The Accounting System #4: The Big Reversal
Also sponsored by Earth Pendant at PeacefulJewelry
previous: Banks, Credit, and Gold Cycles
Decade by decade, The Accounting System grew in size and importance. Since some of the accounting by corporations listed on the American stock markets was found to be fraudulent in the aftermath (pun intended) of the 1929 crash, the Securities and Exchange Commission (SEC) undertook to establish public accounting standards. Over time these came to be issued by the Financial Accounting Standards Board. The Generally Accepted Accounting Principles (GAAP) are used by all accountants in the United States. Similar systems are used in other nations.
When a statement about money is made that diverges from GAAP, accountants refer to those figures as non-GAAP. Non-GAAP figures issued by publically listed corporations during the Internet Stock Bubble led to the current era in which any non-GAAP figures released by traded companies are expected to be issued with an explanation of their relationship to GAAP figures.
The possession by individuals of gold coins and bullion (but not jewelry) was illegal in the U.S. from 1933 to 1974. Because there was inflation during this period, some economists claim the gold standard is necessary for a sound economy. Reasoning from ideology rather from fact, they refuse to look at the fact that using gold as money had been a historic disaster. Overall 1933 to 1974 for a great run for the American economy, showing that the gold standard had holding the nation back, rather than helping, back before 1929.
Credit cards as an idea go back at least as far as the novel Looking Backwards by Edward Bellamy, first published in 1887. Credit cards in their modern form first became common in the 1960s, when perhaps 100 million were mailed, often unsolicited, to bank customers. While there are many other forms of credit, including business loans, loans on property, and student loans, the credit card and its relative the debit card put The Accounting System in the pockets of most Americans (and their international equivalents).
This led to a paradoxical role reversal. We do our accounting in units of coin (the dollar in the U.S., originally silver coins issued by the Dutch and then Spanish governments). For portability these units are mainly represented by paper currency, mostly in the form of $20 bills accessed from ATMs. While banks count paper currency in their accounting systems, and businesses still account for such bills until they can be turned into real money (bank deposits), individuals seldom systematically account for the cash they carry or keep. Each note has a serial number, which the Federal government records, largely as a defense against counterfeiting.
In effect cash is now at the periphery of The Accounting System. Almost all money in the United States, and even globally, now consists of entries in the accounting system. These entries are not even hard copies on paper ledgers. They are held in computer databases. They are electronic representations of 1's and 0's. If something ate the banking aspect of the accounting system, they would disappear.
Thus units of value were once counted by coin, but now value is direct relation of numbers of virtual accounting dollars to whatever real goods and services they can buy at any given time.
The Internet itself led to another major expansion of The Accounting System, and a consolidation of its power over people. The Internet tied computers together, including the computers used by banks, government, corporations and individuals for accounting. This led to pressure on individuals and businesses to use electronic fund transfers rather than physical checks for all deposits and withdrawals. Physical checks are now photographed rather than returned to their writers after cancellation. We are rapidly moving in the direction of it being difficult to use cash or even paper checks to make payments for goods and services. Physical property is increasingly identified; even ordinary jewelry diamonds have small serial numbers burned into them.
All sorts of extensions of The Accounting System have come into existence. Medical records are being virtualized. Most forms of messaging via Internet go into permanent records. Almost every action made by any individual on the Internet is recorded, and those "personal profiles" are increasingly being exchanged by corporations and governments.
The Accounting System knows what your balance is, your debt level and credit worthiness, where you shop, what you like, what you own, and whether you can get permission to drive or fly on a commercial airline or cross an international border.
The Accounting System is not just counting and recording. It is an increasingly active system that determines the fates of individuals. It has traps for the unwary and free rides for the privileged. Parts of it are fair, but much of it is biased.
Next, the virtualization of money will be examined at a much higher level of detail.
[The Accounting System, Your Fate is in the Cloud, is a work in progress by William P. Meyers, ©2013]
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