|Reconstruction of economic theory
As explained in this book, it is clear that classical economic theory
has deficit. There is no theoretical root for the concept of plus fixation
of interest rate. As plus interest rate has been the premise of classical
economic system, it has been followed in construction of the theory.
The biggest paradox of economic theory is for both market principle (free price competition) and plus interest (expansion of scale of economy) coexist at the same time. Sales powers are competed in the market. Prices are varied up and down naturally. Economy expands with average price increase, but economy is reduced with average price down.
On the other hand, premise of plus interest rate is only expansion of
economy, and reduction of economy is not supposed. Therefore, these two
premises aren’t realized at the same time. In short, economic theory conflicts
from the beginning. Therefore, it is not completed as theory. Economy is
managed under the uncompleted theory, situations of economic crisis are
happened very often. If price decreases drastically and scale of economy
is reduced, it contradicts to plus interest rate (expansion of scale of
economy) and paradox of economic theory is revealed.
If minus interest rate is introduced, market principle (free price competence)
and interest rate (expansion / reduction of scale of economy) don’t conflict
each other and degree of completion as theory goes up dramatically. Therefore,
it is necessary to reconstruct economic theory by introduction of minus
Present paradox of economic theory leads to destruction of economy as
If price decreases drastically under plus interest rate, bad debt occurs.
As bad debt smashes up companies and diminishes scale of economy, bad debt
increases additionally. Scale of economy continues to diminish in this
way. It is occurrence of what is called “Deflationary spiral”. But currency
increases with plus interest.
This situation being continued, difference between amount of money and
scale of economy becomes larger. Amount of currency becomes much more than
real economy. Then, confidence in the currency is lowered. If confidence
in the currency is lost, the funds can’t be collected without high interest
rate. If interest rate of the funds rises, whole interest rate rises drastically.
Then prices rise drastically in conjunction with it. Occurrence of what
is called “hyperinflation”. Scale of economy expands sharply by sharp rise
of prices. Amount of money and scale of economy correspond in the end in
But, process of sharp rise of prices means destruction of economy. It
means stability of economy is lost. Therefore, sharp rise of prices like
this must not be happened.
Present economic theory assumes situation of destruction of economy. But economy is our life itself. It must not be destroyed. Therefore, we must not manage economy on the basis of this economic theory. Present economic theory can’t be used practically without amendment.
The reason of unstable economic situation is that scale of economy and
amount of money differ largely and credit of currency is lost. As credit
of currency is not lost without the difference, economy doesn’t become
unstable. Then stable management of economy can be continued.
Recently rating of Japanese government bond has been lowered because excessive
volume of Japanese government bond has been issued compared to scale of
economy. Credit of yen has been lowered. If plus interest rate is continued
when scale of economy diminishes, amount of money and scale of economy
differs, so credit of currency is lost.
If minus interest rate is introduced, amount of money and scale of economy
always correspond, so stable economy can always be managed. Stable economy
leads to stability of society.
For the above reasons, it can be understood that both reform of economic
system by introduction of minus interest rate and reconstruction of economic
theory are necessary assignments.