The state of the economy can be understood by observing the movement of “money.” The state and movement are inseparable.
To understand the meaning of the movement of “money,” it is necessary to know about “money” itself. First, the functions of “money.” Textbooks state that the functions of “money” are exchange, measure, and value preservation. However, this is not enough to cover the true functions of “money.”
The mathematics of natural science and the mathematics of economics should be considered as separate systems.
The important point is that “money” is information, specifically numerical information.
The functions of “money” are, first, to prepare for payment. Second, exchange. Third, a means of distribution. Fourth, to relate production and consumption. Fifth, unification of value. Sixth, a measure of value. Seventh, preservation of value. Eighth, quantification of value. Ninth, nominalization, abstraction, and symbolization of value. Tenth, to give liquidity to economic value. Eleventh, to anonymize economic value.
The fundamental function of “money” is to prepare for payment. This is because the function of “money” is aimed at exchange and distribution.
“Money” prepares for payment. It compensates for the surplus or shortage of funds. Without “money,” it is impossible to buy necessary resources from the market. Since necessities are obtained from the market, one cannot live without “money.” “Money” is depleted when used. When it runs out, “money” becomes insufficient. People must continue to work to replenish “money” to survive. This is the fundamental mechanism of the market economy. The insufficiency of “money” makes production activities function, and the use of “money” realizes distribution. Consumers buy goods from the market, providing income (inflow) to producers. Wages are paid to workers as preparation for payment (outflow). Households (consumers) purchase (expenditure) and consume goods produced by producers with the wages (income) they earn from working. Production and consumption are connected by “money.” Producers are also consumers, and consumers are also producers. The economy operates through this repetition. And “money” prepares for payment.
“Money” is a means of exchange and symbolizes exchange value. “Money” is established on the premise of exchange. The function of “money” is exerted through exchange. Distribution is realized by exchanging “money” for production goods in the market. “Money” does not exert its utility unless it is used, that is, unless it is exchanged for production goods.
“Money” is a means of distribution. As a means of distribution, “money” is a relative measure. It is not an absolute, self-contained measure like length, weight, or temperature. It is a relative measure influenced by supply and demand, market conditions, etc.
“Money” is obtained by being involved in production through work and exerts its utility by purchasing necessary goods from the market. It is obtained by being involved in production and is expended for the purpose of consumption. Through the two functions of income and expenditure, “money” connects production and consumption and controls the economy.
Quantification, nominalization, abstraction, and symbolization of value mean the informatization of economic value. Through the quantification, abstraction, and symbolization of value, it becomes possible to unify economic value. By unifying economic value through “money,” it becomes possible to calculate economic value. “Money” aggregates economic value.
Unification of value is one of the important functions of “money.” Economic value is unified by “money.” By combining monetary units with physical units, it becomes possible to calculate economic value in the same dimension. By unifying value, it becomes possible to add or subtract heterogeneous economic values such as horses and cars, houses, etc. It also becomes possible to compare them. It becomes possible to compare the value of rental housing and owned housing. It also becomes possible to calculate and evaluate the economic value of different dimensions such as labor, time, art, theater, music, rights, electricity, gas, land, length, area, volume, distance, results, abilities, etc., in the same dimension.
Quantifying value means aggregating and grouping economic value by some attribute. For example, counting one apple, two apples means identifying the object by the attribute of apples. In other words, quantification means classifying objects by specific attributes. It also makes it possible to grade, differentiate, and subdivide objects.
“Money” is information. “Money” is a function. “Money” functions even if it loses its physical substance, that is, becomes intangible. This is because the essence of “money” lies in information and function. As evidence, in recent years, “money” has been transforming into signals, symbols, and records in storage devices. “Money” is an abstraction and a symbol. “Money” is a value that symbolizes exchange value.
“Money” preserves exchange value as preparation for payment. The value preserved in this way becomes an asset and forms surplus funds. For financial institutions, the preserved payment preparation becomes a liability. Lending means lending payment preparation.
“Money” is negative value. In other words, “money” is based on debt and means negative. While “money” is negative, positive value, meaning goods and work, is positive. Market transactions always assume positive and negative, zero. “Money” does not exert its utility by itself. “Money” is a measure. “Money” exerts its utility when it is integrated with the object it indicates. “Money” is worthless unless it is used. It does not have use value by itself. “Money” is a value that symbolizes exchange value.
“Money” creates a negative space.
The function of “money” is measured by balance. Monetary units are natural numbers. Negative numbers and decimals do not exist. Therefore, calculations are remainder calculations. The economic state of economic entities and sectors is inferred by measuring balance, outflow, and inflow. The market is formed by the buying and selling and lending and borrowing of economic entities and sectors.
The calculation of monetary value is basically balance-oriented. “Money” was originally a thing, whether it was a coin or a banknote. It is a thing that symbolizes monetary units and exchange value in substances such as banknotes and coins. Therefore, monetary units were determined as if counting things. The calculation of double-entry bookkeeping is based on additive subtraction. The numbers used in the calculation of monetary value are natural numbers, excluding decimals and negatives. Therefore, it basically becomes remainder calculations and carry-over calculations. How to handle remainders, carry-overs, and fractions becomes important.
“Money” creates a negative space, but the calculation is basically that the economy has no negative values. Balance is fundamental. Therefore, if assets become negative, it means they have turned into liabilities. If liabilities become negative, it means they have turned into assets. In calculations, assets and liabilities do not take negative values. If they do, it means economic activities have collapsed.
Market transactions determine economic value. “Money” does not determine economic value, nor does it have economic value. “Money” is a measure and unit for determining economic value. Economic value is determined by sellers, buyers, and production goods.
Giving liquidity to economic value means making it possible to carry, move, and transfer economic value. “Money” extracts economic value and replaces it with objects, signals, symbols, and numbers, making it possible to carry, move, and transfer it to others.
“Money” can be moved and transferred. In other words, “money” has ownership. “Money” can be owned. These are the basis of cash liquidity.
The anonymity of “money” means that “money” leaves no history and does not choose owners or means. This is the convenience of “money,” but it also causes crime.
The function of “money” is exerted by input and output. In other words, it is exerted by inflow and outflow, income and expenditure.
What should be observed is the composition, quality, relevance, and trends of income and expenditure. How to link the items of income and expenditure. How to discern the trends of the items that make up income and expenditure and the overall trends. This will reveal the future of the economy. Income is basically income, borrowed funds, and the liquidation or sale of assets, gifts, and inheritance. Expenditure is consumption expenditure, debt repayment, investment (mainly construction costs, but also disasters, illnesses, marriages, education, etc.), and savings.
The expenditure of one economic entity becomes the income of another economic entity. The income of one economic entity becomes the expenditure of another economic entity. And the total of transactions balances to zero. The expenditure of one sector becomes the income of another sector, and the income of one sector becomes the expenditure of another sector. And the total of market transactions balances to zero. The balance of payments and loans of a country also balance to zero. This is the balance in the horizontal and vertical directions. In normal corporate accounting, double-entry bookkeeping is used, but when looking at a single transaction as a whole, that is, when considering both the seller and the buyer as one, horizontal double-entry bookkeeping and vertical double-entry bookkeeping are performed. In national economic accounting, quadruple-entry bookkeeping is adopted.
The basis of the economy lies in consumption. Consumption is life. What is needed to live. In other words, what to consume. Furthermore, what to spend on. In other words, what kind of life one wants to lead. What is necessary for that. What to produce or procure, how much, and how. And how to distribute the resources produced or procured, based on what grounds and standards. This is the most important issue of the economy. This is the basis of the economy. “Money” is just a means to sustain human life. However, the current economy is biased towards production. And “money” is too dominant. Therefore, the inverted idea of how to consume what is produced arises. Distorted thoughts and evil intentions dominate. The root of the economy is human life and living. The essence of what kind of life one wants to lead is what kind of way of living one wants. Few people desire a life based on greed. When the root of things is lost and only the function of “money” dominates, people can no longer control the economy.
“Money” is not bad. “Money” is just a tool. Being controlled by “money.” Becoming a slave to “money.” It is a problem of the human heart being trapped by “money.”