The money economy

Money is only a tool.
Money is something for you to use. You must not be used by money.
You must be the master of money.
Otherwise, you will become a slave of money.

In order to make money, it’s not a matter of making money. Making money might be a means to some end, but can not be the purpose of making money. The purpose of making money is to make people happy. For the sake of making money, sacrificing the happiness of one’s family is like putting the cart before the horse, and it is just foolish.
People do not live to eat bread. They eat bread to live.

The money economy has quantified the value of money and enabled the circulation of money by giving the value of money to a substance called currency.

With this, the money economy created a money flow that flows in the direction opposite to the commodity flow. The money flow has established a function that stimulates the commodity flow. This is the basic dynamism of a money economy.

Once a money economy has been established, the economy is expressed and measured with money. A money economy resembles a gamble. A game starts when a banker distributes chips to players and the game is over when there are no more chips. Basically, the players borrow chips and exchange them for commodities as needed.

At the beginning, the players borrow chips from the banker. So to speak, the central bank is like the banker in gambling. The essence of money is based on borrowing. This symbolizes the essence of the money economy.

A game does not begin unless chips are provided to players in advance. Similarly, the money economy does not come into effect unless money is provided to consumers in advance. The fundamental function of a money economy is how to distribute money to consumers.
Defaulting or insolvency means that the economy ultimately fails and the balance is lost.

An economy does not work effectively unless production and means of production are related to each other. For example, an economic system in which labor and distribution are not related is uncontrollable. The substance and positive function of an economy lie in commodities and people. Money is the shadow of an economy and a negative function. The foundation for a commodity economy is production and consumption. The foundation for a people’s economy is a means of production and distribution. Labor is a kind of means of production.

Overall equilibrium is not always united with partial equilibrium. In a free economy, partial disequilibrium is a premise of overall equilibrium. The important point of a free economy is how to harmonize partial disequilibrium as a whole.

A money economy can be deemed to be an aggregation of the value of money. In order to make a money economy work effectively, it is necessary to know the functions of the value of money.
This is because the functions of money depend on the attributes of money.

In order to learn the function of the value of money, it is necessary to clarify the attributes of money. Money is, at first, numerical information representing value. Second, the value of money is expressed as natural numbers and discrete numbers. Third, money fixes the monetary value of an object. Fourth, it substantializes the unit of value of money. Fifth, it can materialize an object. Sixth, it is exchangeable. Seventh, it can be owned. Eighth, it can be moved or conveyed. Ninth, it can be stocked, or put in dead stock. Tenth, the value of money can be centralized and disparate things can be calculated if the standard is unified. Eleventh, money can be made and issued by an arbitrary institution. Twelfth, an independent money system can be constructed using an arbitrary unit. Thirteenth, money is a means or tool for transactions. Fourteenth, money has a function to stimulate circulation of commodities and services. Fifteenth, money is a means for buying, selling, lending and borrowing. Sixteenth, money is a means for evaluating labor. Seventeenth, money is a right or evidence on which the credit system is based. Eighteenth, money is an artificial thing.

The value of money is a relative value and fixed through transactions. An aggregation means the scores and points collected based on some kinds of premises or conditions. At the base of such scores or points, there are some materials. In other words, scores or points that constitute an aggregation symbolize some object.

Scores or points that constitute an aggregation have some biases or characteristics. A seemingly flat aggregation of figures has irregularity. Furthermore, such irregularity has biases or characteristics. Scores and points that constitute an aggregation, i.e. elements, reflect events in the real world.

Mass production and mass consumption have a function to unify and standardize commodities. Namely, mass production and mass consumption average commodities. Mass production and mass consumption have a function to offset the individuality of each product by means of averaging. This is a demerit of mass production and mass consumption.

The concept of an economy depends on whether individuals’ desires should be handled with uniformity or with diversity. Both the mass production-oriented approach and communism have a common directionality. Both the mass production-oriented approach and communism head toward the unification of life.
Human desires are not uniform. This is a major premise. The unification of life is inconsistent with humanity. Therefore, it is inconsistent with the autonomy of an economy. Affluence lies in diversity. A wide variety of commodities is required to realize a mature market.

For the elements that constitute an aggregation, the functions and the direction of the functions are important.

If you want to turn a motion into a rotary motion, you need to make a setting so that an action in a reverse direction is activated when another action is activated. This two-action set has an action-reaction relationship.
In a money economy, the money flow and commodity flow have such an action-reaction relationship.
While the money flow forms the nominal value, the commodity flow forms the substantive value.

It is the zero-sum relationship that brings this action-reaction function into play for money.

The function of money comes into effect by means of transactions. Transactions are basically a zero-sum relationship.

Money flows in the opposite direction of the commodity flow. This point is important. The problem is seen in the equilibrium between the value of money and the value of commodities.
A current balance in the red means a capital balance in the black. If money is insufficient to import commodities, you must borrow money to cover the shortage. Before you see a shortage of money as a problem, you must see creditworthiness for money-raising as a problem.

The basics for an economy are income and spending. Economic conditions are determined by the movement of people, commodities and money to or from an economic entity. The scale, manner, departure point and destination of the movement are the decisive factors.

The actions to circulate money are lending, borrowing, buying and selling. The interest on money is the function that stimulates the circulation of money.
While lending and borrowing generate rights, buying and selling generate physical distribution.
Lending and borrowing as well as buying and selling come into effect respectively as pairs. If the viewpoint or standpoint is shifted, borrowing becomes lending and selling becomes buying.
Lending and borrowing as well as buying and selling are two sides of the same coin. Basically, they mean income and spending. Namely, the money flow consists of the stages of remainder, income, spending and remainder.

Money flowing into an economic entity is the total of income and borrowed money. Spending is the price paid in exchange for consumption, investment and surplus. Investment can be deemed as means of production and surplus can be deemed as savings. Borrowed money, a means of production and savings form stock.

If seen from another viewpoint, savings are credits to financial institutions. Savings are debt for financial institutions. In this way, lending and borrowing are two sides of the same coin. Savings and debt can be considered to do the same actions.

In a money economy, which is built on an action-reaction relationship brought about by a zero-sum relationship, average and dispersion have a special meaning. The fact that average and dispersion have meaning suggests that the central limit theorem and normal distribution are important.
In addition, the effectiveness of Bayesian probability is also indicated.
When anticipating economic phenomena, how to set an a priori probability or an a posteriori probability is an important key. Therefore, Bayesian probability and Bayesian statistics are important.

What we should note is that cash flow is a non-zero sum relationship.
Cash is a natural number, i.e., a plus number. Accordingly, the balance is important for cash flow.
Double-entry bookkeeping is an operation that converts a cash flow, which is a non-zero sum relationship, into a zero-sum relationship. When converting a non-zero sum relationship into a zero-sum relationship, the value of time holds the key.
When anticipating economic events, it is necessary to definitely distinguish flow and stock. Economic phenomena emerge in the process of production and consumption. Flow is formed by the cash flow and stock is formed by the means of production and rights.

Consumption is the action of spending values. Investment is the action of spending funds for the means of production, that is, it is the action of paying for the means of production. In terms of the functions of money, basically investment is also the action of spending values similar to the action of consumption. What distinguishes between investment and consumption is the issue of a time period, namely, a time axis. The functions are basically the same.

Means of production include depreciable assets and non-depreciable assets. Depreciable assets are things whose value will be lost within a certain period of time according to a predetermined standard. In contrast, non-depreciable assets are assets whose value is determined on the market. However, this operation is only on the books and it does not refer to the substantive value. The substantive value is determined through market transactions.

The accounting value is a virtual value.
Monetary transactions form nominal values. Though the commodity value is not always consistent with the value on the books, the nominal value agrees with the value on the books in principle.

In corporate accounting, the relationships among the principal repayment of a long-term loan, depreciation, profit, tax and cash flow are important. This is a problem that involves the fundamentals of the economy.
The market system is a purposeful and artificial system.
The systems of a market or an economy are not naturally developed systems.
Competition is a sort of means to achieve the objective of the economy or market. It is not a rule like a principle. The means to achieve economic objectives include the means to hold down competition such as tie-ups, collaborations and agreements.
The principle is to have people compete while maintaining earning capacity. If people are exclusively forced to compete, earning capacity would not be maintained resulting in an oligopoly or monopoly.

It is the power of politics that decides the objective or means of an economy or market. That’s why statesmen must take economically neutral positions.

It is not advisable to make use of an economy politically. This is because an economic collapse may involve the risk of inviting unexpected results such as a war or starvation.

War is effective in the market expansion stage. But, in a mature or shrinking market stage, war may involve the risk of devastating the market.

Rather, market activity is induced by incentives. Industries have the function of developing in a direction to gain profits.
A good example is energy policies. To solve environmental issues, thorough saving of energy is required. However, promoting the saving of energy does not always lead to profits for the energy industry. It is necessary to take measures so that the saving of energy can produce some profits.

For corporations, continuation is a major premise.
This is because the social mission or original purpose of corporations is to provide employment while supplying useful goods to society. Therefore, corporations are not the possession of a particular individual or family but are institutions that exist for the public.
The deficit or surplus in the periodical profit and loss is just a rough indication. The success or failure of a corporation is determined by the income and expenditure of funds.
Corporations stand on the equilibrium of lending and borrowing as well as on the equilibrium of stock and flow. The criterion for the sustainability of a corporation is the equilibrium of profit and loss. It is a silly stunt to encourage competition until corporate management collapses.

For cash, the elements are income, expenditure and balance. Neither goods nor cash has any value less than zero.
For goods, the elements are production, consumption and inventories.

The flow of cash resembles an electric current more than the flow of blood.
The economy works by means of the waveforms that rise when cash moves between economic entities. If cash flows excessively, the negative side will increase. When the negative side is increasing, business activities will overheat.

For people today, money is everything.
After all, the world is controlled by money.
You can do anything you want if you have enough money.
And that is why, when it comes to money, you must not do anything dirty.

People should be the master of money, and that is how it used to be.
When money lords over people, it is like mistaking the means for the end.
People must not live to earn money.
People only need money to live.

ページの著作権は全て制作者の小谷野敬一郎に属しますので、 一切の無断転載を禁じます。
The Copyright of these webpages including all the tables, figures and pictures belongs the author, Keiichirou Koyano.Don't reproduce any copyright withiout permission of the author.Thanks.

Copyright(C) 2014.4.8Keiichirou Koyano