The fundamental principle of the EU is that peace rests on top of the economic equilibrium.
The fundamental principle of the EU is that peace rests on top of the economic equilibrium. This point should not be forgotten.
After the war, Europe and Japan restarted from zero. Therefore, the war was followed by a period of investment. This is what prompted their economic growth.
The market has become supersaturated, and because a break was taken in real investment, the market turned into one of a diminishing equilibrium from an expanding equilibrium.
However, since expanding equilibrium types of economic measures have been continuing the economy has stalled.
With high growth levels at an end and a break occurring in investments, when the market is saturated, income from some depreciation of equipment is over, and there are many cases with assets with unrepaid debt. As a result, expenditures are not recorded as expenses.
This means it appears that the gains are the result of increasing profits because the expenditure does not appear in cash flow tables. And when this occurs all at onces, it is bad for the cash flows of economic entities.
Such a situation in household and fiscal budgets appears as though fixed expenditures have increased while the percentage of disposable income has decreased.
This also means that the percentage of lending transactions has increased over sales transactions. That is, it also appears that there is surplus money, but there is a shortage in the flow of money in the market. Therefore substantial gross income overall is experiencing sluggish growth.
Such an economic structure is what is spawning the fiscal deficit.
What is referred to as a fiscal deficit means that when the cash balance has a zero-sum relationship, the fact that there is an entity with a shortage means that there is also an entity with a surplus. Care should be taken in such a case because the meaning of the deficit here is a deficit in income. Revenue and expenses do not have a zero-sum relationship. Therefore, this is not to say that if there is an entity with a deficit there is also an entity with a surplus.
Saying that public finances have a deficit, is saying that the private sector, or any of the overseas sectors, have a surplus. A public sector and private sector with deficits, and only the overseas sectors with a surplus, is a conceivable situation, but eating away at past assets, and not being blessed with resources to a great extent is not situation that will be sustainable for very long. Generally, the situation is one in which the public sector has a deficit and the private sector has a surplus.
The Japanese economy is a typical example. In 1990, after the collapse of the bubble economy, the fall in collateral shortage by the decline in land prices cut off the means of procuring external funds in the Japanese economy. As a result it was forced to operate within the range available with internal funds. This suppresses spending and also compresses debt. And it is a diminishing equilibrium measure. A result of all of the companies adopting diminishing equilibrium measures, the private sector had a financial surplus, that is, a surplus appeared in the cash balance, and public finances suffered a lack of funds, resulting in a contraction or income and the markets.
The figures appear very clearly when analyzing Flow of Funds Table from the Bank of Japan, Corporate Statistics published by the Ministry of Finance, the National Economic Statement by the Cabinet Office, the Company Sample Survey Results issued by the National Tax Agency. And depending on how you look at it, fiscal deficit in Japan can be said to be the result of the pursuit of profitability by the private sector. The more profitable the private sector is, the more deficit appears in the fiscal and current account balance.
When the private sector has a surplus it may seem as though this means that the private sector is enjoying good economic conditions, but actually this is not necessarily the case. That point is the problem. Even though the private sector is profitable, it does not necessarily mean increased income for private income. On the other hand, it is possible to be profitable in the accounts balance with reduced spending. However, in such a case, revenue and income would be reduced as a whole. And, this does not mean that if the private sector is profitable it will have a better cash flow.
A money economy is comprised of the circulating movement of money. Fiscal deficit is also formed in the process of circulating money. Prices are determined by the balance of work, income and achievements. Work is a force, income is expenditure, and achievements give birth to supply and demand.
Funds circulate through actions that try to compensate for the exchange of goods and money and for surpluses and shortages of money. Profit and loss and the index generated by the process itself do not have the function of circulating money. The purpose of management is not to make a profit.
By circulating funds and adjusting income and expenditure, consumption and production are controlled through proper distribution. Profit is not only an indicator for monitoring the circulation state of funds.
Lending and borrowing is what supplements the shortage of funds. Unilaterally accumulating deficits or surpluses will break the equilibrium, making lending and borrowing not possible and causing the circulation of funds to stagnate. Taxes are the compulsory redistribution of income to correct differences in income that can not be corrected in the ordinary course of business.
The problem is where will the deficit be made up. This is not just becoming a deficit.
This is making a deficit happen. And, if entities with a surpluses do not lend money to entities with deficits, the circulation of funds stops. Thinking like this, in the EU without an overconcentration there are many choices.
What is important in a money economy is not an issue of production, it is an issue of how to circulate the money. This is not an issue of deficits or surpluses, it is an issue of equilibrium, an issue of income. It is an issue of how to properly allocate income.
When a deficit occurs, how and where to replace it is the issue, not whether it is a matter of right or wrong. In the economy, equilibrium is important. Thinking that surpluses are good and deficits are bad is a mistake. The right and wrong of deficits and surpluses should be judged by the relationship between the whole and its parts.
The fact that there are economic entities with deficits means that there are economic entities with surpluses. Saying that public finance has a deficit, generally, is saying the private sector has a surplus. If trying to turnaround finances, the only way to do it is to turn the private cash balance into a deficit. Making the private cash balance have a deficit is way to activate incomplete investments to create a healthy economic state. Simply robbing private profits is not the way to activate the economy.
One cause of the public finance deficit is that, even though public finances are in accordance with cash accounting, unlike households, savings are not allowed. In other words, one of the causes of the deficit lies in the single-year equilibrium principle. If long-term equilibrium is not allowed by lending and borrowing, the equilibrium will become zero. This is a zero-sum.
This is the single-year equilibrium principle.
And if commercial businesses are allowed, not being able to horde money is a means to eliminate the cash shortage. Once there is a shortage of cash, because no money is being horded, it also can not be liquidated.
Also, if operations are allowed within a predetermined range, when the budget has some left over amount it is used up. And if the budget is inadequate, in the short-term it is compensated with borrowed money from somewhere. But then if the borrowed money can no longer be paid back, this may result in a chronic financial deficit.
For private companies, even if they have a short term deficit, their income is calculated based on the idea that it is all right if they have long-term equilibrium.
To eliminate the budget deficit, there is nothing to do but to replace the fiscal deficit with the deficit of the private sector. For the means of using the private sector deficit, there is nothing to do but to return to the stance of introducing the period profit and loss principle for long-term equilibrium. But, if you think that fiscal deficit is bad....
When thinking about the economy, I feel a strong will about God. This is because, if people do not cooperate together with God, there would not be a means for the economy to be established.
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