Transcript Money and Credit

Money and Credit
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The object and purpose of the course "Money and Credit“
The Money: the necessity and the concept of origin
The specific nature of the value of money
The development of forms of value
Functions of money
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Main definitions:
 Money
 Credit
 Value
 Consumer value
 Exchange value
 Relative value
 Liquidity
 Absolute liquidity
 Barter
 Commodity
 Currency
 ………
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The subject of the course "Money and Credit" is a
detailed description of the basic categories of the theory
of money and credit, banking.
Course description - give to the future specialists
knowledge of the nature and mechanism of functioning of
categories such as money, credit, money market interest;
form the theoretical and methodological base for the next
practice of the use of monetary instruments, as well as
the ability to evaluate and analyze the monetary policy
conducted in the country.
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The Money: the necessity and the concept of
origin.
Typical features of money:
* «product of goods» for each commodity that shows its value in
money;
* Money - a specific product that acts as the general equivalent;
* the main subject» in a market economy;
* «market language».
Concepts of money origin
Evolutionary
Rasionalist
Aristotel
P. Samuelson
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А. Smith
D. Ricardo
K. Marx
Objective arguments of money appearance:
*it is the market causes the objective need of money,
which the state should be considered;
*market imposes stringent requirements for carrier of
monetary functions, and the state should choose the
carrier that is able to fully meet these requirements;
*amount of money in circulation is determined by
objective laws that should be considered by the State in
its regulatory activities.
Money are not decreed by the state, but are caused
by the actual market economy. The role of
government is not the determine, but to correct
their creation.
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The exchange value - the ability to exchange goods for other
goods in certain proportions and quantitative comparisons
them.
Money - a general equivalent of all other goods, that they are
a means of expressing value.
Money - specific product.
Essential features of a specific commodity - MONEY
Money is not able to directly
meet any physical or spiritual
needs of people, but only
indirectly - through the
purchase of ordinary goods
and services
Having the ability to share in
any value, money converted
into an abstract medium
value, in absolute liquidity as
an abstract value or wealth
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Liquidity is defined as:
* the use of certain assets as a means of payment;
* the ability of the asset to preserve their nominal value
unchanged.
Absolute liquidity - the ability to instantly share asset to any
good.
Portfolio approach:
* Cash;
* Securities;
* Real estate;
* ………
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Characteristics of money
* Recognizability;
* Durability;
* Homogeneity;
* Divisibility;
* Portability;
* Cost effectiveness.
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The money is a commodity that has its own intrinsic value at
its inception and development of market relations.
Current money (bills or check deposits) have relative value.
Modern monetary theory comes from the fact that the relative
value of money is connected with the characteristics of their
economic utility.
The economic utility of money
With absolute liquidity, money can be exchanged for other
goods
Money is the most convenient form of wealth accumulation
and storage in a form that requires minimum costs
Money has a unique feature - connection between present and
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Evolution of money
Stage 1: The Barter System
Stage 2: Commodity Money
9000 - 6000 B.C.: CATTLE
1200 B.C.: COWRIE SHELLS
1000 B.C.: FIRST METAL MONEY AND COINS
500 B.C.: MODERN COINAGE
118 B.C.: LEATHER MONEY
A.D. 800 - 900: THE NOSE
Stage 3: Currency Debasement
806: PAPER CURRENCY
Stage 4: Metal Money
1816: THE GOLD STANDARD
1930: END OF THE GOLD STANDARD
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Evolution of money
Stage 5: Fiat Currency
Stage 6: Creating of a New or Modified Monetary System
THE PRESENT
THE FUTURE: ELECTRONIC MONEY
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Simple form of value
C1 – C2
C3 – C4
C2 – C3
CX – CY
Connected with barter exchange of commodities of different consumer values
C2
Expanded form of value
C3
C1
C4
CX
C2
General form of value
C3
C1
C4
CX
C2
Monetary form of value
C3
M
C4
CX
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Appertain on a higher
development of division of
labor.
The exchange is regular.
One commodity, which is
systematically exchanged
on others, becomes the
general equivalent.
Other commodities are
equal to it.
The commodity of C1 in
general form of value has
characteristics of
monetary unit.
Medium of exchange.
A unit of account.
Store of value
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* The most important job of money is to serve as a medium of
exchange
– When any good or service is purchased, people use money
– Money makes it easier to buy and sell because money is universally
accepted
– Money, then, provides us with a shortcut in doing business
* By acting as a medium of exchange, money performs its most
important function
* Money facilitates exchange by reducing the cost of trading.
* Without money, we would have to barter.
* Money does not have to have any inherent value to function as a
medium of exchange.
* All that is necessary is that everyone believes that other people
will exchange it for their goods.
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Money serves as a common measure of value in terms of
which the value of all goods and services is measured and
expressed. By acting as a common denominator or
numeraire, money has provided a language of economic
communication. It has made transactions easy and
simplified the problem of measuring and comparing the
prices of goods and services in the market. Prices are but
values expressed in terms of money.
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The standard of deferred payments is the thing of value in
which, by the law or by contract, the amount of a debt is
expressed. A credit transaction is a lengthened exchange; one
party fulfils his part of the contract, the other party promises
to give an equivalent at a later date.
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