FITTING MONEY AND FINANCE
            TO THE INFORMATION SOCIETY

1. INTRODUCTION
Modern economy, even in the world economy even in the domestic economy, is under the global financial capitalism system, it is actual situation that the entire economy including the real economy such as manufacturing and service industries is subjected to a strong influence by market fluctuations in the stock and foreign exchange and various types of futures and financial factors such as the monetary policy of the country and other countries, while that side of the real economy is affecting the entire economy including the financial is nearly gone except such as great innovation related to products and services and natural disasters.
Originally monetary and financial is the presence as blood of the real economy or the presence of the order to function smoothly the real economy, those that function to accompany with the activity of the real economy,that should to be controlled by the real economy. However, actually it is in reality that the real economy has been brandished by the repetition of the bubble and the financial recession by the behavior of the global financial capital. In order to clarify how to such a situation has been occurred, how can eliminate the occurrence of such a situation, once again consider what is money and financial after all, further we would like to consider how to exist the money and finance in the future of the information society.
2. MONEY
Money have been defined as having four functions of the exchanging means, value measuring means, accumulation means and payment means, but it is not essential just enumerating surface nature and function. Money has been established as having the property that the list price which is embodied the value at the time of the exchange continues to maintain and it is able to exchange with any thing at any time. Based on this property, it will function as the four means. In short, money is a medium to promote the distribution of value by fixing and maintaining the value to the price at the time of the exchange, and have a characteristic that make able to accumulate and hold the value in the form of the price by the value that can not accumulate and hold transferring and fixing to price.
Originally, to ensure the nature of this money, money itself was formed by worthy material for example a noble metal such as gold. However, with the money circulation having universality, on the assumption that the value of the list price of the money is guaranteed, the money comes to distribute apart from the value of itself and maintaining its list price but having possibility of its value changing. Then, goods (including the service,information) is exchanged with money of the price corresponding to the value of that time, after that the exchanged money distribute as having a value corresponding to the list price but having no relation to changes of the value of originally changed goods, consequently goods are smoothly distributed by the exchange with money (payment of compensation). Thus, the money will be to fulfill the function of to facilitate the exchange and distribution of goods.
In this way, once the system that the money is the value distributing medium have been established, it is hidden that the money is inherently a medium. the money emerge as if self-existence that is fetish and thing of self-sufficiently storing value. Money is never required the source that always exist if the medium and is becoming to distribute as if having its own value even if there is no value entity to source. After that, initially economic entities that had accumulated enormous money issued the certificate that is for the elimination of the complexity of handling such as transportation of money, and cases occurred that the certificate was becoming to be used as substitute of a money as the basis of credit based on the accumulated wealth, here is recognized beginning of credit creation of money.
In addition, it was becoming to that government organs such as the state control monetary value entity namely the full measure and the quality in order to the goods distribution is carried out smoothly mediated by money in its territory, or depending on the situation, money is issued under the control of the state in order to achieve the unification of the quality of money. Further, by government institutions such as the state monopolize the money issue right, it is becoming possible to force the distribution of money which has been credit created. In consequence, in order to compensate for the financial shortage and to compensate for the shortage of precious metals such as gold, it is becoming to issue credit created convertible bill by money indirectly link to precious metals such as gold coins, ie, by the money to be distributed replace to the bill separated from the substantive value products,and the convertibility of the bill with precious metals such as gold (value products) guarantee.
3. FINANCE
Upon the production of goods funds is necessary for its equipment and materials, so there is a need to raise funds and money. In the case of production is relatively small, it is possible to meet the funds demand by applying funds of their own hand. In addition wealthy merchant who came to possess enormous funds in commercial distribution ensure a large amount of their own distribution products by expanding own business using own funds or by letting others to produce with lending the funds,and by that state spread in society commodity production is increased and social division of labor is to be development.
In accordance with the social division of labor is developed and the goods production is increased by leaps and bounds, it is necessary to more significant funds for the production means. So, it is brought full-scale appearance of finance and as its institutions of the banking system that collect socially widely as principal occupation from each economic entities the money accumulated by delaying the use of the consideration received by the exchange, and offer it as a production fund of others, and request the share of the part of the profit obtained by production as the interest of the loan funds. Also, when doing business having a possibility of obtaining the great wealth by fulfillment of the business while there is a very high risk, for example such as adventurous voyage, the project funds have been procured from more than one investor by sharing each other. These example have been becoming as the beginning, equity investment that raise investment by issuing shares that is certifying the sharing of a part of raising business funds at risk is to appear.
In addition, on the occasion that companies that are already doing business raise funds for such as the start of the expansion of business or new business, bond investments to obtain funds by issuing corporate bonds appear. And, securities market for these equity investments and debt investments appear. In addition, such as the insurance system to compensate for the losses incurred by previously paying premiums to be able to deal with the occurrence of a contingency in the trade business etc also appear. In this way, as long as carrying out the social division of labor on the condition of the money economy, in accordance with its development and deployment such various financial systems appear.
4. TRANSFORMATION OF MONEY
In the case of that the money has been issued on the assumption of the convertibility into the precious metals such as gold, there is naturally a limit to the money issue amount of the credit creation. When the money issue amount is increased up to a limit corresponding to the storage amount of gold, it can not be increased any more money issue amount.In these condition in which can not be increased money issuance amount, for example, if economy further expand and production increase by exports surge, the amount of the money supply can not be increased correspondingly, of course product prices fall with increasing in the monetary value by the money shortage, and bring sales volume reduction, production stagnation by funding difficulties.More serious thing is, in debt, that is, in the case of that the producing system receiving investment and lending is universal, it becomes difficult to maintain corporate activities by the burden of debt repayment becoming heavy while sales decrease, so that the crisis caused by deflationary spiral of lowering prices, reducing production, declining income occurs. Therefore, it is necessary to increase the quantity of money in response to the expansion of at least production. On the other hand, it becoming to universal that money present fetishistic self-existence as having a value even if there is no source of value entity as described above, the stable money distribution had become possible based on the power of the state ideologically of the authority and by the assurance, even if stopping the convertibility to gold that secure the monetary value.
Thus, after a drastic change during from the Great Depression to the end of the Second World War, the administration currency system that the central bank, the nation's monetary issuing authority, creates and circulates money based on the reliability of the state and controls its currency distribution to be implemented is realistically enforced. Money issuance by the central bank is specifically made by the government issuing government bonds, purchasing the government bonds and supplying money to the government as compensation. Money is also supplied by credit creation that a bank lends more than a deposit, and its money supply amount is controlled by the central bank.
With regard to the specific money supply control by the central bank, deposit reserve ratio in the reserve deposit system, the official discount rate, and market opening operation are known as traditional adjustment means. The reserve deposit system, which focuses on depositor protection, imposes an obligation to deposit an amount equal to or greater than a certain ratio (reserve ratio) of such as deposit in the current account of the central bank, and adjusts the amount of money supply and the economy by adjusting of reserve ratio, but it has not been used since 1991. The official discount rate adjusts the money supply amount by adjusting the standard discount rate and the standard lending interest rate, but stopped because the existence significance disappeared due to liberalization of finance. In the market opening operation, central banks buy and sell government bonds and bills on hand in the market to control the call rate (unsecured overnight call) in place of the official discount rate, and adjust the money supply amount, and the upper limit is limited by the standard lending interest rate of the official discount rate.
Since this managed currency system is based on the reliability of the state, it will naturally be implemented for each country. The exchange rate between currencies managed by each state is stably maintained by maintaining the exchange rate decided by each country based on the international agreement (Smithsonian agreement), and the reliability of the agreement is ultimately The US dollar, which has a decisive influence on the world economy, was kept by guaranteeing convertibility with gold.
However, overwhelming dominance over the world economy of the United States gradually declines due to the economic reconstruction of each country after the war, and the world economy has progressed from the product export and import system to the passing border production system with the progress of information technology, the world economy has been united by strengthening the tie-ups of each country economy.In the those situation, it became difficult to maintain the convertibility of the dollar and gold due to the huge budget deficit due to raising of war expenditure and the trade deficit, at last, in 1971 the cessation of gold conversion was declared. By this dollar conversion stop so called the Nixon Shock, money is finally released with valuable items as itself such as gold, fluctuating exchange rate system is to the mainstream of currency exchange, all the money in the world was in the condition of mutually floating under the management currency system of each country with the independence of each country and international coordination.
In this way, the currency under the controlled currency system that is genuinely completed in each country, although it is unfinished because it is not managed globally, is a debt certificate without interest by the state = central bank , and existence of the debt is substantially in name only. So, it can be said that money is information that functions as a nominal value carrying information or carrier, that is, special information that can not be duplicated, not coexistent at the same time, privately owned, and moved by ownership transfer. Thus, the money has transformed into special information or information carrier based on credit from realistically worth thing or one associated with it.
The first case caused by the transformation of money was the oil shock of 1973 that oil-producing countries unilaterally raised crude oil price, and as a result, cost-up inflation and recession, that is stagflation, occurred naturally once. Although, the developed countries leveraged the economy with having made significant monetary increase by monetary easing etc. enabled by the transformation of currencies, and the money accumulated by the oil producing countries is returned to the developed countries for its operation, after all, it shifted to a new dynamic equilibrium state and it became stable as it was. Thus, it was realistically recognized that if conditions were inevitable to increase currencies, even if money was increased, it would eventually transition to a new financial equilibrium state corresponding to that through a disturbing adjustment process.
5. TRANSFORMATION OF FINANCE
5.1 What is transformation of finance
With the transformation of money like this, it became possible to freely additionally issue the money according to the need at the discretion of the state, so that the main function of money is changed to a function as an operational medium about financial from function as a medium to facilitate the production and distribution of goods, and it became possible to bring financial transformation. In other words, the finance of the times when money was linked to value objects was mainly banking business which is dedicated to lending money acquired as a consideration for the provision of goods and services and saved as necessary funds for large-scale goods and services production under social division of labor. However, in response to the fact that based on the money becoming a debt security of the nation and released from the direct connection with the value object in principle money can be issued endlessly as long as the credibility of the state is secured, financial derivative products intended for risk avoidance of lending and investment bonds and made by full use of IT (information technology including ICT (information and communication technology)), that is, financial products dispersed the risk of credits by securitization of financial receivables, are newly created. Further, by creating such as financial products that hedge the risk of the financial products, the financial assets is increased as self-propagating of financial derivative products that advocate realization of high dividends and low risk by information processing. Thus, the financial system that self-propagates financial assets, in which further increases lending and investment by fueling the economy with increasing of the financial assets, has come to be built.
Insurance systems such as life insurance and medical insurance also operate in this financial system because they are being forced to a situation where initial results of operation can not be obtained if their assets are managed with stable bond investment, moreover deposits and pension fund systems of the general public are also forced to operate in this financial system, and they are inevitably dragged into this financial system and contribute to the promotion of self-growth of the financial system. Furthermore, because the control currency system of each country is independent, foreign exchange between national currencies fluctuates and also fluctuates even with a small disturbance factor, so the exchange rate is greatly and unstably fluctuated due to speculation targeting the fluctuation,so that financial products and financial markets for risk hedging against such speculation will also be enormous.
In this way, based on that money can be supplied and controlled without being directly limited by the real economy because of the transformation of money,the illusion that high return investment is possible at low risk by securitizing the risk using risk management technology of IT is swiftly spread. So, the transformation of finance in that speculation is encouraged by recommending speculation as a safe investment on a large scale to achieve a dramatic expansion of the financial economy is brought and resulted in a cancer and runaway of finance. However, on the other hand, although in principle money can be issued indefinitely due to the transformation of money, the origin of the financial asset which is the existence form of increased currency is in fact in the real economy that actually produces useful goods and services, so financial assets that is built up in enlarged state on the real economy will not be able to operate well unless expansion and growth of real economy are accompanied, and the financial system will collapse
In other words, it can be said that the financial system generated by financial transformation is a virtual system built on top of the real economy linking to it at the bottom, the semi-virtual financial and economic system in this sense has the characteristic that the system propagate virtually in the self-propagating process, on the other hand, once the financial system becomes unstable or collapses, bring a serious effect on the real economy of the bottom that is operated through money, and the entire economy system will fail.
Transformed finance is a self-propagation system of virtual capital on the premise of informationization of money, but eventually it is dependent on the growth of the real economy as a fundamental premise, so unless growth of the real economy accompanies the financial system will result in the collapse.
However, in the domestic economy of advanced capitalist countries, the real economy has matured already and it is impossible to achieve dramatic expansion and growth, so self-growth of the financial system will naturally quickly become stalemate. In other words, due to the progress of information technology, the rate of decline in value of goods in real economy has become much faster and the profit rate for invested capital has drastically decreased. Accordingly, in order to securing capitalistic profits and achieving 'economic growth' indispensable to capitalism, it is necessary to fuel the "economy" by excessive supply of money enabled by the transformation of money, and it is forced to adopt financial policy to expand financial economy. As a result, it becomes to the economic system in that only the financial economy expands with the real economy stagnating, the demand of the economy as a whole eventually does not increase by the majority of wealth is owned by some wealthy bracket drawing the financial economy, and the real economic stagnation will not be solved. Consequently, as a matter of course the above-mentioned financial system will promptly collapse for its runaway condition is subject to constraints from the real economy and repeat the bubble and financial collapse.
On the other hand, however, the capitalist economy is developing globally with the progress of informatization, by means of developing the economies of developing countries with the capital of advanced capitalist countries, it has becoming possible to proliferate financial assets based on the economic growth obtained as its own by co-opting expansion and development of the economies of developing countries, and it is possible to defer bankruptcy for a certain period of time. Thus, it can be said that such financial transformation as described above exists through the development of financial derivative products based on the IT technology developed accompanying informatization of society and globalization, and that is the process of transitioning to information society.
5.2 Historical process of financial transformation
Next, we are looking over the specific historical process that has forced monetary policy to actually push forward the above-mentioned financial transformation. The Ford Keynes system before the Nixon Shock, which had maintained its effectiveness by the restricted administrative currency system under the gold-dollar system and being some extent secured the independence of each country economy, had lost its effectiveness due to the transformation of currency after the Nixon Shock. Seeing more directly, although it was temporarily, extreme inflation and production stagnation was occurred by the cost push inflation due to the sharp and extreme price hikes of crude oil by the Middle Eastern oil-producing countries, which is said to be oil shocks, and speculation taking advantage of it, and by the reduction of production by the lack of production goods due to the export restrictions of oil producing countries and speculation taking advantage of it and the sluggish demand due to high prices, and resulting in stagflation coexisting inflation and the situation of production stagnation due to the fact that Keynes policy did not work effectively to resolve such a situation.
In other words, while progressing the cost push inflation due to oil shocks and production restraint, it was possible to suppress the upsurge in inflation by adopting measures to restraint demand by monetary tightening as a countermeasure against the rapid inflation, however naturally, in order to maintain the economic cycle, restraint of demand can only be tolerated to an extent allowable inflation trends, so production will remain stagnant under inflation. Thus it was caused stagflation leading to high unemployment rates under inflation. Furthermore, even after overcoming the drastic change period right after the oil shock, it was hard to get out completely from the stagflation.
Keynes' policy is force to create demand so as to act directly on the real economy based on the idea that the reason why it is not able to get out the recession is due to the lack of effective demand, and the necessary funds for carrying out the policy are secured by issue of government bonds. However, since directly absorbing of government bonds by the central bank is considered contraindicated from the viewpoint of preventing the occurrence of malicious inflation, money is secured by the absorbing in the market and supplied to real economy. Therefore, it was assumed that money is automatically increased by utilization of money sleeping in the market and credit creation of money accompanying with production expansion due to increase in effective demand, and money stock is not increasing by directly supplying money. The policy is to escape the recession by expanding the economy by circulating the demand increase and production expansion.
However, in general, in the state that the expansion of the financial economy becomes bigger than the expansion of the real economy due to the transformation of money and the financial economy becomes overgrown, once the economy has fallen into recession, it has becoming in the state that a huge amount of credit is damaged and suffering from heavy pressure of excessive debt. Therefor, it can not be in a state where there is sufficient available money stock, so in that state if government bonds is absorbed in the market, the interest rate will rise, and there is no situation in which new investment funds for expansion of production will be supplied. So, even if an effective demand increase policy is implemented, the ripple effect will not be exerted, resulting in so-called crowding out. Thus, only being exhausted and not leading to the revitalization and economic growth of the real economy that actually produces useful goods and services, it was impossible to escape stagflation that maintains a high unemployment rate with stagnating production while under inflation.
Therefore, it was becoming to issue a larger amount of government bonds, and the central bank indirectly increase the money supply amount by indirectly absorbing the government bonds,that is, by banks receiving funds from the central bank and buying the government bonds. But in such a case inflation will rise first before the economy recovers and accelerate inflation. On the other hand, in countries that have policy of monetary restraint as a measure against inflation, recession will become more serious. In this way it got bothered by chronic stagflation. Under these circumstances, based on a idea that as background of stagflation there are factors such as effective demand management policy by the large government of Ford Keynes system, huge fiscal expenditure based on social welfare system, and inflation promoting factor by downward rigidity of wages, a neoliberalism policy was launched to insist policies of economic growth by deregulation, competition promotion and tax cuts to encourage revitalization of corporate activities, and realization of small government by privatization to secure tax reduction funds and welfare reduction.
Under the flag of the neoliberalism, it is also asked a revitalization of corporate activities through deregulation and tax cuts, but it is mainly tried to revive expanding reproduction of capital with expansion of financial economy and stepping up financial transformation by financial liberalization policy, that is, the policy that enables financial transformation by removing the barrier between banks and securities, and by easy monetary policy to promote financial liberalization, that is, policies of increasing the money stock in the market by increasing the monetary base anyway during recession, trying to reduce the interest rate and raise the asset price, and attracting the investment to the financial economy by only increasing the demand due to the increase in asset revenue rather than boosting investment psychology by asset effect and balance sheet effect.
Along with the progress of such financial transformation, by the economic indicators it show that the economy is enjoying favorable conditions. However, on the other hand, by promoting of deregulation and competition relative poverty proceeded in the stratum not directly related to the financial economy, the poverty became progressive by the welfare cutting off, and the economic disparity became large. Further, the economic bubble economy was promoted to draw the poor into the financial economy by sub-prime mortgage and other measures. However, the bubble eventually collapsed, leading to a global financial crisis shown as Lehman Shock.
However, the system that replaces global financial capitalism has not yet been concealed inside the economic society. Regarding to the collapse of the bubble, while relieving and protecting financial capital by injecting public funds of different dimensions in order to prevent further financial collapse, it is trying to control the expansion of finance by strengthening the regulation so as to suppress the runaway as much as possible with keeping financial transformation and suppressing the recurrence of the bubble. However, if restraining financial expansion and bubble growth, renewal of financial capitalism will stagnate and the economy as a whole will become deflationary or stagnant. Thus, the current situation is not a deflation after the collapse of the bubble, but is a chronic stagnation situation due to malfunction of the financial capitalism system, and for this situation it is trying to restore the economy with causing inflation especially asset inflation by further increasing the monetary base by further monetary easing.