The beginning of international trade lies in importing resources that cannot be produced or procured domestically. It is the primary responsibility of a nation-state to ensure that all necessary supplies are evenly distributed to all citizens. Securing and distributing the resources necessary for survival is a matter of life and death for the people.
Therefore, procuring the resources necessary for the survival of all citizens is a matter of national survival, even if it means resorting to violent means or military force.
However, war is not a productive activity.
It is not necessarily true that war leads to economic downturns. In fact, it can sometimes lead to economic booms.
There is a phenomenon known as the “war economy.” Countries that are not battlefields may appear to have a booming economy by fully operating their defense industries. However, since this is not the production of goods directly related to daily life, the consequences will eventually catch up.
The important thing is to be able to compensate for the surplus and shortage between nations without resorting to violent means. Trade is the means to compensate for the surplus and shortage without resorting to violent means.
When there is a shortage of goods, surplus resources must be sold to raise “money.” This is the origin of international trade.
Overseas trade is a matter of international division of labor. The buying and selling and lending and borrowing between nations are zero-sum balanced.
Originally, a nation must balance production and consumption. If balanced, self-sufficiency is achieved.
The goal is to continue distributing and supplying “money” so that everyone can obtain the resources necessary for survival. The reason for the need to continue supplying is that “money” disappears when used.
Domestic buying and selling and lending and borrowing are balanced. This is because the circulation of currency is constant. In other words, currency circulates to compensate for the surplus and shortage. The overall buying and selling and lending and borrowing in the international market are zero-sum balanced. Vertical and horizontal directions are balanced.
The market is composed of several markets combined into one whole. There are vertical markets and horizontal markets.
Vertical balance is formed by the current account and capital account. Horizontal balance is spatial balance in the international market. In the domestic market, it is the balance between sectors, namely households, businesses, finance, fiscal, and international balance of payments, which are zero-sum balanced. Production, distribution, and consumption are equivalent.
The reason market transactions are zero-sum balanced is due to an extremely simple and clear principle. “Money” is originally a thing, so it is just an exchange of things. The thing exchanged for buying and selling is considered equivalent. In other words, the thing bought is considered equivalent to the thing bought (this is “money”). When the goods (products) are removed from the buying and selling, only the exchange of “money” remains. This “money” is the same thing regardless of buying or selling, so the seller receives the same thing as the buyer hands over. Also, the thing sold and the thing received (“money”) are equivalent. Equivalent exchange. Therefore, a single transaction is assumed to be zero-sum balanced.
Also, if “money” is insufficient, it is borrowed. The lender and borrower are equivalent and the same. The lender creates a bond, and the borrower creates a debt certificate, which are symmetrical and the same. The borrowed “money” is allocated to the insufficient part. The surplus and shortage are based on the balance, so the balance and lending and borrowing are the same amount.
Therefore, the current account (difference in buying and selling) and the capital account (difference in lending and borrowing) are balanced. The balance between sectors arises from transactions between sectors, but overall it is zero-sum balanced.
The economy is controlled by the balance of the capital account and current account, the balance between sectors, the balance of production, distribution, and consumption, and the balance of the international market.
The principle of the market is simple: variation, immutability, simplicity.
Household current account + business current account + fiscal current account + financial current account = international current account Household capital account + business capital + fiscal capital account + financial capital account = international capital account
Capital transactions constitute lending and borrowing, and current account constitutes buying and selling. The capital account and current account are zero-sum balanced. The current account consists of the trade balance and service balance.
There are several types of exchange rate systems, and it is necessary to understand the characteristics of each.
Factors affecting exchange rate fluctuations include capital transactions, current transactions, trade volume, interest rates, prices, income, foreign exchange reserves, government bonds, fiscal policy, economic policy, speculation, economic conditions, war, accidents, disasters, crude oil prices, stock prices, spot prices, harvests, and production volumes.
To predict exchange rate movements, it is necessary to understand the correlations and causal relationships of each factor and model them. Then, find the zero-sum balanced relationships and build a balanced model. Human power is limited, and AI cooperation is necessary.
The biggest problem is the value of currency and exchange rates. The premise is that there are multiple currency zones.
It is not as simple as solving the problem by unifying currencies. This is because currency is deeply related to national sovereignty. National sovereignty is constrained and bound by not only economic policy but also national systems, founding principles, constitutions, and legal systems. Also, even if currencies are unified, regional disparities cannot be eliminated.
There is said to be the trilemma of international finance.
The trilemma of international finance is the theory that only two of the three can be achieved simultaneously: exchange rate stability, independence of monetary policy, and free capital movement. Exchange rate stability means fixing the exchange rate, monetary policy mainly refers to interest rate policy, and free capital movement means liberalizing international capital movement.
I do not believe that the trilemma of international finance is absolute, but I think it can serve as a reference for understanding correlations. It is important to base analysis on facts rather than being confined by theories and doctrines.
This theory had significant implications when considering exchange rate systems. It was often brought up, especially when transitioning to a floating exchange rate system.
Currently, although interest rates have risen slightly, they are not functioning effectively, and the floating exchange rate system has become the norm, making it unclear how capital movements are affected. However, this situation, where previous common sense no longer applies, might actually be a good condition for understanding the true relationships.
This principle suggests how interest rates affect exchange rate fluctuations and capital movements, but it is not reliable enough to be called a law. It is considered to represent the correlation between capital, exchange rates, and interest rates.
There is a difference between countries that have and those that do not. However, just because a country is resource-rich does not mean all its citizens are wealthy. The key is whether there is a mechanism for wealth distribution and whether it functions properly.
There are some of the world’s wealthiest individuals in the poorest countries. In other words, poverty can be absolute or relative. Disparities exist between countries and within countries.
Basically, the population of the poor is larger than that of the wealthy.
What is wealth? Wealth is felt by improving the quality of consumption.
To borrow “money,” collateral is required. Even if a country receives support from another country, if the supporting country’s companies undertake the projects, there is little financial benefit for the supported country. This is because funds flow back to the supporting country, and if debt increases, only debt remains. The important thing is whether employment increases with the “money” received as support and whether “money” circulates domestically.
When supporting another country, it should not be prioritized to create debt for that country. Economic independence of the supported country also brings benefits to the supporting side. If the supported country cannot achieve economic independence indefinitely, it only increases the burden on the supporting side. Colonizing or subjugating increases the economic burden. It is inefficient and only makes both parties unhappy.
When all countries achieve economic independence, international division of labor is fulfilled.
The ultimate goal of the economic system is to balance production, distribution, and consumption. It is also to balance the relationship between people, goods, and “money.” Whether it is production, distribution, or consumption, or the relationship between people, goods, and “money,” what disrupts it is quantitative shortage, excess, structural bias, distortion, and unfairness. When balance is lost, people try to balance it violently. This is the main cause of war.
War fundamentally stems from the collapse of international division of labor, and it cannot be resolved without cooperation from all countries. If that is the reality, then it is the will of God.
The economy is not just about the results; the process is important.
The market is not a single entity. Many markets come together and combine to form the overall market. Each market that makes up the parts has its own characteristics, structure, and rules. The regulations that govern these markets are like the dividers in a bento box, separating wet and dry items. Ignoring the characteristics of individual markets leads to their deterioration.
Production entities often also serve as distribution entities. We must not forget that production entities have the role of creating employment. A company that makes a profit of 50 million yen with 100 people is more efficient in terms of productivity than a company that makes the same profit with 1,000 people. However, from the perspective of distribution, the latter is more efficient.
Products that are diverse, produced in small quantities, high-quality, high-priced, and long-lasting may be uneconomical from a productivity standpoint compared to bulk purchasing, mass production, mass consumption, and low prices. However, from a consumption perspective, they are economical.
Prices have meaning, roles, and functions. It’s not just about being cheap. Maintaining a fair price is crucial. Prices constitute costs and form the basis of living expenses. They are also the source of income and the funds for debt repayment.
As the saying “nothing is more expensive than free” symbolizes, prices have meaning. If everything in the world were free, the economy would not function.
Revenue is the sum of added value and profit, and added value is a cost. Pursuing profit alone and compressing costs means endlessly reducing added value. Inevitably, the economy loses vitality. It is inevitable that many discount retailers are black companies because they do not strive to create added value, only seeking profit.
Simply saying to uniformly relax or strengthen regulations is reckless. Each market has its own unique history and customs, and discussions should be held after verifying whether they are suitable for the times, environment, and changes.
Producing a variety of products in small quantities, high quality, and high-priced long-lasting goods may be uneconomical from a productivity standpoint, but it is economical from a consumption perspective.
We must once again remember the spirit of the Antimonopoly Act.
The Antimonopoly Act prohibits excessive oligopoly and monopoly, as well as unfair low pricing. This is to maintain fair competition and protect high-quality consumption. Regulations exist for this purpose. Regulations are both moral and legal. Why did pollution and environmental destruction occur?
The spirit of the Antimonopoly Act is to maintain fair prices and costs. It’s not just about being cheap or just about competition. A fight without rules is not competition; it is merely a struggle.
What is God showing us?
Deregulation is not a panacea. However, it is not about regulating everything either.
The important thing is the purpose of regulation.
Regulations are established to protect people’s lives, support the weak, and protect the environment. However, regulations that have fulfilled their role and no longer fit the times or environment become vested interests, create class disparities, suppress fair competition, hinder growth, and rigidify the market.
Regulations should be adapted to the environmental conditions.
Industrial products are based on quantity, crafts on quality, and art on universal value. Each should form its own market. The concept of the market is different.
Cars, watches, meals, and preferences form different markets. Mass retailers, local retailers, and long-established stores have coexisted according to their purposes. The diversity of car and watch stores made the market vibrant.
Clothing, like ethnic costumes, was part of the culture.
The taste of coffee in New York, Tokyo, and Shizuoka should not be made the same in the name of progress.
How much and on what consumers spend their money is their decision. The problem is when they are not given a choice.
What did people learn from World War I and World War II? What did God show us? If you want to survive, help and share with each other. If you want to perish, then perish.
It is about life and what kind of environment you live in. For the young and old, children, men, and women to live happily together, what kind of human relationships should be built, where should they live, what kind of house should they live in, what should they wear, and what should they eat? It is a community issue, a life plan, and happiness. That symbolizes richness. Money is a means to live a happy life.
The origin of the economy may lie in urban planning.
Tariffs are important. However, not for the purpose of creating high barriers. They aim to correct the unfairness caused by income disparities, labor conditions, and currency fluctuations, to achieve fair competition, and to protect domestic industries. What is important is to maintain employment stability and fair competition.
Since the role of tariffs is also important, we should understand and utilize them correctly, rather than simply debating whether they are right or wrong.
We must not forget that it can lead to the importation of poverty, discrimination, and forced labor.