Fractal Economic Theory
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 Home > Fractal Economic Theory
Equity is Double possession of value of money. (Detail description).

Economic value of company occurs when static value of company is exchanged for money of others (dynamic value). (Please refer to static value and dynamic value). Money owned by company (source of equity of company) occurs by economic transaction between money of others and static value of company (Fig.6).
But, in the current system, value of company is possessed as equity before money of others is used. As a result, value of company is doubly possessed. (Fig.7)

 
Money owned by others and equity have relation like two sides of a coin. One value in nature is possessed doubly.
So it is wrong to possess equity and money owned by other people as independent dynamic value.
Left : Value of money of others = Economic value of company
                        (Transactions of buildings etc.
                         are included.)
Right : Value of money of others = Value of equity
                        (= economic value of company)

(Fig.9) Economic value of a company is possessed as value of money in economic transaction and as value of money in equity market. One static value corresponds to two dynamic values (money of others, equity). Economic value of a company is possessed doubly.

Source of value of money (for the most part) is listed company. Value of money does not occur without these companies. Economic value of listed company is possessed as money. If value of listed company is possessed as equity in addition, economic value is doubly possessed.
Without Japanese company, nothing can be bought in yen (value of yen is lost). Source of value of yen is in Japanese company. (Supplier of commodity, service, etc. (static value)). Economic value of company is possessed as money of others used in economic transaction. If economic value of equity is possessed, economic value of company is possessed doubly. (Two dynamic value correspond to one company (static value)).
Present equity market is established by double estimation of economic value of company.

Source of dynamic value is static value of others. (Money does not have value in itself. Source of value is commodity or service supplied by others). (For the most part) Source of value of money (yen) owned by someone are commodity or service supplied by Japanese listed company. Without these supplies, source of value of money is lost, and situation is like to have fake bill. Dynamic value corresponds to listed company (static value) is possessed as money of others used in economic transaction.
You can see for all of these reasons described above, possession of such dynamic value as equity other than money of others used in economic transaction makes double possession of dynamic value (value of money).

'As equity has management right, it has value independent of money.' This is mistaken notion. Company can supply commodity and service because the company has manager. Value of company which includes management right is possessed as value of money (of others) used in economic transaction.
When business begins to pick up and economic growth rate increases, stock rises in price. It is to view economic growth (increase of sum of money) from a different standpoint. Dynamic value of stock is only double possession of value of money in economic transaction.
(Right in fig.9) Value of equity is possessed as copy of value of money in economic transaction (Left in fig.9).
So, it is natural for price of equity to rise as scale of economy expands.
As the number of those who cash in the equities increases, the equity market decline. Equity becomes unsellable in extreme cases.
It is not true that dynamic value of equity is lost by decline in the equity market. Equity is double possession of value of money and equity does not have dynamic value independent of money of others in economic transaction. It is understood that decline in the equity market is realization of this theory.

Closing price of the Nikkei Stock Average (2008/10/23) is 8,460 yen, total market value of the first section of the Tokyo Stock Exchange is 282 trillion yen. But proper total market value (total dynamic value) is 0 yen. As a result of double possession of value of money caused by paradox of financial economic theory, dynamic value which does not exist essentially is possessed as 282 trillion yen.
Equity transaction is only money transfer among the affected parties. Equity transaction is only money transfer with confirmation of value of company (Economic scale etc.). It is reality of equity transaction.
Enormous manpower is spent on useless work. It leads to much better productivity of all society to abolish going public. People of all society will become rich.

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   Fractal Economic Theory (PDF)
Contents
   Explanation of [Fractal Economic Theory].
 Chapter 1 Problems and solutions of financial/economic system
   Static value and dynamic value.
   Indefinite possession does not make sense.
   Present money system is possession of future value in advance.
   Economic value of company is possessed as money of others.
   Equity is double possession of value of money. (Detail description)
   Money of my company is economic value of other company.
   Paradox of plus of sum of dynamic value.
   Equity should be debt of company.
   Owner of company is consumer.
   Money is fractal structure.
   Fractal structure of both static value and dynamic value.
   Securities are multiple possession of value of money.
   Securitization is exploitation means.
   Reduction of value of money caused by securitization.
   Resolution of financial crisis by abolishment of securitization.

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