Accounting is a way of thinking.

Accounting is a way of thinking. As such, accounting standards are rooted in social consensus. This is to say that an accounting standard is not a natural phenomena but a historic event. Accounting standards lie at the foundation of capitalism.

Accounting is a way of thinking. This means that accounting has a fundamentally different character from laws drawn up by observing phenomena like laws of nature. Accounting is a sub-language formed from economic phenomena. The economy comes first - not accounting.

For this reason, accounting cannot change the true nature of the economy. But, it can change the state of the economy. Accounting can lead economic conditions.

Capitalism is a way of thinking based on an accounting system.

The economy is mathematics. Accounting is an aggregate. Accounting is a group of functions - addition and multiplication. Everyday accounting is obligated to repeat this matrix of operations.

Due to the negligence of mathematicians, accounting has not been analyzed mathematically. The damages and disasters that humankind has incurred due to such negligence are huge. In this light, the negligence of mathematicians may be seen as a criminal act against humankind.

When mathematics, accounting and the economy are integrated, the economy becomes a science.

Some people say that mathematics is useless. Such a view is not because mathematics is useless but because mathematicians have made only useless studies. Mathematics is a means to save humankind.

In a money economy, the flow of money generates economic power and moves economic entities - nations, corporations and households.

The power of money moves when it flows like an electric current. When it stands still, it has only potential power.

That is to say, money can exert its power when it flows. Usually, money does not remain in economic entities. Money keeps passing and flowing through economic entities and never stops even for a moment.

The figures in corporate financial reports such as account settlements, earnings statements and balance sheets are counterfeit. Such figures do not mean that there is an equal amount of cash that matches the amount noted in the figures.

It is money that actually moves the systems of corporations. But, judgments to provide or collect money are based on accounting information. That is why accounting information is important. When the individual roles and objectives of money and accounting are not properly understood, economic policies get out of harmony.

A corporate accounting system is a system for measuring the actual conditions of the corporation - not unlike such devices as a speedometer or a fuel gauge in an automobile or an altimeter in an aircraft. Accounting systems do not directly indicate an actual substance - like a fuel level. They are devices to convert measured values using a certain measure and indicate the resultant figures. However, grounds for restricting management codes of conduct lie in accounting standards, just like the fact that the grounds for controlling speed violations lie in existence of speedometers.

A corporation is a system that is created based upon accounting principles and driven by cash for the purpose of production and distribution. Though cash moves a corporation, the factors constituting a corporation are people and products.

If we watch the movement of corporate cash alone, we cannot grasp the movement of people and products. When employment declines and the flow of properties worsens, economic conditions deteriorate even though the counterfeit figures have improved.

We should not make this mistake: it is money that moves a corporation, but the decision whether money should be supplied or not is made based on accounting information.

That’s why a corporation does not function normally only by simply supplying funds.

Subsidies and loan guarantees are effective means for supplying funds. But, they are not enough for the current money economy to function normally. Corporations function soundly only after a market structure in which they can gain proper profits is created. Only after profits improve can corporations function normally.

Money value is generated through transactions. Circulation of money is generated in the market by transactions, and then the pressure caused by money value is generated inside the market. That pressure serves to keep the economic value. If no money circulates in the market, the pressure will immediately decrease and the economy will lose its vitality.

Cash appears in the form of currency and its original function is exerted though movement.

A loan balance means the amount of procured cash or the amount of cash payable in the future.

Insider trading like depreciation is a virtual transaction that has no substance as a transaction. A virtual transaction is established as needed.

The funds constituting corporate management have two flows - long-term funds and short-term funds. The periodical accounting of profit and loss regards the long-term fund flow and the short-term fund flow as things with different natures.

Suppose that long-term funds are fixed and short-term funds fluctuate. Regard the fixed portion as a constant number and the fluctuating portion as a variable number. Next, establish a relationship between the constant number and the variable number as a function. Then, consider the state of long-term funds and the state of the short-term funds separately.

The problem is that funds that should be fixed change to fluctuating funds without any advance notice.

When executing an economic policy, preconditions are important. It is important to see that such-and-such market conditions have appeared because of such-and-such causes. Favorable economic conditions are not always good because, in some cases, they may suggest economic overheating.

It is also dangerous to make stereotyped judgments such as that fanning the competition by easing regulations is the one and only policy to take.

If a depression is brought about by worsened corporate earnings, it is necessary to restore discipline in the market rather than to fan competition by easing regulations.

Funds that cannot be absorbed in the real market will have nowhere to go, and will create a virtual market, and then flow into that virtual market. As a virtual market, a speculative market such as a real estate market or capital market is optimum. The typical example is the subprime loan issue.

A speculative market brings about excessive fluidity and produces economic bubbles. Since a bubble-producing market has no substance, it falls apart when it deviates too far from reality. That is to say, the real market and virtual market fall apart when they are not linked. From a different viewpoint, a bubble-producing market is a market that causes hyperinflation. As such, there is no other route for the economy to take other than to fall apart or become hyperinflated.

At present, the amount of funds is viewed as a particular problem. But, rather than the amount, what is important is the direction of flowing funds. Funds flow into business only after corporate earnings improve. Without improvement of corporate earnings, no funds will flow into the real economy, no matter how much money is supplied. Funds flow into the collection side, i.e., the financial side. Such a flow invites enormous amounts of funds flowing into the fund market. Here the fund market means the financial, futures and fund markets.

As another way of putting it, the present economy is experiencing bad blood flow because of blood clots. Blood clots block the path of flowing funds, and for this reason money is accumulated in the financial or futures market. The path of the flow will expand and, in the end, become injured. This is not at all unlike like the economy suffering a stroke.


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