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Building a One-Earth Balance Sheet

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HONG KONG – The 2008 global financial crisis changed the way the world looks at balance sheets. Now, an even more profound transformation is needed – one that recognizes the limits of narrow national-level accounting.

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    Balance sheets balance. This is the beauty of double-entry bookkeeping: an economic entity’s assets must ultimately be equal to its liabilities. When they are not – when the income from assets, including the ability to secure additional finance, falls short of liability-related obligations – crises become inevitable.

    For many decades, economists did not pay much attention to the stocks of assets and liabilities contained within balance sheets. Instead, they focused on flows, such as GDP, savings, and trade.

    That changed in 2008. The global financial crisis reminded the world that when liabilities are hidden........

    © Project Syndicate

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