Creative accounting. That’s how it’s done. An excellent article in Huffington Post, which should be compulsory reading by all citizens of the Western World, spells out how the likes of Goldman Sachs do it.

Out of the several exposés provided I’m just going to shine a bit of light on the first one that Arianna Huffington talks about. This one is Goldman Sachs. This company, which switched to a bank in September of 2008, posted a fabulous profit for the first quarter of 2009.

I use the word fabulous in its true sense of the word. Made from fables. The profit was $1.8 billion for the period of January to March 2009. Goldman Sachs ‘forgot’ to mention in the first 12 pages of their report that it had lost $1 billion in December 2008. In one month.

But now in this creative accounting patch, it was posting a nice little profit. So why, one would imagine would they need to pursue this bit of accounting fable?

To pay executive bonuses of course. What stupid questions we ask. They have shown this fake profit in order to raise money so that they can pay back the US government bail-out money, called TARP. That money comes with strings attached the main string being reduced pay packages for the ruling folk.

If Goldman Sachs were serious about raising money to pay off debt they would cover the money borrowed from Warren Buffett first. The reason being that Buffett managed to squeeze them for much higher interest than the government did. With other words Buffett’s money is much more expensive.

So if one were serious about ones business the first debt to pay off would be the one costing the most. But then that would mean one would still need to curtail executive bonuses as TARP dictates.

What to do. Easy. Pay off TARP first to get out from under that pay restriction. In any case, if things go awry the taxpayer will bail out again, won’t he. Phew. Nasty system this capitalism. Always thought that was money and opportunity for everybody, not just money and opportunity for a very few.

Wrong again.