MONEY AND BANKING
(ДЕНЬГИ И БАНКОВСКОЕ ДЕЛО)
Money and its Funсtions. Деньги, их функции.
Although the crucial feature of money is its acceptance as the means of
payment оr medium of exchange, money has other functions. It serves as a
standard of-value, a unit of account, a store of value and ft a standard of
deferred payment. We discuss each of the functions of money in turn.
The Medium of Exchange. Средство обращения.
Money, the medium of exchange, is used in one-half of almost аЦ
exchange. Workers exchange labour services for money. People buy and sell
goods in exchange for money. We accept money not to consume it directly but
because it can subsequently be used to pay things we do wish to consume.
Money is the medium through, which people exchange goods and services.
To see that society benefits from a medium of exchange, imagine a
barter economy.
A barter economy has no medium of exchange. Goods are traded directly
or swapped for other goods.
In a barter economy, the seller and the buyer each must want something
the other has to offer. Each person is simultaneously a seller and a buyer.
In order to see a film, you must hand over in exchange a good or service
that the cinema manager wants. There has to be a double coincidence of
wants. You have to find a cinema where the manager wants what you have to
offer in exchange.
Trading is very expensive in a barter economy. People must spend a tot
of time and effort finding others with whom they can make mutually
satisfactory swaps. Since time and effort are scarce resources, a barter
economy is wasteful. The use of monеу - any commodity generally accepted in
payment for goods, services, and debts - makes the trading process simpler
and more efficient.
Other Functions of Моnеу. Другие функции денег
Money can also serve as a standard of value. Society considers it
convenient to use a monetary unit to determine relative costs of different
goods and services. In this function money appears as the unit of account,
is the unit in which prices are quoted and accounts are kept.
In Russia prices are quoted in roubles; in Britain, in pounds sterling;
in the USA, in US dollars; in France, in French francs. It is usually
convenient to use the units in which the medium of exchange is measured as
the unit of account as well. However there are exceptions. During the rapid
German inflation of 1922 - 1923 when prices in marks were changing very
quickly, German shopkeepers found it more convenient to use dollars as the
unit of account. Prices were quoted in dollars even though payment was made
in marks, the German medium of exchange.
The situation in Russia nowadays reminds of that of in Germany.
Money is a store of value because it can be used to make purchases in
the future.
To be accepted in exchange, money has to be a store of value. Nobody
would accept money as payment for goods supplied today if the money was
going to be worthless when they tried to buy goods with it tomorrow. But
money is neither the only nor necessarily the best store of value. Houses,
stamp collections, and interest-bearing bank accounts all serve as stores
of value. Since money pays no interest and its real purchasing power is
eroded by inflation, there are almost certainly better ways to store value.
Finally, money serves as a standard of deferred payment or a unit of
account over time. When you borrow, the amount to be repaid next year is
measured in pounds sterling or in some other hard currency. Although
convenient, this is not an essential function of money. UK citizens can get
bank loans specifying in dollars the amount that must be repaid next year.
Thus the key feature of money is its use as a medium of exchange. For this,
it must act as a store of value as well. And it is usually, though not
invariably, convenient to make money the unit of account and standard of
deferred payment as well.
Different Kinds of Money. Различные виды денег
In prisoner-of-war camps, cigarettes served as money. In the 19th
century money was mainly gold and silver coins. These are examples of
commodity money, ordinary goods with industrial uses (gold) and consumption
uses (cigarettes), which also serve as a medium of exchange. To use a
commodity money, society must either cut back on other uses of that
commodity or devote scarce resources to producing additional quantities of
the commodity. But there are less expensive ways for society to produce
money.
A token money is a means of payment whose value or purchasing power as
money greatly exceeds its cost of production or value in uses other than as
A $10 note, is worth far more as money than as a 3 x 6 inch piece of
high-quality paper. Similarly, the monetary value of most coins exceeds the
amount you would get by melting them down and selling off the metals they
contain. By collectively agreeing to use token money, society economizes on
the scarce resources required to produce money as a medium of exchange.
Since the manufacturing costs are tiny, why doesn't everyone make $10
notes?
The essential condition for the survival of token money is the
restriction of the right to supply it. Private production is illegal:
Society enforces the use of token money by making it legal tender. The
law says it must be accepted as a means of payment.
In modern economies, token money is supplemented by IOU money.
An IOU money is a medium of exchange based on the debt of a private
firm or individual.
A bank deposit is IOU money because it is a debt of the bank. When you
have a bank deposit the bank owes you money. You can write a cheque to
yourself or a third party and the bank is obliged to pay whenever the
cheque is presented. Bank deposits are a medium of exchange because they
are generally accepted as payment.
VOCABULARY NOTES
the means of payment - средство платежа
medium of exchange - средство обращения
a standard of value - мера стоимости
a unit of account - единица учета
a store of value - средство сбережения (сохранения стоимости)
a standard of deferred payment - средство погашения долга
subsequently - впоследствии
a barter economy - бартерная экономика
to swap (also swop; syn. to exchange, to barter) - обменивать, менять
to hand over in exchange - передать, вручить в обмен
a double coincidence of wants - двойное совпадение потребностей
a monetary unit - денежная единица
to remind of - напоминать
to be worthless - обесцениваться
an interest-bearing bank account - счет в банке с выплатой процентов
to pay interest - приносить процентный доход
to erode - зд. фактически уменьшать
hard currency - твердая (конвертируемая) валюта
soft currency - неконвертируемая валюта
invariably - неизменно, постоянно
prisoner-of-war camp - лагерь военнопленных
commodity money - деньги - товар
token money - символические деньги (дензнаки)
inch - дюйм (равен 2,5 см)
to melt down - расплавить
tiny costs - мизерные затраты
legal tender - законное платежное средство
to supplement - дополнять
IOU money - I owe you - я вам должен; деньги - долговое обязательство
a bad deposit - вклад в банке
THE ROLE OF BANKS (РОЛЬ БАНКОВ)
The following story is going to explain the role of banks. In the past
most societies used different objects as money. Some of these were valuable
because they were rare and beautiful, others- because they could be eaten
or used. Early forms of money like these were used to buy goods. They were
also used to pay for marriages, fines and debts. But although everyday
objects were extremely practical kinds of cash in many ways, they had some
disadvantages, too. For example, it was difficult to measure their value
accurately, divide some of them into a -wide range of amounts, keep some of
them for a long time, use them to make financial plans for the future. For
reasons such as these, some societies began to use another kind of money,
that is, precious metals.
People used gold, gold bullion, as money. Those were dangerous times,
and people wanted a safe place to keep their gold. So they deposited it
with goldsmiths, people who worked with gold for jewellery and so on and
also had a guarded vault to keep it safe in. And when people wanted some of
their gold to pay for things with, they went and fetched it from the
goldsmith.
Two developments turned these goldsmiths into bankers. The first was
that people found it a lot easier to give the seller a letter than it was
to fetch some gold and then physically hand it over to him. This letter
transferred some of the gold they bad at the goldsmith's to the seller.
This letter we would nowadays call a cheque. And, of course, once these
letters or cheques, became acceptable as a way of paying for goods, people
felt that the gold they had deposited with the goldsmith, was just as good
as gold in their own pockets. And as letters or cheques, were easier to
carry around than gold, and a lot less dangerous, people started to say
that their money holdings were what they had with them plus their deposits.
So a system of deposits was started. The second development was that
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