Sustainable Energy and Economics in an Aging Population by Kozo Torasan Mayumi

Author:Kozo Torasan Mayumi
Language: eng
Format: epub
ISBN: 9783030432256
Publisher: Springer International Publishing

5. Capital Interest, the Financial Sector and Debt Expansion: Toward a More Sustainable and Equitable World Order

Kozo Torasan Mayumi1

(1)The Kyoto College of Graduate Studies for Informatics, Kyoto, Japan

Kozo Torasan Mayumi

Email: [email protected]

5.1 Introduction

Capital is a form of purchasing power exchangeable for money. So, capital interest is related to money interest, as it was discussed in Chap. 4. Yet, capital interest rate is usually higher than the money interest rate . The gap between the two interest rates is related to investment uncertainty and to the expansion of production scale and capacity, expansion due to the superiority of fossil fuels and monetary systems. Unified treatment of capital and money paves the way towards discussing four important topics that are not touched upon in Chap. 4. Those topics are: (i) the role, for their balance sheets, of the expanding financial sectors of Sony , Toyota and Honda; (ii) the dubious role of the International Monetary Fund and the World Bank in terms of their economic development strategy for poor countries; (iii) the ratio of external debt to national income for each of a set of selected countries caught in debt trap ; and (iv) the Macleod-Soddy-Allais (MSA) relation and its grave implication for the world economic system—presently trapped with a status of running solvency .

Section 5.2 discusses the origins of capital interest. There are three additional factors for the case of capital interest , namely: the biophysical factor, the monetary factor and the anticipatory factor. None of those factors can be attributed to the case of the origin of money interest. Section 5.2 also reexamines five theories of capital interest and proposes an alternative new theory of capital interest .

Section 5.3 first introduces F. Knight’s analysis of uncertainty . The four forms of uncertainty , related to perception, modelling of the future, effect and implementation, are discussed in relation to the forward-looking character of humans—the key element of investment activity. The four forms of uncertainty are examined in terms of perspectives for lenders and borrowers of capital associated with the anticipatory, biophysical and monetary factors that influence capital interest .

The steady growth of the financial and insurance sector is a highly conspicuous trend in developed society, in particular, post-World War II. In relation to that trend, Sect. 5.4 examines the balance-sheet of three representative producers, i.e. Sony , Toyota and Honda. It is perhaps not well known that the operating income of each of those three companies derives mainly from their respective financial divisions. For example, Sony is involved in the business of life insurance , non-life insurance and banking . Similarly, car loans, car lease contracts and auto insurances are typically arranged by automobile manufacturers, such as Toyota . The balance sheet status of each of the three representative producers assessed is discussed in Sect. 5.4 in relation to the quantitative easing policy of the Bank of Japan, a policy which began 2013 and was accompanied by an increase in monetary base .

Section 5.5 discusses the role of the World Bank and

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