Growth is not everything.

The economy undergoes changes. Growth is not everything. There are stages of creation, growth, maturity, decline, and regeneration.

It is necessary to review and change the economic structure, regulations, and behavioral norms according to these stages. Transformation extends to values and ethics, hence philosophy and faith are required.

The current situation in Japan provides many lessons. The first lesson is that the Japanese people became arrogant and failed to face reality and learn from it.

There is regret for the proud dragon.

Those who have reached the pinnacle of success have no choice but to fall, and thus there is always regret.

Movement is fundamentally either rotational or linear. Linear motion does not bring about change, so it is the rotational motion that causes change. The changes in rotational motion appear on the surface as waves.

The monetary economy functions through the circulation of “money.” Therefore, rotational motion is fundamental.

The economy is not all about growth and expansion. Rather, the maturity period is longer. If policies based on growth are adopted when the economy has matured, the economy will collapse.

The current situation in Japan is a good example of this.

Everything starts anew from unity. When things reach their extreme, they must return. When yin reaches its extreme, it becomes yang, and when yang reaches its extreme, it becomes yin. There is yin within yang and yang within yin.

The end of high economic growth, the era of low growth, and the yen appreciation recession. What is high economic growth? It started from a market of hunger. Borrowing money with low-priced land as collateral, investing, selling the products of that investment in the market, converting it into income, and supplying it to households. Households supply labor, receive income in return, and purchase goods from the market with that income, returning “money” to businesses. “Money” circulates through the relationships of price (income), cost (expenditure), and income (distribution).

During the high growth period, the market was in a state of hunger. Goods sold, absorbed costs, and pushed up income, creating a virtuous cycle. High growth was also supported by the linkage between rising land prices and market expansion. During the high growth period, quantity was prioritized over quality. Mass production and mass consumption. Even so, the market had the capacity to absorb production goods. However, in the late stages of high growth, the market became saturated, profits peaked, and costs could no longer be absorbed. Additionally, mechanization and rationalization led to excess labor, and income growth could no longer be expected. This was when the yen appreciation recession hit.

When the market becomes oversaturated and income stagnates, a shift from quantity to quality must be made. From mass production to small-lot production of many varieties, high-priced but high-quality products.

Originally, income should have been maintained through a shift to quality, but financial assets were used to compensate for the lack of income. As a result, funds with no place to go turned to land, causing a bubble.

Land prices rose disconnected from actual demand, and the market collapsed. The problem lies in the policies adopted at that time.

One policy should have been to suppress market prices and shift the focus to competition based on quality. Another was to shift from an economy based on land as collateral to loans based on future income. In other words, the focus should have been on developing infrastructure for new industries, but the policies adopted were the opposite. Measures were taken to curb the rapid decline in land prices and to nurture the devastated market through recession cartels and regulations. Efforts were also made to secure income by stabilizing employment. However, policies were adopted to increase non-regular employment. It must not be forgotten that deregulation is a deflationary policy. As a result, discount retailers dominated, and market monopolies and oligopolies progressed. Instead of diversifying, the market became uniform, and industries became unmanned.

The relationship between production, income, costs, currency circulation, and land price trends. Is the factor driving the boom the expansion of the market, which raises prices (inflation), pushes up costs, and increases income? Or is it the increase in currency circulation due to rising land prices?

Which element is leading and driving the economy? Policies should be determined based on that.

The important thing is that multiple elements are interacting at any given time, and without modeling, accurate predictions cannot be made. In the future, it will be necessary to rely on generative AI for calculations. The elements include income, prices, costs, unemployment rate, interest rates, tax structure, fiscal policy, exchange rates, population composition, industrial structure, market stages, research and development population, land price trends, and many others, making it impossible for humans.

People need to quickly recognize their limitations and learn to leverage the power of AI.

The funds raised are invested. Depending on the investment target, they are classified into capital investment funds and working capital. Capital investment funds constitute initial costs, while working capital constitutes running costs. Initial costs refer to initial investments or initial expenses. Initial investments and initial expenses constitute the long-term function of money, while working capital constitutes the short-term function of money. Long-term funds and short-term funds are classified based on the initial setup.

The long-term function of money is basically based on agreements, while the short-term function of money constitutes regular income and expenditure and is based on credit transactions. Working capital is based on short-term borrowing and lending. It mainly compensates for the time difference between income and expenditure, thus addressing temporal surpluses and shortages. Initial investments, on the other hand, become assets.

It is important to note that assets are nominal accounts. Therefore, there is a separation between nominal and real values.

Assets generate revenue by being expensed. Products are also considered assets until they are sold.

Assets that are expensed are called depreciable assets.

The relationship between long-term funds and short-term funds forms the basic structure of profit and loss. This forms the basis of cash flow structures and break-even points.

In other words, the function of long-term funds constitutes the balance sheet, while the function of short-term funds constitutes the profit and loss statement.

Incidentally, labor costs at the break-even point are considered long-term funds and fixed costs. Labor costs are initial investments.

Basically, in a monetary economy, as long as money is circulating, it will not collapse.