Accountancy does always require double entry. Tett is worrying about the size of the credit – as is so commonplace, based on government debt obsession – but the consequences of the debit – which represents the asset that ownership of debt represents – is just as significant.
Growing debt represents increasing wealth inequality. There is no widespread ownership of this debt, and nor is there widespread ownership of the legal entities that own that debt, such as banks. Pension entitlement is, for example, very concentrated.
Borrowing is required to provide access to funding for those without it. But that creates increasing wealth for a smaller number. In my opinion the issue here is not the debt as such. It is the increase in inequality that really matters here, I think, because that is the real cause of the stress Gillian Tett is worrying about.
How to tackle that? Additional taxes on wealth are one very obvious way to do this, not because we need the money to fund anything, but because inequality has to be reduced. It is time we recognised that.
So we tax folks more, reducing the debit, which means – ineluctably – reducing the credit which is that borrowing that is required.
This works how then?
Umm, “because inequality has to be reduced.” – why? And how much?
His thinking (such as it is) stops at the door of the pension companies. Who does he think actually benefits from returns to pensions?
Single man living in house with 4 bedrooms and 3 public rooms rails against inequality and un-green over-consumption
Seem to recall that accounting works a little differently when talking about sovereign governments with their own currency.
I definitely know it works oddly for departments and government funded organisations where any ‘remaining funding’ evaporates to nothing once a year leading to some interesting fluctuations in spending patterns and invoiced commitments.
Then why is one particular sub-category called “double-entry” accounting”?
I have used single-entry accounting for dozens of years.
One of the alleged advantages of double-entry accounting is that is self-checking but I have found hundreds, (probably thousands – I gave up counting them decades ago) of errors in audited accounts.
It seems to shock trained accountants how a simple transaction/stock register and keeping an eye on your bank account works for most small businesses
@ BniC
Yes: it is a shock, not a surprise, because it deprives them of a lucrative captive market.