The Balance Equation reads as follows:

Assets = Liabilities + Capital, or, A = L + C

The Balance Equation simply states that the net difference between what is 'owned' and what is 'owed' is 'profit'. The term 'profit' is embedded in the term 'Capital'.

The principles of accounting, built around the Balance Equation, did not exist until the 16th century. Those principles came from the work of a Franciscan monk, Luca Bartholomes Pacioli (1450-1520).

2. "Contemporary Studies in the Evolution of Accounting Thought", c. 1968, by Michael Chatfield (UCLA), by Dickenson Publishing Co. Inc., Belmont, CA.]

Many scholars still wonder why da Vinci kept detailed records of expenditures for brushes and paints. Most likely, because of his close acquaintance and friendship with Fr. Pacioli. 'Leonardo' was probably just helping his friend from the Monastery by exercising bookeeping theories and inputs as Fr. Pacioli worked to prove validity of that equation.

The Rennaissance (renewal) that followed the so-called Dark Ages after the fall of Rome would never have happened without the Balance Equation foundation of all accounting principles. (And it was accomplished without the bribes of government study grants, Congressional Commissions, or Committees on Education and Higher Learning.)

From 1934 through 1974, the physical bulk volume of gold in the U.S. Treasury was fairly a constant, while the volume of money supply paper in relation to the fairly fixed quantity of gold was increasing. Ultimately, gold backing of paper had to be completely abandoned.

The total absurdity and depths of stupidity of the use of some physical element, like a piece of dirt or rock, to represent 'value', 'worth' or 'wealth' was demonstrated in spades. What this observer sees is: the challenge by God to the human race, to search, and to learn from trial and tribulation, that He provided His 'natural laws', to find and to use as INSTRUMENTS to rise from the depths of ignorance and stupidity.

Reminder:
Appendix 2 offers the following four illustrations:

1. Figure A2-1, Fundamental Structure and Circular Flow of Money

2. Figure A2-2, Analog Computer Model of the Balance Equation and the National Household

3. Figure A2-3, Closed-Loop Architecture of the Analog Model for Circular Flow of Units of Currency

4. Figure A2-4, Circular Flow and Distribution of U.S. Money Supply Income Loads

1. How the flow of money, as a function of domestic trade (buying and selling) is circular.

2. How new or additional money is added to the circular flow of existing money in circulation by debt.

3. How new or additional money is a forced addition to the circular flow of existing money in circulation as a product of Congressional Action to pay for profligate expenditures of money by the Federal Government when Federal Tax Revenues (all sources) fall short of the amounts required to pay for them.

4. Universal presence of the Balance Equation.

5. The fact that all banks and institutions, authorized to exist under law and to lend money, draw their income solely from interest on Debt, and none of the money they lend is theirs to begin with - just like tax dollars are not the property of Government.

6. The fact that distribution of income from all sources, to each and every individual, across the elements of the Balance Equation, is no different than distribution of income from all sources for every paper structure of business (company, corporation, partnership, et al), except that the 'socialist' bureaucracies of Federal, State and Local government and the overly-complex tax codes, treat the 'wage-earning worker citizens' like beasts of burden, not free citizens.

Dynamic relation of the terms of the balance equation (Assets, Liability and Capital) from accounting principles, to the three fundamental devices of the electronic circuit (Resistor, Coil and Capacitor) is illustrated using Figure A3-1, Balance Equation In Vector Form.

The Resistor (R) is an energy consumption device. The Coil (L) and the Capacitor (C) are energy storage devices. The Coil stores energy in the form of a magnetic field because of a flow of electron energy through the Coil. The Capacitor stores energy in the form of an electrostatic field because of the difference of electron energy between two plates of the Capacitor.

[NOTE: 'Lightning' is a discharge of an enormous amount of 'electron energy' from a buildup of electro-static energy between a layer of atmosphere that acts as one plate, and the surface of the Earth that acts as the other plate of one very large 'Capacitor'.]

In nature, magnetic energy, electrostatic energy and resistance, co-exist; that is, one does not exist, and cannot exist, without the other two. Relationship of the forces of electromagnetic energy and electrostatic energy to resistance, and to each other, cannot be easily or readily understood unless they are graphically illustrated as vector forces within the system of rectangular coordinates.

Distribution of the vector forces of electron energy across the co-existing Resistor, Coil and Capacitor is displayed using the following convention:

Resistance (R) is always displayed as a vector in a positive direction of the horizontal axis at 0 degrees.

Electromagnetic energy across the Coil (L) is always displayed as a vector in a positive direction on the vertical axis in a counter-clockwise direction at '- 90' degrees.

Electrostatic energy across the Capacitor (C) is always displayed as a vector on the vertical axis in the opposite direction at '+ 90' degrees.

Thus, energy across the Capacitor is always '180' degrees in the opposite direction of the energy across the Coil. In exactly the same time-phase relation, 'Liabilities', representing stored human energy in a 'negative' direction, is always '180' degrees opposed to 'Capital' that represents stored human energy in a 'positive' direction.

The sum of the vector forces of energy across R and L is always a resultant vector at some angle less than '+90' degrees.

The sum of the vector forces of energy across R and C is always a resultant vector at some angle less than '- 90' degrees.

If L is greater than C, the resultant vector lies at some angle less than '+90' degrees.

If C is greater than L, the resultant vector lies at some angle less than '-90' degrees.

All of these relationships of the three fundamental devices of the electronic circuit correspond on a one-to-one basis with the three fundamental terms of the Balance Equation.

Assets (A) correspond to Resistance (R) because human energy is expended in Labor to acquire Assets. Assets then are the 'energy consumption' devices.

Liabilities (L) correspond to energy across the Coil (L) - energy stored in the negative direction - exactly the same as Liabilities or Debt. Liabilities or Debt is representative of human energy that is 'owed' or that must be expended to retire that debt.

Capital or Profit corresponds to energy across the Capacitor (C) - energy stored in the positive direction - exactly the same as Profit or Capital Investment, and the net difference between energy that is owed and measured in terms of the magnitude of Liabilities, and energy that is consumed through Labor to acquire Assets.

Time is an element inherent in this display of vector forces. One cycle of time is a measurement of one counter-clockwise rotation of a time vector, starting at 0 degrees and rotating counter-clockwise through 360 degrees until it arrives back at the 0 degree mark. In electronics, the speed of rotation of this vector is called a 'hertz' (formerly called a 'cycle'). In life and the business of life, the speed of rotation of this vector is once per year and called a 'fiscal cycle'.

The natural relationships illustrated and described here are the drivers, and un-assailable in technical argument to support adoption of the 'Corrective Actions' proposed by this work.

• Figure A3-1, Balance Equation In Vector Form

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