John Tamny of Forbes
The great Austrian economist Ludwig Von Mises long ago wrote that “accountancy is not perfect. The precision of its statements is only illusory.” In particular, Von Mises cast a skeptical eye on balance sheets because of “the variation of the value of money itself.”
With money merely a store of value meant to represent real underlying values, accounting for profits and losses in currency terms is to some degree a fool’s errand–especially in an era of floating, undefined money. If a currency is devalued, what an accountant might book as a profit in dollars could actually be a loss if those dollars have declined substantially in value.
In an October column, New York Times economic commentator Paul Krugman observed that “the falling dollar is good news.” His reasoning was that a weak dollar would make U.S. exports more attractive when measured in foreign currencies and that increased exports would accrue to the average American company.
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