In the national economic accounts, income and expenditure, assets and liabilities, sales and purchases, horizontal and vertical, all balance to zero. Additionally, the three aspects are equivalent. Households, corporations, finance, fiscal, and international balances all balance to zero. Both the global and domestic markets balance to zero. What this means is that balance control is crucial.
This is a fundamental principle because if there is a seller, there is a buyer. If there is a buyer, there is a seller. And what the seller sells is what the buyer buys, meaning the same thing. The seller receives money equivalent to what was sold, and the buyer hands over money equivalent to what was bought. The same money.
If there is a lender, there is a borrower. The existence of a borrower implies the existence of a lender. When lending and borrowing occur, equal amounts of claims and debts arise.
If there is a positive, an equal amount of negative arises on the opposite side.
The global market is always balanced. It is obvious, but somehow overlooked. In other words, deficit countries and surplus countries balance to zero. If a country like Japan continues to have only surpluses, money accumulates unilaterally, and money does not circulate in the global market. If households unilaterally accumulate surpluses, other parts will face a shortage of funds. Since lending and borrowing are balanced, if lending increases, debt also increases.
Balance in a zero-sum context means oscillatory motion and rotational motion. In oscillation, amplitude is the issue, and in rotation, the number of rotations and rotational speed are the issues.
The keywords are zero-sum and zero balance.
The reason why current economics cannot be based on this is that it does not base itself on this relationship and structure.
Therefore, do not be bound by theory, but focus on data. Constancy, variability, and simplicity (laughs).
Basing on zero balance makes accounting principles inexplicable and policies prioritizing only the country’s current account surplus impossible. Why is the U.S. in a current account deficit, and is a current account deficit a bad thing?
It is bad because it is perceived in terms of good and bad. We should consider structure and balance, and it is bad for deficit and surplus countries to become fixed. Therefore, the economy should be viewed as oscillation, cycles, and rotation.
Profit and loss were structured to be imbalanced. Otherwise, the scenario where all companies make a profit cannot be depicted. If based on income and expenditure, if there are surplus companies, there will inevitably be deficit companies. Also, short-term business activities cannot be evaluated over a period.
Therefore, it was decided to separate short-term and long-term activities. That is profit and loss. Viewing income and expenditure based on profit and loss leads to anomalies.
In other words, by separating long-term and short-term balance, profit and loss were made imbalanced. However, in accounting, assets and liabilities are balanced.
Profit and loss allow all companies to make a profit, and there is a trick in accounting. Without knowing this trick, do not talk about economics, management, or accounting.
Why does zero balance not apply to profit and loss? Because assets and liabilities work behind the scenes. Profit and loss are structured to balance to zero with assets and liabilities.
The meaning of corporate profit surplus and national current account surplus is different. Simply being in deficit does not mean it is bad.
Based on this premise, management and national economy should be viewed.
The current danger is that, especially the U.S. president, being a businessman, tends to aim for a surplus. It is easy to understand. This incites all countries, especially major powers like the U.S., China, Russia, India, and Brazil, to aim for a current account surplus.
This is structurally impossible from the start, so if it happens, they will try to achieve it by force. If individual countries try to achieve a surplus by force, balance will be broken, and at worst, it will lead to war.
In short, balance as a whole and balance as parts. The global economy is sustained by the circulation of money.
It is not about being good or bad in terms of surplus at a certain position, but each country’s role and function at that point and in that situation. Understanding this correctly is crucial.
In other words, each country and each sector, when viewed in context, must maintain overall harmony by oscillating and rotating at a certain cycle.
If any country or sector is consistently in surplus or deficit, money will not circulate and will flow in one direction. If money does not circulate, it will hinder distribution, and the economic system will not function properly, leading to bias, rupture, division, distortion, stratification, cracks, stagnation, etc. At worst, it will become uncontrollable, leading to runaway and eventually collapse.