Modern economies started
A market economy is controlled by a double structure, one that comprises cash basis accounting and periodic profit and loss accounting.
Modern economies started from debt. This is because debt is the origin of money.
However, modern people have some illusions when it comes to debt. The first is the belief that they must repay their debt. The second is that they think that debt is something of substance.
What is important is what debt is used for. Depending on what debt is used for, debt becomes something substantial. As long as there is something substantial, debt does not necessarily need to be repaid. However, when there is nothing of any substance for what the debt was used, there is no choice but to work to repay the debt.
When you get into debt, you get your hands on some money. When you get your hands on some money, there is an illusion of becoming richer.
And, then you get bolder and use that money fruitlessly. Then the burden of debt multiplies and the pressure to repay it intensifies all the more.
Debt in itself does not have any substance, but rather it is something imaginary. And left as it is, it can only become a negative value.
Debt is “money.” It is said that “money” can be transformed into anything. But, that is just a sham. “Money” in itself has nothing of substance.
People change when they get their hands on some “money.” They fall into the trap of an illusion that they’ve got their hands on some special kind of power.
However, there is nothing special about debt. It is something that is hollow and empty. It is fruitless to use debt for something without substance.
However, borrowing money only for the purpose of consumption, only just to use it, is fruitless and self-destructive behavior. The result can only have the same effect as being robbed.
The problem of getting into debt is often taken to be a problem of only debt itself.
However, debt is not only made up of the borrowed money. Debt comprises a number of elements: the people who borrow the money, those who lend the money, the way the money is used, and the plan for repaying the money. This composition of what makes up debt is what is important.
There must be money for debt to exist. Next, lenders and borrowers must be present. And on top of that, something is needed as collateral to guarantee the repayment of the debt.
In order to borrow money, it is necessary to have something to guarantee the repayment. Without some way of securing the loan, you can not borrow any money. To be able to use something as collateral, it must be something that you privately own. In other words, you can only use your own property for securing a loan.
Repayment can be guaranteed by another party, but in that case, it is necessary to have that party’s property used as collateral.
Without some backing, money can not be borrowed.
Future income or property is something that can be used as collateral.
Debt is a cash reserve. Debt is also an advance payment. The original payment is postponed.
Debt is merely something that is borrowed. When there is something of substance, repayment is possible, but when there is no longer anything of substance, repayment becomes not possible.
The problem at present is that incomes have remained flat.
When income stays unchanged, the bills of old debt weigh heavily on real income. In other words, it reduces the disposable income. This has the same effect on income as an increase in prices.
So therefore, when income levels off, the percentage of real disposable income is reduced.
If the rise in income is higher than the rise in prices, the possibility for income to absorb the rise in prices also increases. And by reducing the current value of money, the interest burden is also reduced.
When the value of assets is increasing, since the real value of debt decreases because it is a nominal value, the principal to be repaid is also reduced. And in addition, unrealized gains are also derived.
When income rises, a reduction in debt may be assumed, but when income flattens out, then it causes real disposable income to decrease.
For the lender, as well, the rise in the value of their assets is not a bad thing as long as a negative spread is not derived. This is because, the principal is also a financial asset for the lender. And this means, when looked at from the opposite viewpoint, that it is an interest-bearing debt.
On the other hand, when the value of assets begins falling and the collateral value of the assets is reduced, the backing support of tethered funds is lost which causes a “minus investment” to occur. A “minus investment” means obtaining the source for raising funds from internal funds, which refers to a reduction of expenses, a reduction mainly of labor and employment, a reversal of idle assets and the repaying of debt.
When many companies seek to raise their funding from internal sources, the economy drifts from an expanding equilibrium toward a balanced contraction.
The frightening thing about debt is the numbness that takes place with regard to the sense of being in debt. And also that debt deviates from the thing of real substance.
When debt deviates from the real substance, money is just functioning on its own.
Once the substance of debt is lost, money soars aimlessly.
This is also the same for a nation’s debt.
Government bonds are the debt of a country.
A nation is different from other economic entities in that a country is capable of printing “money”. However, the essence of the debt does not change, even when it is the debt of a nation.
The more debt increases, the more the value of “money” decreases.
If you use money obtained by getting into debt for some fruitless purpose, debt will be the only thing that remains. And the only thing to be done with such debt is to work and pay it off.
The point is not that debt is something that must be returned. The point is that it something that is empty and fruitless.
Why was it necessary to get into debt? If you forget the purpose of getting into debt, then you can not keep debt in check.
As long as funds are not being circulated in the market, the production of public finances and fiscal policy can not be effective.
Supplying funds through the market is the most effective means of circulating funds in the market.
Public investment is effective as long as it is tied to expanded reproduction, but there is a limit to its effects if it is only implemented in order to stimulate demand.
The purpose of economic policy is to enable the original functioning of companies other than financial institutions, in other words, to prepare the market conditions to enable the allocation of resources while repeating expanded reproduction.
And this means promoting the democratization of the economy.
A market economy assumes some moderate disparities along with private ownership.
But a market economy hates extreme disparities and rigid disparities. But, a market economy also does not accept the idea of everything being done uniformly.
It is only an illusion that equality can be achieved by distributing everything uniformly.
First of all, uniformity has to do with assessments of quantity, and includes nothing about quality. In fact, quality can not be included. This is because quality is a subjective thing.
And, it is precisely because quality is subjective that the work to achieve equality is so crucial.
Equality is something that involves recognition, because recognition is something that is subjective.
The EU should establish cross-border investment centers and cross-border international project organizations.
These will serve to bring about financial changes. Investment centers would operate as public institutions, and project agencies would operate as private organizations. And through them, economic rationality will be maintained.
Life is but something that is borrowed. When we die, all that we are and have must be returned to God.
No matter how much status or honor or wealth we have obtained, we can not take it with us to the next world.
What is important is a person’s own truth.
The economy is made up of the activities needed to live our lives.
When all is said and done, the things we possess in this world are simply on loan from God.
When people have forgotten about this, they are moving farther away from the truth.
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