Wednesday, October 25, 2017

Ramanan — Do Bank Recapitalisation By The Government Lead To Higher Fiscal Deficits?


Some national accounting.

The Case For Concerted Action

5 comments:

Matt Franko said...

“Anyway, this simple point was missed even by the US Treasury”

They didnt miss anything, Treasury uses a different basis of accounting to determine the “deficit!”...

It’s a Modified Accrual Basis that differs from the procedures used by BEA/National Accounts people...

The “problem” occurs when you have unqualified people who are not adequately trained in Accounting Science looking at the Modified Accrual reporting and then evaluating the data using (at best) a standard Accrual Basis criteria... see Bill’s rant today too it’s the same “problem” ....

Matt Franko said...

Here:

https://www.cbo.gov/publication/24992

“Outlays rose by 18 percent in 2009, the fastest rate of growth since 1975. Three initiativesthe Troubled Asset Relief Program (TARP), net cash infusions for Fannie Mae and Freddie Mac, and ARRAdrove that growth, adding $353 billion to outlays in 2009, ”

Matt Franko said...

You can’t say 2 different Basis of Accounting are “right” or “wrong”...

Ramanan said...

Matt,

Understand, but any accounting standard should be self-consistent.

So the Treasury standard can run into a lot of self-contradictions. The SNA tries hard to be self-consistent.

Matt Franko said...

Ram,

Seems the people always freaking out don’t understand the uniqueness of this Modified Accrual that the FMS department of the US Treasury uses...

They accrue the right side but not the left side with that methodology... it naturally creates a long term imbalance ... which then the people assess like it was normal Accrual and then they think it’s a problem...

Look at Bill’s screed from today the guy he is torching is doing this ...