<**>The lender's wealth has not been reduced unless the borrower is unable to repay the loan.<**> -------------------- It has been reduced if the borrower throws the money into the ocean, as is reflected in the valuation of the borrower's securities in the secondary market for notes, stocks and bonds. --
<**>My claim is that, at the time this transaction is made (and before B commences to use the borrowings), both saving and wealth are increased.<**> -------------------- I invite you to revise this statement. It appears to be complete nonsense. Before anything is done with the money, both saving and wealth are increased? --
<**>What we may disagree about is whether the method used by the borrower's accountant to record the transaction is important insofar as one's goal is to understand the capitalist economy.<**> -------------------- "The power of double-entry bookkeeping has been praised by many notable authors throughout history. In *Wilhelm Meister*, Goethe states: 'What advantage does he derive from the system of bookkeeping by double-entry! It is among the finest inventions of the human mind.' Werner Sombart, a German economic historian, says: '...double-entry bookkeeping is borne of the same spirit as the system of Galileo and Newton' and 'Capitalism without double-entry bookkeeping is simply inconceivable. They hold together as form and matter. And one may indeed doubt whether capitalism has procured in double-entry bookkeeping a tool which activates its forces, or whether double-entry bookkeeping has first given rise to capitalism out of its own (rational and systematic) spirit.'" --
<**>You (all) believe that you are smarter than the entrepreneurs. This is precisely why your arguments do not attempt to predict how real entrepreneurs are likely to react if the policies you propose are adopted. You assume also that, besides receiving distorted information, the entrepreneurs are too stupid to realize that the information is distorted.<**> -------------------- Accounting is a technology whereas marginalism is hypothetical idealism. In the real world entrepreneurs use information supplied to them by their accountants not the practitioners of marginalism. Improving the technology of accounting will only help the entrepreneurial decision making process. We maintain that the money and credit system is part and parcel of that process.
As to the crack about entrepreneurs being too stupid to realize they are getting distorted information, entrepreneurs know they are getting distorted information. It is the economists not the entrepreneurs who are too stupid to know the entrepreneurs are getting distorted information:
"It is common to hear adventurers in the different channels of industry assert, that their difficulty lies not in the production, but in the disposal of commodities; that produce would always be abundant, if there were but a ready demand, or vent. When the vent for their commodities is slow, difficult, and productive of little advantage, they pronounce money to be scarce; the grand object of their desire is, a consumption brisk enough to quicken sales and keep up prices..."
"Adventurers" is the translator's interpretation of J. B. Say's use of the French word "entrepreneur."
It would appear that Say was calling the entrepreneurs stupid. He proceeded to lecture them on money: "Wherefore, it is products that you want, and not money." Which ignored the fact they needed money not goods to pay their bills.
"The silver coin you will have received on the sale of your own products, and given in the purchase of those of other people, will the next moment execute the same office between other contracting parties, and so from one to another to infinity; just as a public vehicle successively transports objects one after another."
But if the number of public vehicles remain constant, it is impossible for them to transport an increasing quantity of goods per unit time. --
----Original Message Follows---- From: Pat Gunning <[EMAIL PROTECTED]> [snipped]
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