What Is Real Capital?

Actual capital is also called real capital, physical capital, etc., and refers to the capital held by the enterprise that functions as a plant, machinery, raw materials, etc., including various means of production and production tools, various products, commodities and current assets , Financial commerce capital, and so on. It is the first form of existence of capital. It is derived from the corresponding virtual capital.

Real capital

The natural and primitive form of capital is actual capital, but when the economy develops to a certain stage, virtual capital is derived. Virtual capital is generated based on real capital, and it is a derived form of real capital. Therefore, in the qualitative relationship between virtual and real capital, real capital is the first and virtual capital is the second. It has a basic and content determinant role, while virtual capital has a derivative and formal counteraction to real capital. The qualitative relationship between virtual and real capital is the first basic issue facing the regulation of total social capital.

Fictitious capital itself has no value, it is only a certificate of ownership of the capital, indicating that it has the right to gain. Virtual capital is called virtual capital because it can exist and add value away from actual capital. Therefore, virtual capital should be a financial asset that does not have a direct relationship with the company's production and operation activities. However, virtual capital also has a close relationship with actual capital, and the stock price of the secondary market directly reflects the company's performance.

Positive interaction between virtual and real capital

On the one hand, the healthy development of real capital will promote the healthy development of virtual capital. The added value created and realized by real capital is the basis for the existence and development of virtual capital. The healthier the development of real capital, the more the value created and realized by it will increase, the more solid the foundation for the existence and development of virtual capital, and the virtual capital. Only healthy development can be guaranteed. On the other hand, the healthy development of virtual capital will in turn promote the healthy development of real capital. Virtual capital with liquidity and convenience is a guide to promote the efficient and reasonable allocation of real capital. It guides the flow of real capital to the place where the most value can be multiplied. The more healthy the development of virtual capital, the more liquidity it can guide the rational allocation of real capital To promote the healthy development of real capital. For example, in the United States in the 1990s, on the one hand, its real capital successfully realized a strategic transformation with intangible intellectual capital as its core, and its ability to increase the value of its real capital was greatly enhanced, thereby supporting the healthy development of its virtual capital. On the other hand, the healthy development of American virtual capital, in turn, successfully attracted and guided the flow of real capital to the place where the most value can be multipliedknowledge capital, thereby promoting the United States to achieve a strategic transformation with knowledge capital as its core. The positive interaction between American virtual and real capital in the 1990s promoted the prosperity of the entire society and economy.

Vicious interaction between virtual and real capital

On the one hand, the abnormal development of real capital will hinder the development of virtual capital. The more malformed the development of real capital, the less and sometimes negative value added it creates and realizes, so the basis for the existence and development of virtual capital will become smaller and smaller, and its development will naturally be hindered. On the other hand, the abnormal development of virtual capital will in turn hinder the development of real capital. Virtual capital with abnormal liquidity and convenience is a guide to invalid deformed allocation of real capital. It guides the flow of real capital to places where it is not possible to add value to the value but is most likely to extract excess profits-super monopoly capital, hype non-production capital, etc. The more deformed the development of virtual capital, the more convenient its liquidity will be to guide the flow of real capital to places where effective value cannot be multiplied, thereby hindering the development of real capital. For example, the East Asian economies in the mid-to-late 1990s, on the one hand, their real capital has a low knowledge content, irrational structure, and uneconomical scale. The value appreciation of real capital has been greatly reduced, sometimes even negative, so that their virtual capital exists and develops The foundation of the company is getting smaller and smaller, which eventually leads to the serious obstruction of its virtual capital development. On the other hand, the abnormal development of its virtual capital in turn leads to the invalid allocation of real capital, thereby hindering the development of real capital. The vicious interaction of virtual and real capital in East Asian economies in the mid-to-late 1990s eventually led to the East Asian economic crisis.

Virtual capital also has a close relationship with actual capital, and the stock price of the secondary market directly reflects the company's performance.

The positive effects are "voting with your feet", allotment or additional sponsorship to monitor and motivate.

The negative effect is: on a micro level, the cash flow of an enterprise is subject to the financial management level of the enterprise on a micro level. In developed economies, the financial activities of enterprises are also involved in the operation of virtual capital on a large scale at the same time. The purpose is to manage liquidity and reasonably allocate returns and risks through virtual capital transactions. However, once the operation is improper, such as buying stocks with a large loss, it will affect the actual production of the enterprise.

Further from a macro perspective, the financial system is often linked to the real economy through the financial activities of the enterprise, which in turn affects the total cash flow of the society; in addition, the excessive growth of virtual capital and related transactions continue to swell, becoming farther and farther away from actual capital Form a bubble economy. The definition of the 1992 White Paper on the Japanese Economy states that "actual stock prices and land prices will skyrocket beyond the basic conditions and theoretical prices of the economy, and a bubble economy will emerge." Therefore, the essence of a bubble economy is an inflation of asset prices that deviates from the basic economic conditions.