The money supply in circulation is presented in two forms. Valid are coins and banknotes. For such money, the nominal value (indicated on them) corresponds to the real one. Let us consider in more detail the functions and properties of money.
Coins
The form of money of this kind was different. At first it was piece, then - weight. Coins of later periods possessed distinctive features established by law. The most convenient form of money made of metal is round. Initially, silver and gold coins were used. The latter moved in the 2nd half of the 19th century. Making money from gold was due to the characteristics of this metal. They allowed the coins to fit their purpose. The main properties of money from metals are that they have their own value and are not subject to depreciation. Gold coins are considered a fairly flexible financial instrument. They can adapt to existing conditions without prejudice to their owners. When a country has a lot of money from gold, that is, their number exceeds the real need for it, they are sent to the reserve. In case of increasing need for them, the coins are returned and again begin to be used. In such conditions, it is not necessary to regulate the amount of money by any special measures, as is the case with banknotes, for example. However, there are disadvantages. They consist of the following factors:
- Gold mining did not keep up with the release of goods. In this regard, the complete need for money was not provided.
- Highly portable coins could not be used in shallow circulation.
- Gold money is much more expensive than paper money.
Banknotes
Russian paper money appeared to replace gold coins. The difference between the nominal price and the value of the issue form the emission profit of the treasury. She acts as a significant element of state revenue. Banknotes were issued simultaneously with gold coins, gradually displacing the latter from circulation. With the advent and development of the budget, emissions expanded. Its value was determined by the state need for money. The issuance of banknotes is not regulated by the needs of trade. There is no automatic mechanism for withdrawing them to reserves. In this regard, the stability of money cannot be ensured.
Depreciation
When a country has a lot of money out of paper, it can linger "on hand" regardless of the turnover. As a result, they overwhelm the circulation channels and begin to depreciate. This occurs for the following reasons:
- Excess government output.
- Decrease in confidence in the issuer.
- Unfavorable correlation between export and import.
The basic property of banknotes is that they are signs of value and are issued by the state to close the budget deficit. As a rule, they are not exchanged for gold and are endowed with a forced exchange rate.
Credit signs
They appeared with the beginning of the development of commodity production, in conditions when the implementation was carried out in installments (on credit). Their occurrence was determined by the implementation of the function and property of money as a means of payment. They act as an obligation that must be repaid on a specific date. The economic purpose of banknotes is:
- Reflection of the need for cash turnover.
- Saving valid value marks.
- Promoting the development of cashless movement of funds.
The banknote represents the credit money of Russia. They are issued by the Central Bank to carry out the relevant operations of loans and loans in the framework of various business processes. By providing a loan, a banking organization can allocate its own funds to a borrower. At the end of the period of use of the loan, they are repayable to repay the debt.
Distinctive features
Paper money and classic banknotes differ:
- By the method of emission. Paper money is issued by the Ministry of Finance, and banknotes by the Central Bank.
- The purpose of the introduction into circulation. Paper money is intended to finance the budget deficit, banknotes - business transactions.
- The specifics of the release. Banknotes are put into circulation in connection with credit procedures that are carried out in conjunction with the actual production and sales processes, paper signs are sent into circulation without this binding.
In the event of a communication failure, credit funds lose their advantages and acquire the general properties of money. In such cases, they turn into paper cost signs.
Money properties
Signs of value act as the universal equivalent. They have a complex of three characteristics:
- Direct exchange. This means that any product can be exchanged directly for finance.
- An independent form of exchange value. The price of various products takes on a uniform expression in the article of one product.
- External proprietary form of labor. All or part of the effort has a financial dimension.
Direct exchange
It is believed that this is the main property of money. It manifests itself in the process of exchange of goods or their implementation. Part of the population’s finances turns into different products, as a rule, personal necessities. At the same time, funds that are intended to compensate for the costs of production and its expansion cannot be used to purchase items that satisfy personal needs. Nevertheless, in both cases the main property of money is manifested - direct exchange for services and goods.
Exchange value
A manifestation of this property of money is that in the production process the labor contained in the product is equated by comparing its price with the signs of value. Goods are expressed through exchange rates (prices). At the same time, money is the universal equivalent. They have a certain independence of movement. Funds can accumulate in savings, participate in the maintenance of economic relations between one or another specific person. At the same time, the properties of money do not allow them to turn into absolute wealth. This is due to the fact that the movement of labor costs does not in all cases act as the real price of production. For example, given the cost of fixed capital, one should take into account inflationary trends that affect redistribution processes.
Social work
The external material form of labor consists in the fact that when equated with money, products express and measure the work contained in them in terms of value. In traditional cases, this measure from the standpoint of quality is the purchase value of the goods. From a quantitative point of view, the volume of production is considered.
Appointment
The properties of money allow you to use them to:
- Accounting for the costs of in-kind materialized labor.
- Comparisons of social and individual production activities.
- Comparison of planned and actual costs.
Summarizing these functions, we can say that money is used to provide control over the measure of labor and consumption, assess financial, industrial and economic activities in the enterprise, accounting, statistics, analysis. A specific feature of the performance of these tasks is the ideal use of funds.
Pricing
It is carried out in several directions. According to the main ones, in determining the price of products, the decisive role belongs to the indicators of costs and utility. In the framework of this trend, the formation of value is carried out due to equating it with money. The second direction was considered by Marx. He attached great importance to the function of money as a cost measure. Marx believed that signs act as the equivalent of the price of production. The third area involves the use of money in pricing due to their ability to be a means of payment.
Domestic concept
In Russia, the following is considered the most common direction in the development of the task of money as a cost measure:
- Pricing of goods without the use of financial resources is not possible.
- Price acts as a monetary expression of value - the value of the product.
- Market indicators have upper and lower limits of deviation. This can be represented as equalities: lower threshold = cost + income, upper threshold = profit + demand.
- Deviation allows you to redistribute the national product between different spheres and sectors of the population.
- The process of determining the price takes into account the usefulness of the goods, production costs, the degree of solvent demand and the cost of complementary and interconnected products.
Specificity
The price scale is a special current element of the system. Within the framework of the gold coin standard, the value of a certain weight unit of metal is formed. The prices of all products are tied to the gold content in the currency. The cost scale is based on the cost of living. Along with this, an inverse relationship is established. They determine the scale of prices solely for consumer goods. In a transition economy, all these concepts are not interconnected and are multilevel.
Score
The use of money as a means of counting is characteristic of a developed market economy. In such conditions, the established prices act as a mentally perfect operation based on traditions. Changes in the financial system in the form of monetary reform, structural adjustment of the economy, and denominations do not change this function. In these cases, the price scale is adjusted.
Means of turnover
In terms of circulation, money is considered an exchange intermediary in the process of simultaneous movement of services and goods. This task is necessarily performed by real signs, but not in all cases complete. The purpose of this function is as follows:
- Elimination of the qualitative and quantitative limits characteristic of barter.
- Ensuring the realization of financial income in accordance with labor costs.
- Participation in the distribution and redistribution of GDP.
In the event of negative phenomena, money that does not fulfill this function activates the naturalization of exchange. This, in turn, leads to the emergence of a shadow economy.
Problems
When violations occur in the financial system (for example, with hyperinflation, lack of signs "on hand"), the purpose of money acting as a means of circulation is curtailed. This, in turn, provokes the development of barter, netting. Surrogates, pseudo-money appear, the shadow economy is increasing. This situation leads to a decrease in budget payments, non-payment of transfers, lower solvency of citizens, aggregate supply and demand.
Means of accumulation
This function concerns the turnover of gold or banknotes with one hundred percent security. Realizing this task, financial assets act as a factor in macroeconomic equilibrium. In modern conditions, this function is associated with the absolute liquidity of money. Unlike another asset, the owner is in any case able to pay off his obligations. In addition, funds can save cost. This property is manifested in the ability to use the appropriate price purchased today to pay for products in the future.
Prerequisites for Accumulation
The growth of citizens' savings is due to:
- Increase in population income.
- A change in the structure of consumer demand in the direction of consumer goods.
- The desire to create conditions for the continuation of familiar life after disability.
- The desire to eliminate the contradictions between consumption and income of young people (in this case, the savings are directed to the maintenance of children).
Types of Savings
Savings may be of a credit nature. In this case, the funds are stored in banking and other financial institutions. This type of savings is consistent with market conditions, since credit institutions accept available funds, redistributing them in economic interests. Thesaurus (savings in cash) does not have public significance. The development of this form provokes the paradoxes of frugality. At the same time, the state loses control over the distribution of financial flows. Money, performing the function of accumulation, affects solvent demand, changes its dynamics, affects its distribution depending on population groups and its volume.
Instrument of payment
When money performs the function of a medium of circulation, its movement occurs simultaneously with the movement of products. If the task of the payment instrument is realized, a time gap is created. The mismatch of the movement of money and goods is considered a feature of this function. Its implementation is associated with various obligations and the need to repay them. Money as a means of payment is used for:
- Payroll, accrual of pensions.
- Repayment of loans and interest.
- Making tax, transfer payments.
- Making insurance premiums.
- The implementation of judicial and administrative decisions.
Among the features of this function, it should be noted:
- The independence of the movement of funds not related to the movement of products.
- The participation of various cash forms - cash / non-cash - as real finance.
- Possibility of participation of defective funds.
- Failure to fulfill the task may provoke the likelihood of an increase in the non-payment crisis.
World finance
Money is involved in international circulation. The use of them by different states and foreign nationals (non-residents and residents) makes them global means. Finances that serve international economic relations are called currencies. Money acts as a universal equivalent with absolute liquidity. World funds are used to cover the balance of payments deficit in the framework of international exchange. Today, contracts in foreign markets are in dollars. This currency has the highest liquidity and convertibility.
