Liberalism functions effectively
because it is a democratic system.
At one time, the people who established a democracy, talked about freedom, fought for freedom, and worked to be free. Where have all those great leaders of those times gone to?
Liberalism functions effectively because it is a democratic system. Totalitarianism
and dictatorships produce a bias in society, and also make it easy to transition
to a controlled economy. A liberal economy would stagnate as a result.
It is necessary to be well aware of this point.
Compromises made through political dealings with totalitarianism and dictatorships will cause serious problems in the economy in the long term. This is exactly why the foundation should be a relationship with liberalism.
Liberal systems achieve a balance between politics and the economy because there is activity in both directions.
If there is activity only in one direction, the balance of power between politics and the economy will not be maintained.
For this reason, when there is activity only in one direction, balance will not be maintained resulting in the breaking apart of the system.
The roots of the economy lie in distribution. The essential scale of the economy is determined by the distribution of producer goods and the population. It is not about money. And therefore, poverty is a relative phenomenon, and the economy will not be balanced as long as there is no power of activity in both directions at work.
The problem with the economy at present is that economic policies have deviated from market realities, so they can not easily produce effects. The reason for this is because, although economic policies are established based upon current economics, current economics is not directly connected to actual practices.
Therefore, practitioners do not trust the study of economics.
In order to understand the movement of the economy, it is necessary to know not only the phenomena that appear on the surface layer, but also the mechanisms behind them.
When thinking about the economy, one should keep the following points in mind.
First, the market economy of today is a debt economy.
And second of all, in the final analysis, what moves economic entities is cash.
It is the flow of cash that produces the vibrations that move the market and economic entities.
For activities that are derived from the flow of cash, in particular, the functioning of the negative is important. This functioning of the negative means that there is a minus, a back side that is at work in the shadows.
In periodic profit and loss accounting, the workings of debts and deficits are responsible for half of the activities.
We should not forget that it is cash that is moving the market economy. The periodic profit and loss principle is a mechanism for facilitating this flow of cash. If you forget this, you will lose sight of the essence of the economy.
Funds are the making use of cash as resources. The flowing of funds, the in-flow and out-flow, is the energy that moves the economy and economic entities.
However, while the cash flow that is referred to for accounting purposes does represent the flow of funds, cash flow does not represent the functioning of funds. And as such, it therefore becomes necessary to measure the profit and loss of the period.
The time axis is the key to periodic profit and loss accounting.
In addition, averaging is the most important factor in the periodical profit and loss accounting. And averaging is premised on having a fixed income.
A fixed income is the basis for finalizing long-term debts. In other words, it comprises the introduced portion.
The ratio is an important factor in periodic profit and loss accounting. However, in cash basis accounting, the difference is important. The reason for this is because, while periodical profit and loss accounting is based on integers and negative numbers are allowed, cash basis accounting is based on natural numbers and negative numbers are not allowed.
In periodic profit and loss accounting, the workings of debts and deficits are responsible for half of the activities.
The first problem is that in the market economy systems of today, the principles of cash basis accounting and periodic profit and loss accounting are mixed.
The second problem is that systems based on cash basis accounting and systems based on periodic profit and loss accounting are not clearly separated, and they have not been made systematically consistent. Above all, the most problematic issue is consistency with the tax system.
The structure of profit and loss and the structure of income and expenditure are asymmetrical.
And the tax system is a compromise between cash basis accounting and the periodic profit and loss accounting. And this puts pressure on the flow of funds and distorts it.
For this reason, cash based income and expenditure and profits have an asymmetrical relationship.
This also distorts the relationships between capital and assets and liabilities.
In order to maintain the consistency of profit and loss accounting with cash basis accounting, as well as with the tax system, we must clarify whether we base the tax system on profit and loss accounting or cash basis accounting, and in addition, what do we use to harmonize the systems.
This is an issue of what is taxable, as well as an issue of using paid taxes as funds.
The problem is the lack of consistency between the depreciation and the repayment of the principal of the debt.
Depreciation and repayments of the principal of debt are asymmetrical, so if profits were made taxable and taxes were imposed it could possibly cause serious trouble for the management of funds. In such a state, there is a possibility that serious problems could be caused not only for one economic entity, but to the entire economy.
In order to be able to avoid such disorder, it is necessary to understand the workings of deficits (losses).
The workings of deficits also have a role to play. In other words, deficits should not be condemned as just something bad.
The important thing is the workings of deficits in their individual aspects.
If we assume that deficits are bad, then surpluses must also be bad. The problem lies in the workings of a deficit at a given point in time, in its characteristics, direction and temporal transition. But the deficit itself is not bad. It makes no sense to be discussing the pros and cons of deficits if you do not have an understanding of the pros and cons and the respective workings of surpluses at the opposite side.
By substituting these relationships in the following formulas,
Revenue - (Depreciation + Interest expense + Other expenses) = Profit
Revenue - (Interest expense + Principal repayment + Other expenses) = Cash balance
Cash balance - Profit ´ Tax rate = Net cash proceeds.
The net cash proceeds can not be allowed to be negative. This would mean an economic collapse. In order to avoid that, it would become necessary to increase borrowings.
If the tax payment exceeds the cash balance, it could turn into a case of so-called “black-ink bankruptcy” due to taxes.
The structure of the economy should have a balance between lending, borrowing, profits and expenses. But the problem lies in the fact that depreciation and repayments of long-term debt are asymmetrical, and this has an impact on lending and borrowing and on profit and loss that is visible on the surface.
The part that appears on the surface has to do with buying and selling, and this part is related to goods. In contrast, in the background are lending and borrowing, and money, that is, the financial part. For profit and loss, and for revenue and expenditure, even though the taxable amount is based on the difference, the base factors and the factors to be subtracted differ respectively, and the amount of tax to be paid is calculated by that ratio. This prevents the smooth flow of currency.
For the concept of added value, as well, a difference occurs in both profit and loss accounting and in cash basis accounting.
In cash basis accounting, added value is returned in the end as land and building rents, interest rates and labor costs.
In profit and loss accounting, depreciation expenses are also exerting an effect.
The basis of a free economy lies in differentiation and segmentation, and these also lead to equality in the end.
The factor that forms the center of the market economy is price, and prices are determined by segmentation and differentiation.
Prices can be decomposed into volume and monetary value.
In the value of goods, people and money, there are qualitative factors and quantitative factors, and density will become an issue.
Therefore, in prices, too, there are qualitative factors and quantitative factors, and the price structure in which density is not an issue involves the value of goods, the value of money, as well as the need for people. The value of goods is determined by the relationship between supply and demand. The value of money depends on the rate of the passing flow. The need for people is determined by such factors as the amount of people, that is, the amount of income of each person and the population.
In other words, price is a function of people, goods and money.
This means that price is also an index representing the density of the monetary value of goods.
Price is structured by the quality and quantity of goods, as well as by monetary density.
And, price is formed by being bound in a complex manner to a combination of the exchange value and goods and the needs of consumers.
Prices are assumed to be able to fluctuate.
This is because, first of all, the relationship between production and consumption is asymmetrical. Second, while there are physical constraints on production and consumption, there are no physical constraints on the quantity of money. And, for the third point, while external factors determine production, consumption is determined by needs which are influenced by internal factors. These three factors together are what determines the trends of prices.
And, the entities that determine the allocation of resources for production and the entities that determine the allocation of resources for consumption are independent of each other.
Consumption and income are in the end results related to individuals. Therefore, your awareness of resources will depend on how you define the personal attributes, work and character of individuals.
Today, price is no longer seen as the result of a one-to-one relationship between goods and the monetary value of the goods. Rather, it has come to be recognized as having one-to-many, many-to-one, and many-to-many relationships.
When considering price, you might tend to fall into a one-sided trend of one-dimensional thinking. If you are not able to think two-dimensionally and three-dimensionally you will not reach a resolution.
Price is established by joining together the product groups, the fee structure group and the consumer group.
This relationship is formed through the working of the price. The working of the price means that products and consumers are linked through the exchange value which encourages the distribution of goods.
And, the product group, fee structure group and consumer group should be diverse, and not derived from even uniformity.
The way the economy ought to be, should be determined by the total amount and standards of income and by fluctuations in distribution.
Income means the right of distribution and the right to exchange goods in the market.
We tend to think of differences between the rich and the poor as differences in income, but whether one is rich or poor is only a part of the problem, an aspect of it. However, if you want to determine the trend of the economy, you will need to capture the overall problem, as well.
In addition, whether one is rich or poor is fundamentally a matter of results, and the problem lies with the cause of the results or the mechanism from which the results are derived.
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