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Monday, 18 July 2011

4 Reasons why CIPPA automatically maintains capital constant forever

4 Reasons why CIPPA automatically maintains capital constant forever

CIPPA automatically maintains the constant purchasing power of capital constant forever in all entities that at least break even during inflation and deflation – ceteris paribus – as a result of:


1. Financial capital maintenance in units of constant purchasing power during inflation and deflation: the rejection of the stable measuring unit assumption;

2. Double entry accounting: For every credit (e.g. capital) there is an equivalent debit (e.g. fixed assets, stock, trade debtors, cash, etc.);

3. The fact that the constant real non-monetary value of capital is equal to the real value of net assets, and

4. The fact that a company, in principle, has an unlimited lifetime.


Nicolaas Smith

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