Bill Ryan wrote:
> >
> > Douglas' theorem from *Social Credit* first
> > published in 1924 holds as a
> > statistical matter between zero and the upper limit
> > which is continually shifting:
> >
> > "In respect of financial institutions, let deposits
> > = D, loans etc. = L,
> > cash in hand = C, and capital = K. Then: assets = L
> > + C,
> > liabilities = D + K, so that L + C = D + K.
> > Differentiating with respect to
> > time: dL/dt + dC/dt = dD/dt; K being fixed, dK/dt =
> > 0.
> > Assuming cash in hand is kept constant, dC/dt = 0.
> > Therefore dL/dt = dD/dt,
> > which means that loans create deposits and the
> > repayment of loans cancel deposits."
> > --
> >
> > Comments:
> >
> > 1. "liabilities = D + K" -- capital is
> > conventionally regarded as an
> > asset, not a liability.
> > 2. It is not absolutely clear in this example
> > why C and K are being
> > held fixed.
> > 3. For depository institutions, "cash in hand"
> > may be more broadly
> > interpreted as reserves.
> > 4. The movement of interest payments has been
> > completely ignored here.
> >
> > Using the accounting equation L + R = D + K
> > ("L"=loans, "R"=reserves,
> > "D"=deposits,
> > "K"=capital) one may analyze two important
> > scenarios:
> >
> > (a) Advance of money Q from Bank A to an account
> > in Bank B:
> >
> > Bank A: D1 --> D1, R1 --> R1-Q L1
> > --> L1+Q K1 --> K1
> > Bank B: D2 --> D2+Q, R2 --> R2+Q, L2
> > --> L2 , K2 --> K2
> >
> > Net: D --> D+Q, R --> R,
> > L --> L+Q, K --> K
> >
> > Thus, increasing loans by Q also increases
> > deposits by Q.
> >
> > (b) Loan repayment Q from account in Bank A to
> > the lending Bank B;
> > Let i be the interest payment:
> >
> > Bank A: D1 --> D1-Q-i, R1 --> R!-Q-i,
> > L1 --> L1, K1 --> K1
> > Bank B: D2 --> D2, R2 --> R2+Q+i,
> > L2 --> L2-Q, K2 -->
> > K2+i
> >
> > Net: D --> D-Q-i, R --> R,
> > L -->
> > L-Q, K --> K+i
> >
> > The deposits and loans both decrease by Q;
> > However deposits decrease by i, and capital
> > increases by i.
> >
> > Obviously net profit will be obtained from i
> > (together with other sources
> > of income) after all costs have been deducted.
> >
> > John Hermann
> > --
>
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