Presentation on theme: "Money and Credit. 1. The object and purpose of the course "Money and Credit“ 2. The Money: the necessity and the concept of origin 3. The specific nature."— Presentation transcript:
1. The object and purpose of the course "Money and Credit“ 2. The Money: the necessity and the concept of origin 3. The specific nature of the value of money 4. The development of forms of value 5. Functions of money 2
3 Main definitions: Money Credit Value Consumer value Exchange value Relative value Liquidity Absolute liquidity Barter Commodity Currency ………
4 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.
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». 5 Concepts of money origin Rasionalist Aristotel P. Samuelson Evolutionary А. Smith D. Ricardo K. Marx
6 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.
7 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
8 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; * ………
10 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 Money has a unique feature - connection between present and future Money is the most convenient form of wealth accumulation and storage in a form that requires minimum costs With absolute liquidity, money can be exchanged for other goods
11 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
12 Evolution of money Stage 5: Fiat Currency Stage 6: Creating of a New or Modified Monetary System THE PRESENT THE FUTURE: ELECTRONIC MONEY
14 Medium of exchange. A unit of account. Store of value
15 * 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.
16 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.
17 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.