Jamesian Philosophy Refreshed

All that wonderful seeming social democracy exhibited by certain of the nations in Europe, Sweden notable among them, can come along with a frightening degree of social control. Gold-plated chains are still chains. And the degree of anti-cash animus now exhibited by the government of Sweden is an outstanding example of the clinking of such chains.   Jim Edwards for Business Insider  reports: I'll say no more.

Entities large enough to hire accountants tend to keep a different set of books for each of three purposes: 1) Dealing with the tax authorities, 2) Communicating with their own investors and creditors, and 3) Allowing their managers to engage in informed internal deliberations about mergers, spin-offs, prices, wages, and so forth. That is to say, there are three sorts of accounting: tax, financial, managerial. The two sets of books that are designed for external communication, the tax and financial accounting books have a fascinating off-setting feature. The normal temptation in financial accounting will be to overstate revenue, and the normal temptation in tax accounting will be to understate it.   If you are a potential investor, and if you suspect the books they’re showing you are a bit too rosy, you’ll want to see the books they show the tax authorities. At any rate, in what follows we will chiefly discuss financial accounting. There is a good deal of drama ...

Thinking this through. What happens to the value of shares of public stock if the company buys some of the stock back in the marketplace? Think of it first as a simple accounting matter, and let's assume for simplicity's sake that the actual or potential buyers of the stock in the marketplace (who constitute the market demand) know and care about the book value on the balance sheet: that is, the equity as defined by the formula Assets - Liabilities = Equity . Suppose the company has 1,000 shares of stock outstanding, each selling for $50. Its market capitalization, then, is $50,000.  Now, it uses some of its own cash (an asset) to buy back some of the shares of stock. This decreases the amount of stock still available to a would-be buyer.  So if 100 shares are retired and 900 are left, as a first approximation -- assuming demand for the stock stays the same, we might well expect the value of those to increase to $55.55 per. BUT something else has taken place, ...