Let’s take bad debt reserving for banks. That is a really important subject in a world where Gresham’s Law is going to cause a lot of terrible cognition and terrible behavior. The accountants want a system and they ordained we have to use it that says you compute your bad debt reserve actuarially -- you look at your bad debt losses in past years, and you use that in judging what your future bad debt losses will be. But, of course, if you are making a totally different kind of loan to a different kind of borrower, using the past experience is insane. It is not just slightly insane, it is really insane. Nobody would do this with his own money who had any sense - judge his future exposure in lending based on his past exposure in making a totally different kind of loan which is obviously way safer than what he is doing now. But once the accountants chose this crazy accounting convention, then people have a wonderful opportunity to game the system. If you want your bank to look like a big earner for two or three years, just make a bunch of lousy loans that will take a while to be diagnosed as such. Your accountants will cause the loans to stay on your books accruing a lot of wonderful income and you will report it to the analysts, and the credit agencies will believe in the income, and so on and so on and so on and you’ll look fine for quite a while. You can say this will eventually come home to roost? Oh no, when it starts coming home to roost, we’ll just do twice as much more and that will swamp the old troubles coming home and when that gets in trouble we’ll double again and if you are deposit insured you can do it ad infinitum as long as your accountants will let you because you are using the government’s credit to attract the new money. And, of course, that credit is unlimited.

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