That is to say that economic issues are structural.
The major premise is primarily that it’s not possible to make all divisions positive or negative, and secondly, it’s not possible to move all nations into the black or the red. Thirdly, there is a spatial balance between positive and negative.
That is to say that economic issues are structural.
Some nations gain while other nations lose. It would not do if all nations were to lose, nor if all nations were to gain.
The sectors that comprise a nation’s economy are household budgets, enterprises, government and overseas. The economic effects vary depending on which division funds are fed into.
The five fields of accounting consist of individual divisions, which are debt, capital, revenue, assets and expenses. Apart from these five fields, financing is a division to which funds may be supplied.
Financing means the flow of funds, and supplying funds for financing means supplying funds directly to that flow of funds.
Funds can be supplied to debt, capital, revenue, assets, expenses and financing. The effect varies depending which area the funds are supplied to.
For instance, when funds are supplied to meet debts, the effect is indirect and it takes time for the effect to become apparent. On the other hand, when they do appear, these effects are very wide ranging.
In comparison, when funds are supplied directly to revenue or expenses, an immediate and direct effect is apparent, but the range of the effect is limited.
Further, if funds are supplied directly to financing, the effect is expected to be an emergency measure, but profit and loss have no impact so it can easily become only a stopgap effect.
Expenses and profits are the fields that allocate funds to each division of household budget, enterprises, government and overseas. Expenses are directly related to consumption, and profit forms a part of the available funds.
Expenses represent an additional value and the principal of that additional value must come from profits. The scale of the profit restricts the scale of the additional value. Thus, for adequate allocation, it’s necessary to ensure a certain level of revenue. The economy does not get better because adequate and stable revenue and income cannot be gained.
Expenses consist of additional value, and when they are consumed, the additional value is transformed to income.
Expenses indicate consumption. Economic action can be completed by consuming.
Therefore, it is necessary to review the economy through the state of consumption.
When supplying funds to each division, which of the individual divisions funds are receiving funds is important.
For instance, when supplying funds to meet debts in household budgets, a reduction in the tax on home mortgages can be used as a method. When supplying funds to revenue, allowances such as child benefits and pensions can be used, and when it is to expenses, tax incentives such as dependent deductions can be used.
For companies, public investments or tax reductions can be used for revenue, or regulations can be enhanced or eased according to their status. There are subsidies and other methods available for financing.
For governmental institutions, a tax increase can be used for revenue, reduction in public investment, administrative reform or reduction of benefits can be used for expenses, and issuing government bonds is a possible method for financing.
For overseas transactions, funds can be loaned for debt and there are methods involving overseas aid or investments for financial resources. Customs duties can be used to adjust the balance of visible trade.
The flow of funds can be controlled by differences in interest rates. The balance of visible trade and the balance of capital account fluctuations are exchanged.
The point we must pay careful attention to is that funds always function with a bidirectional action.
Furthermore, there are bidirectional actions for household budget, enterprise, government and overseas divisions, and actions for debt, capital, revenue, asset and expense fields.
For instance, child benefits have a positive effect on household income but a negative effect on government expenses. The issuance of government bonds increases assets and debts for the central bank while at the same time it increases the assets and debts of the government.
When economic stimulus measures are taken, the source and the destination of the funds becomes key factors. Even if the funds are supplied with the intent of expanding the market, if they are used for repaying loans, they will have the opposite effect and shrink the market.
The source of funds is the central bank. The source of funds for any measures is either of four divisions; the government, enterprises, household budgets and overseas.
When funds are injected based upon policy, ultimately, the route through which the funds flow becomes the issue.
The problem with benefits including unemployment insurance, pensions or allowances is that they are essentially unearned income, and the fund source is a government institution. Therefore, such benefits just increase the financial burden.
However, in any case, revenue plays a central role. Economic action does not become evident unless it is first returned to revenue.
It is necessary to control finances because issuing of government bonds directly affects how much currency is minted.
The standard of government bond balance is reflected in the quantity of the currency supply (base money) and the currency balance (money stock). Further, the value of the currency is maintained by securing the balance of government bonds.
As long as the flow of funds remains on a lease basis, its effect is not visible. Only when the flow is returned to revenue and transformed to an expense can it display the function of exchange and perform the role of allocation.
After all, it is a matter of which division should be adjusted to be positive and which division be adjusted to be negative, and how narrow or wide the overall amplitude width should be controlled. It is not an issue of whether or not debt is acceptable.
The issue is which part of ones own country takes in the international markets temporally and spatially.
If each country were to try to take the high ground forcibly and selfishly, wars would occur.
The debt of a nation is not good. The profit of private companies is exploitation. Expenses should be minimized as much as possible.
Saving money is a good thing. Regulation is a bad thing according to the non-aggression principle, so all competition should be eliminated. The economy will not get better as long as public investment remains unacceptable.
As a nation of people, we should base our decisions on a national consensus on what sort of country we would like to have.
Countries with a current-account surplus and those with a current-account deficit have a complementary relationship. It is important that we consider how we maintain this relationship constitutionally.
How do we control the global circulation of funds? That is the issue.
The issues facing Greece provide a good example.
The only choice for Greece is to aim to be a tourism-oriented country and make effective use of their tourism resources, which represent their largest resource.
If they wish to utilize their wealth of natural and human heritage tourism resources, they should aim to develop tourism in which nature and culture could be utilized, not through any development type scenario.
The important point in achieving this is how they establish and maintain high-quality services. The key will be the pride of the Greek people in their own culture.
In a country with a poor industrial sector such as Greece, finance cannot be improved simply by pursuing fiscal austerity measures. Measures for gaining profits become a key issue.
The largest resource of Greece is tourism, and its success depends on how Greece uses it tourism resources. Countries and regions including Monaco, Macao, Singapore, Hong Kong, Hawaii and Bali can all be viewed as models for Greece.
As long as Greece provides good quality entertainment based on their history, tradition or ruins, not through large-scale development that causes the destruction of nature or speculative projects, they will have very good prospects.
Greece is the birthplace of the Olympic Games and many aspects of civilization, and is a treasure trove for academic studies and art including philosophy. For Greece, its history and culture are excellent resources.
At present, the financial deficit is continuing to accumulate in Japan and questions are being raised about the serious social problems this may cause. While questions are being raised, there is no clear answer as to where finance has failed, how bad that failure is or what we should do about it. However, politicians and citizens alike are vaguely aware that if we leave things as they are, the accumulated deficit will surely reach a devastating figure - if it hasn’t so already reached such levels.
Why and how did this financial situation arise, who is responsible and how can we improve things? We need to convert finance from a cash basis to a periodic profit and loss basis to clearly consider answers to these questions.
However, it is clear that a profit structure or lease structure has some kind of flaws. And this is what upsets the flow of cash.
Problems of finance are problems of cash flow. The basis for the system that determines the direction of cash flow is the basis of the tax system.
We need to think about the basis of the tax system after clarifying the distortion in the cash flow using periodic profit and loss.
A tax system varies according to whether it has a cash basis or a periodic profit and loss basis.
When a cash basis is used, the effect varies depending on the timing, method and amount of the tax imposed.
Likewise, when the basis is periodic profit and loss, the important thing is how much tax is imposed at which phase of debt, capital, revenue, asset or expense.
It can be seen that the problem is that loans in the private non-financial divisions are not sufficient. However, no one has attempted to question the cause.
Loans to private non-financial divisions are not sufficient because private non-financial divisions have no willingness to invest and financial institutions find no promising investment targets in private non-financial divisions.
There is no willingness to invest and there are no promising investment targets, and the common cause is that there is no prospect of revenue.
They have eliminated regulations, messed around with accounting and stirred up competition unnecessarily, and they say the economy is bad, which does not do any good.
Profits can be made in areas involving intellectual property ownership including patents, copyrights and brands because these rights are protected.
It is said that the so-called commodity industry is a structural recession industry because there is no provision for protection of their rights. They should warn themselves against denying other people’s rights while keeping their own rights protected.
The role of an economic system is to maintain the flow of commodities and fairness of income. The flow of commodities depends on the distribution of supplies and resources, and fair allocation of income is achieved by maintaining employment. And this means that jobs should be allocated in a fair manner while the commodities necessary for living are being distributed. The system by which this balance is maintained is the system of the economy.
Before discussing whether a current-account surplus is good or bad, it is more important to clarify what sort of country we wish to create for ourselves. What is our nation based upon? Do we export resources, depend on processing trade or stand upon our tourism resources? Do we concentrate on being a financial center? What sort of industry do we choose as the core of the nation?
After that, we should analyze the state of the current account balance structurally.
First of all, if there is no view as to what a nation should be, no concrete measures can be taken. If it is a nation state, the national consensus becomes the premise.
Countries with a current account surplus and those with a current account deficit have a complementary relationship. The important thing is how to maintain this relationship structurally. How should the global circulation of funds be controlled? That is the issue.
Exchange trade is not a trade of commodities or of commodities and money. It is a trade of money and money. This is the crux of the matter.
If it were an exchange trade of commodities and money, it would not be the flow of commodities and money that had an effect. The flow of money and money is affected. The index of aggregation of the flow of commodities and money in the trade between countries is the current account balance, but the index of aggregation of the trade of money and money is capital transaction. Therefore, capital trade directly affects exchange rates. However, against the backdrop of capital transactions, lies commerce, that is, the flow of commodities.
In view of this situation, it is considered that capital transactions lead to exchange rates and the current account balance as the contra account. This means that the exchange rates fluctuate in favor of areas where capital transactions and current transactions are balanced.
And this means that exchange transactions are exchange transactions of currency vs currency. The key point is that it is an exchange transaction. The important thing for an exchange transaction is the ratio of the amount exchanged.
Why does it need to be exchanged? The basic point is the settlement in the trade. The basis of the exchange system is the mechanism of settlement. This point should not be forgotten.
The factors necessary for settlement are those that move the exchange rates. The factors necessary for settlement are foreign exchange reserves, current account balance, capital account balance and government bonds.
A government bond is a method to squeeze out funds to exchange domestic currency for the currency of other countries. This means that it is a mechanism for allowing the domestic currency to cope with unfavorable foreign exchange reserves.
Moreover, the important point about government bonds is whether they are issued on a domestic currency basis or foreign currency basis. This also has a serious impact on the direction that funds flow and relates to exchange rates.
The amount of currency used for exchange and the exchanged currency has a significant affect on the price of commodities and public finance inside a country. Political measures should be established with sufficient consideration of these points.
The direction of the cash flow, whether funds flow into the country or flow out overseas, is determined by excesses or shortages in the capital account.
The direction of the cash flow has a direct impact on the amount of currency in distribution.
When considering external exchange transactions, the important point is this formula: (current account balance + capital balance + change in reserve assets) = 0. This formula expresses the trade structure between currency blocks.
It can also mean that the (current account balance + change in reserve assets) and the capital balance are in balance. It’s also understood as meaning that the capital balance and foreign reserve prove the current account balance.
Or, it can be said that the difference between the current account balance and capital balance gives the foreign reserve.
The current account balance is supported by the capital balance and foreign reserve. The capital balance and foreign reserve are affected by government bonds issued on a foreign currency basis.
Government bonds issued on a foreign currency basis influence the foreign reserve and fiscal revenue and expenditure.
Moreover, the foreign reserve should be greater than 0 or the previous term’s (foreign reserve balance + change in reserve assets) should be greater than 0. This point is important.
Capital transactions are essentially investments.
The problem is the content of the current account balance and capital balance. Capital transactions refer in particular to trade that restricts the function of long-term funds, and the content determines the nature of the funds.
In other words, a capital transaction is an investment transaction, and it is an operation that shifts short-term funds to long-term funds. An investment transaction is made on the premise of collecting funds, which means that it is a negative transaction. If the collection of funds cannot be expected, the imbalance in commerce continues to expand and it cannot be corrected. This means that it is necessary to assume some kind of spot transaction.
However, if it is a transaction just to borrow money or sell one’s own assets, there is no prospect for collecting funds, so there is no prospect for profit after all. In other words, the funds do not become business funds as they are. Funds can be collected only when they are transformed into an investment for some kind of business.
The content of the capital balance determines the nature of the funds.
Foreign reserve means the preparation of payment for the settlement of international transactions. The gold standard is the system for collateralizing gold for payment reserves.
Anything can be used for collateralizing. It can be gold, silver, government bonds, land, jewelry, art objects, currency of a specified country or anything with which the currency value can be determined on the official international market.
It can be determined through agreement between the relevant parties in the currency area.
The system in which the currency of a specified country is considered to be the key currency and that key currency is regarded as the foreign reserve is called the key currency system.
Under the key currency system, the key currency has the function of unifying the currency standards for international settlements.
There are two peculiar points related to the US dollar: US dollars are the key currency, and the international settlement of oil is conducted using US dollars.
In capital transactions, the difference in interest rates performs a significant role. The difference in interest rates is a factor that plays a vital role in the direction of the fund flow.
Temporal and spatial differences in interest rates affect the direction and speed of the flow of funds. Temporal differences are the differences in interest rates in the past, present and future. There are long-term and short-term differences in interest rates.
Moreover, the future is a matter of speculation. In the case of spatial differences, there is impact from differences in interest rates both inside and outside a country.
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