The world is one. What unites the world as one is a zero-sum relationship. In other words, “one” leads to “zero.”
The economy is fueled by the energy generated when things waver between a balance and an imbalance.
People today tend to be fascinated by a short-term and partial balance only and they overlook a long-term and overall balance. But economic policies should try to adjust a short-term imbalance by means of a long-term balance, and if the economy sticks just to a short-term, partial balance, it will be unable to ensure any long-term, overall balance and lose its normal functions.
The current account (in the private sector, public sector and overseas sector), capital and financial account (in the private sector, public sector and overseas sector) and payment reserves (in the private sector, public sector and overseas sector) have a vertical balance among them. On the other hand, each of the sum totals of the current account, of the capital and financial account, and of the balance on goods have a horizontal balance. The sum total of the economic entities has a horizontal balance, too. The current account, capital and financial account and payment reserves have a zero-sum relationship both as a whole and within the economic entities. The current account, capital and financial account and payment reserves have a zero-sum relationship horizontally, too. Therefore, they have a zero-sum relationship as a whole, too.
If currency phenomena have a zero-sum relationship in a short term, they will also have a zero-sum relationship in a long term.
A vertical zero sum relationship means that the entire economy has a zero sum relationship within the economic entities. A horizontal zero sum relationship means that the sum total of the economic entities is zero.
The economic entities include the public sector, private sector and overseas sector. The private sector is further divided into households and businesses. The public sector includes the government finance account and loans and borrowings among public agencies. The issuance of currencies means the borrowings of public agencies. What determines the currency-based scale of the market are the amount and turnover of the currency supplied.
Public finance consists of investment and the government’s income and expenditure, and its loans and borrowings. The income and expenditure in each fiscal year are accumulated in the loans and borrowings of public finance. If public finance is in the black, national debts will decrease. If national debts decrease, debts in the private sector or the overseas sector will increase. An increase in debts in the private sector will affect consumption and investment in this sector.
If debts in households in the private sector remain unchanged, debts of private businesses will increase. Debts of private businesses will be reflected on the financial market and the capital market.
Fiscal revenue and expenditure are directly related to an increase or decrease in currencies. If public investment decreases, the debts of the government will decrease but the flow of currencies will decrease. The problem is the lowest limit to the supply and withdrawal of currencies.
Debts in the overseas sector will affect financial markets abroad.
Loans and borrowings will occur among countries.
Lenders can exist only when borrowers exist, and borrowers can exist only when lenders exist. The problem is the limit to and extent of loans and borrowings; these two factors determine the amount of currencies.
The outflow of funds to overseas countries is basically the same as running into debt abroad.
Creditor nations can exist only when debtor nations exist. Debtor countries support creditor countries.
The international balance is a problem of international investment and loans and borrowings among countries and the total amount of currencies. The state of the world’s economy will also change according to which key currency or which currency of settlement is adopted.
Funds in the private sector will be supplied in the form of income. Income is paid as compensation to those who are the means of production.
Expenditure in the private sector includes consumption and investment. If funds are in excess in the private sector, the surplus funds will be saved, and if people are short of funds in the private sector, they will borrow money. Savings and debts have a zero-sum relationship both from a short-term viewpoint and from a long-term viewpoint. Savings and debts as well as investment will be accumulated.
Seeing the situation with a focus on things, the relationships among production, consumption and stock are zero-sum relationships. Therefore, overproduction produces greater consumption and stock. The problem is density; quantity should be adjusted by quality. Both in production and consumption, quantity should be adjusted by quality.
Goods and money differ from each other. While surplus money will be accumulated, all surplus goods will not be accumulated.
Market transactions are conducted for the purpose of distributing resources (people, goods and money) from areas with surplus resources to areas where they are in short supply.
The role of the economy is to supply necessary quantities of the necessary resources to the areas where the resources are required.
In today’s economy, what is considered important is results only. But what is really important to the economy are the motives and the needs. If you consume something just because you have made it, you will be unable to prevent indiscriminate production and waste of resources. Environmental issues and problems of resources have become graver now, and a system for consuming necessary resources in necessary quantities is required.
The harmony of the entire economy can be achieved by a physical economy. The problem is how to harmonize production, employment, consumption and the means of production. Currency is just a kind of means of production and is not everything.
What we should do is to relax or strengthen market controls and cause the economic entities to compete or cooperate with one another depending on the trends of goods. In addition, we should properly encourage international investment, public investment and private sector investment. Economic controls can be achieved through market mechanisms.
International investment is never a war. This is because the world is one.