and rules in a unified system form a place.
Here is an important question: do we see the market as a unified place or as a place in which multiple independent places are combined? And here is yet another problem: should we aim at a unified place or sustain independent places?
Laws and rules in a unified system form a place.
If a place consists of power uniformly applied to that place, the key questions are: “What is the source of the power applied to the place?” and “What does the system depend on to sustain the power at a constant level?” In order for the market to keep its functions constant, the money system, financial system, accounting system and economic system should be all united. In particular, the money system is fundamental to the other systems. One money system forms one currency block. Therefore, a market is based on the currency system. We should thus understand that an entire international market is a complex of independent markets for each currency block.
The market boundary plays the role of a barrier or a firewall.
It might be desirable that the market becomes unified eventually. However, considering that the present economy and market structures are diversified and the world is full of diversified ideas about value, it is too risky to unify the world aggressively. Above all, there are large differences in the environment, preconditions, living standards and income levels. After all, it would be desirable to create the whole structure on the premise of individual independent markets.
But a market structure like this is a closed and limited place. This means that the market has a scope and borders. The market is not an endlessly open place. The market is not an unlimited place.
Currency is a means or tool to convert economic value into numeric figures. Basically, an object is used as currency. Therefore, currency is as restricted as an object. Introduction of information, encoding and electronic signals into representational currency is promptly progressing. This means that representational currency has been made immaterial. Therefore, the restrictions on currency as an object are being relieved. Still now, however, in the essential sense, currency is subject to restrictions as an object.
Representational currency consists of the factors of volume, number, figures and currency. Quantity consists of numbers and volume. Volume consists of elements that have a certain materiality such as length, volume, area, mass, temperature and time. Volume means a ratio. Numbers are a collection of clearly distinguishable portions. Figures are symbols expressing numbers. The quantity can be computed if it is expressed in figures. Currency is the economic value replaced by figures. By replacing the figure value with an object, the process of exchange has come to be.
On the other hand, currency is subject to restriction as an object when it is replaced by the object. That is, the value expressed by currency, which is an object, is subject to a restraint known as a natural number. As a result, currency-based accounting must use balance calculation as its base. This is a condition for the establishment of double-entry bookkeeping.
A unit is an optional amount. Initially, a unit was not a specified amount, like units used today, but an amount that was arbitrarily specified as needed. Even today, we see the vestiges of this in currency units.
Currency itself does not form a value. The currency value is generated through transactions. A transaction is an action that exchanges wealth and currency, currency and wealth, wealth and wealth, and currency and wealth respectively.
The currency value consists of the right and responsibility generated through such exchange of wealth and currency, currency and wealth, wealth and wealth, and currency and wealth, i.e., receivables and debt.
Therefore, the amount of currency is not a problem. The problem lies in the sum total of the currency value generated by a currency. As an intermediate for transactions, currency has an important role.
Accordingly, the amount of transaction is more important than the sum total of currency.
An economic phenomenon is caused by a composite of the economy of humans, economy of goods and economy of money. There are causes for inflation in each of these economies of humans, goods and money.
Purchasing power does not depend on currency but on consumer confidence. Consumer confidence is generated by need. If a person has a need, purchasing power will rise. If a person does not have a need, purchasing power will decline. Increasing the circulation of currency is not enough. Consumption will not grow and only savings will be accumulated. The fundamental lies in the economy of humans.
If necessary goods are in short supply, commodity prices are forced to go up. If goods are excessively available, commodity prices tend to go down. Shortage of goods results in rising prices. This is a matter-of-course reasoning.
Each nation is required to be self-directed in terms of its economy. It is not favorable to lean only towards production or consumption. So, it is a proper policy to promote self-sufficient living as much as possible.
Concentrated or biased production or export sites in specific areas or companies are not desirable in terms of fairness of the economy.
It is necessary to clearly distinguish between exportable goods and necessary goods that must be imported.
Stabilization of economically unstable factors is the role of management entities such as financial organizations, corporations and the government.
Proper functioning of the market requires maintaining market conditions in which an appropriate number of corporations are competing.
The argument that deregulation should be promoted for more competition is contradictory. There are regulations that encourage competition and regulations that have an adverse effect on competition. It is crazy to abolish regulations to encourage competition. For encouragement or restriction, competition is sustained by regulations.
If deregulation measures are taken to promote competition, market transactions will be vitalized. On the other hand, profits of corporations will decrease. If regulation-tightening measures are taken, their profit ratios will improve. But, market transactions will cool down.
It is necessary to recognize that the present accounting system is very disadvantageous in terms of funds for corporations based in developed nations. This is because there is a problem in the handling of long-term funds.
Long-term funds mean long-term borrowing for corporations and deposits for banks.
Long-term funds correspond to housing loans for the household economy. The risk of such funds is that the short-term burden is invisible. Even so, housing loans can be grasped through income and outgo.
However, long-term funds do not appear in the periodical profit and loss system. That is to say, invisible burdens accumulate constantly. In mature markets like those of developed nations, such burdens gradually compress earnings. Normally, they are not considered to be a problem. But, when profits decline, such burdens could be a fatal issue.
In periods of depression, corporations go bankrupt. This is because lenders withdraw long-term funds concurrently seeing bad debt as a problem under profit-worsening conditions. In normal times, bad debt is a problem of long-term funds. What should be seen as a problem during economic depressions is the profit structure.
One of the reasons of financial collapse is that the increase or decrease of long-term funds directly affects the fiscal revenue and expenditure. Privatization seems effective because long-term funds no longer affect finance directly.
Positive finance increases the circulation of currency, but it also increases financial expenditure.
Budget-tightening decreases the circulation of currency, but it also decreases financial expenditure.
Public investment creates and increases employment. On the other hand, it increases financial expenditure. Moreover, if the funds paid for public investment are used for repayment rather than for reinvestment, a multiplier effect cannot be expected. It is nothing but a transfer of debt from the public sector to the nation.
Purchasing power is not a power that generates currency. Humans and wealth generate purchasing power. In contrast, currency encourages purchasing power and makes it appear.
Financial policies should be determined that take preconditions into account, that is, business trends, fund trends and the influence on both income and outgo. Tax increases do not always invite revenue increases. Tax reductions do not always invite revenue reductions.
Relaxing regulations while implementing austerity measures is a policy that shrinks the market the most. This is because such a policy will worsen profits and turn funds toward the collection side. If such a policy is taken during a period of deflation, deflation will be accelerated.
Financial policies adjust currency flow.
The general rule is to increase currency flow when the market is expanding and decrease currency flow when the market is shrinking.
Shortage of currency invites distribution troubles and conflicts.
Rises in interest compress corporate earning capacity but increase the value of time. Reductions in interest improve corporate earning capacity but decrease the value of time.
If interest is reduced as a quantitative easing policy and regulations are relaxed, excessive liquidity will be generated.
When the flow volume is increased and the valve is turned off, an explosion will take place.
Equity capital control is a policy that turns funds toward the collection side. It is a measure that provides a certain frame to the scale of total assets. Such a measure will halt the expansion of total assets.
Market price accounting accelerates the business trends of the time. Market price accounting in times of deflation serves to accelerate deflation.
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