Market (i.e. Economy’s) Equity of Market Economics (i.e. Marketism)

Market Equity[1] is the value built in assets[2] by the level of market development. Market Equity (i.e. Eq) decreases with rising Lending Interest Rate (i.e. LIR), whereas Market Entropy increases with rising Lending Interest Rate (i.e. LIR).




Market (i.e. economy’s) entropy of Market Economics (i.e. Marketism)

Market (i.e. economy’s) entropy of Market Economics (i.e. Marketism)

The technological improvements in manufacturing, international trade and communications i.e. rapid Globalization and rising Productivity have established global market (i.e. economic) allowances for expanding business activities into not-necessary-industrial related market sectors without prompting Inflation (called by the Marketism – “market entropy”). The entropy is unpredictable business activities succeeded in a market (i.e. economy), which could be invoked by “natural” to the market competition agents i.e. businesses and investors, or “artificial” to the market competition i.e. governmental interventions, or a combination of both. However, if mostly artificial to a market (i.e. economic) competition market tools have used the possibilities for market redundancies or shortages and therefore market volatility and instability if high entropy is achieved is probable, e.g. the governments’ ineptness in handling market (i.e. economy) is well observed. The probabilities for governmentally run economies to bring market distortion are high. However, the trickle-down economics of the priory Capitalism has exhausted its strength to spur enough business activity for supporting adequate market development (i.e. economic growth) for employment and fiscal reserves. The transnational corporations and big investors are favored by the “shady” business laws and practices, fiscal brakes, lack of international transparency, weak intellectual property laws, e.g. whereas they cannot prompt and maintain enough business to respond to the global demand for such. The appointed globalization and productivity growth in combination with China’s industrialization have tipped off the market possibilities for the expansion of manufacturing internationally to the point needed to prompt and maintain global development: the productivity and investment considered as the only market (i.e. economic) carriers for global development under this current condition underperforms greatly. Moreover, the Earth pollution and exhaustion of resources are two factors that additionally load the system because of the necessities for quite expensive environmental protection and the rising natural resources prices. Thus becomes natural for the governments to get involved in markets (i.e. economies) by using stimulus packages, keeping low-interest rates, pouring liquidity, e.g. and unorthodox tools such as quantitative easing all in prevention from a total economic breakup or to prompt business activity, low rate lending, and subsidies to promote environmental protection. However, the pinned to tight-budget politicized economics of oligopolies and monopolistic competition has weak transmissionability to the bottom market that the real business activity is needed to balance the market demand in natural for the market competition. The Small and Medium Enterprises & Investors (SME&I) are those that could enhance and diversify such business activity into unpredictable and uncontrollable directions, i.e. entropy, but the unfair market competition does not allow SME&I natural for the market expansion: the shady business environment is weakening the market security.

Named after Boltzmann’s H-theorem, Shannon denoted the entropy H of a discrete random variable X with possible values {x1, …, xn} and probability mass function P(X) as,


Here E is the expected value operator, and I is the information content of X.[8][9] I(X) is itself a random variable.

Joshua Ioji Konov, 2013

How the Middle Class, Small and Medium Businesses and Investors can benefit from the ongoing Globalization

September, 19 2010

As a natural continuation of a number of articles of mine explaining the effects of the ongoing Globalization on different segments of the markets, is to extract the possible ways to prompt economic development into these new conditions of concentration of industrial production by a few countries: China, the US, Japan, Germany and the new comers India, Vietnam, Brazil, that concentration supported by ever rising Productivity prompted by high technologies and open marketplace creates economic conditions unknown by its Fiscal shortages to many countries, markets. In such conditions the most affected groups are the Middle Class, the Small to Medium Businesses and Investors who are in the foundation of any country’s economy mass employment and high standard of life. Thus, to deal with shortages of industrial jobs and shortages of business opportunities for these “little guys” a new improved system of economics should conceptualize these new developments, recommend and implement the necessary changes to allow the economy to develop under these new conditions. In the Past so called Capitalism and its “trickle-down” Economics succeeded massively in building such economies and markets as the US and Japanese in which rapid and consistent economic growth continued in cases like the US for Centuries; when even interrupted by short recessions the Capitalism always worked out its ways to bring more prosperity by establishing the Middle Class of a plentiful market demand. In Japan, because of  better organization and excessive workforce discipline supported by high education these forces of “trickle-down” Capitalism worked well but in a short term, because since the early Nineties the Deflation and overcapacity has become very difficult and sometime contra-productive indeed, however the Japanese Government has taken and is still taking very precise measures to keep the Japanese market and economy working by pouring Monetary Quantities and by subsidizing exporters, by supporting SMB and the Middle Class, and by keeping the Yen in lower values. What the Japanese have discovered for a long time is that the Capitalism cannot adjust the market Supply-to-Demand balance without Governmental interference, and they learn it well.

However, because of its huge economy and marketplace well developed the US with a few drastic and more technical exceptions like the Great Depression 1929-32 the US never experienced the powerful force of the industrial overcapacity until the time of China entering TWO and of China incredible industrialization and economic growth, and mostly until the last “Great” Recession hit it like a brick, then the US Government started acting by pouring stimulus packages and interfering into finances and business along. The US is very lucky to get decisive and quickly moving administration, because the forces of Economic Upheaval were and are so great that if the Administration did not act so promptly the economic consequences from the incredible Real Estate overcapitalization and overcapacity that provoked huge loss of equity and value in the financial institutions could have been fundamental.

Anyway, what is happening to the US and it could be said to the World already was experienced by Japan starting in the early Nineties for which the reason and the consequences are quite similar, the problem is that Japan was a single very well developed economy with incredible industrial production that could not find enough marketplace, enough market demand to support it, when the US is the marketplace that started losing its strength of Demand because of losing industrial jobs, losing its Middle Class, loosing its Small and Medium Business and Investors ability to access Return on Invested Capital. The system of Capitalism is well based on Industrial Production as a main source for GDP and the following Fiscal Reserves. The system of Capitalism is well working machine promoting Big Money, Big Business and Globalization that works for them: shady business practices supported by lack of personal liability, lack of business laws of contracting, bonding, advertising, high interest rate lending that brings the Capital to a very few, deregulated financial and commodity exchanges that does not allow anyone but them getting to the money.

Small and Medium Businesses and Investors and the Middle Class in such an business environment were well enough when the marketplace was a pro supply, high demand marketplace and thus how 40% of the Global consumption was succeeded by the US, at the same said when the marketplace started lacking demand and the supply went to be on a second place prompted by overcapacity and exodus of industrial production to China that tipped off the demand instead of supply, the economics of trickle-down Capitalism could not anymore provide the economic instruments and economic conditions to deal with such new developments. The Real Estate overcapitalization that brought the last Recession of 2007-2009 was a result of the lack of business opportunities for the Small and Medium Business and Investors that represent the Middle Class, and overall the Recession was prompted by the money coming from them, therefore to deal with or prevent from Recessions, overcapitalizations and lack of Demand an improved economics should be used to maintain the Middle Class, but such could not be succeeded if the foundations of  “trickle-down” pro Demand Capitalism is still ruling.

The rules of the game are to change of practicing Economics and Governments from supporting and promoting Big Business and Big Investors’ concentration of capital to supporting and promoting Small and Medium Business and Investors, and the Middle Class, but for such change of approaches are necessary to change the fundamentals of business laws, contracting, bonding, personal liability of corporate structures and etc. that actions would enhance these entities to stand in courts against their big brothers, and overall will make them more “lend-able”, “finance-able”, the regulated Market Exchanges system would allow these entities to benefit from the ongoing Globalization too.

 However, some additional programs Social, Infrastructural, Financial are needed too that can help maintaining some “Demand-to-Supply” Market Balance nationally and globally by including the Middle Class into the action.
© Joshua Konov,2010