Перекладена на англійську лекція по темі Money and banking (гроші і банківська справа), the role of banks (роль банків), modern banking (сучасна банківська система )

Банківська справа

MONEY AND BANKING

(ГРОШІ І БАНКІВСЬКА СПРАВА)

Money and its Funсtions. Гроші, їх функції.

Although the crucial feature of money is its acceptance as the means ofpayment оr medium of exchange, money has other functions. It serves as astandard of-value, a unit of account, a store of value and ft a standard ofdeferred payment. We discuss each of the functions of money in turn.

The Medium of Exchange. Засіб обігу.

Money, the medium of exchange, is used in one-half of almost аЦexchange. Workers exchange labour services for money. People buy and sellgoods in exchange for money. We accept money not to consume it directly butbecause 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 abarter economy.

A barter economy has no medium of exchange. Goods are traded directlyor swapped for other goods.

In a barter economy, the seller and the buyer each must want somethingthe 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 servicethat the cinema manager wants. There has to be a double coincidence ofwants. You have to find a cinema where the manager wants what you have tooffer in exchange.

Trading is very expensive in a barter economy. People must spend a totof time and effort finding others with whom they can make mutuallysatisfactory swaps. Since time and effort are scarce resources, a bartereconomy is wasteful. The use of monеу - any commodity generally accepted inpayment for goods, services, and debts - makes the trading process simplerand more efficient.

Other Functions of Моnеу. Інші функції грошей

Money can also serve as a standard of value. Society considers itconvenient to use a monetary unit to determine relative costs of differentgoods 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 usuallyconvenient to use the units in which the medium of exchange is measured asthe unit of account as well. However there are exceptions. During the rapid
German inflation of 1922 - 1923 when prices in marks were changing veryquickly, German shopkeepers found it more convenient to use dollars as theunit of account. Prices were quoted in dollars even though payment was madein 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 inthe future.

To be accepted in exchange, money has to be a store of value. Nobodywould accept money as payment for goods supplied today if the money wasgoing to be worthless when they tried to buy goods with it tomorrow. Butmoney is neither the only nor necessarily the best store of value. Houses,stamp collections, and interest-bearing bank accounts all serve as storesof value. Since money pays no interest and its real purchasing power iseroded by inflation, there are almost certainly better ways to store value.

Finally, money serves as a standard of deferred payment or a unit ofaccount over time. When you borrow, the amount to be repaid next year ismeasured in pounds sterling or in some other hard currency. Althoughconvenient, this is not an essential function of money. UK citizens can getbank 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 notinvariably, convenient to make money the unit of account and standard ofdeferred payment as well.

Different Kinds of Money. Різні види грошей

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 money.

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 - засіб платежу medium of exchange - засіб обігу a standard of value - міра вартості a unit of account - одиниця обліку a store of value - засіб заощадження (збереження вартості) a standard of deferred payment - засіб погашення боргу subsequently - згодом a barter economy - бартерна економіка to swap (also swop; syn. to exchange, to barter ) - обмінювати, міняти to hand over in exchange - передати, вручити в обмін a double coincidence of wants - подвійне збіг потреб a monetary unit - грошова одиниця to remind of - нагадувати to be worthless - знецінюватися an interest-bearing bank account - рахунок в банку з виплатою відсотків to pay interest - приносити процентний дохід to erode - зд. фактично зменшувати hard currency - тверда (конвертована) валюта soft currency - неконвертована валюта invariably - незмінно, постійно prisoner-of-war camp - табір військовополонених commodity money - гроші - товар token money - символічні гроші (грошові знаки) inch - дюйм (дорівнює 2, 5 см) to melt down - розплавити tiny costs - мізерні витрати legal tender - законний платіжний засіб to supplement - доповнювати

IOU money - I owe you - я вам повинен; гроші - боргове зобов'язання a bad deposit - внесок в банку

THE ROLE OF BANKS (РОЛЬ БАНКІВ)

The following story is going to explain the role of banks. In the pastmost societies used different objects as money. Some of these were valuablebecause they were rare and beautiful, others-because they could be eatenor used. Early forms of money like these were used to buy goods. They werealso used to pay for marriages, fines and debts. But although everydayobjects were extremely practical kinds of cash in many ways, they had somedisadvantages, too. For example, it was difficult to measure their valueaccurately, divide some of them into a-wide range of amounts, keep some ofthem for a long time, use them to make financial plans for the future. Forreasons 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 itwith goldsmiths, people who worked with gold for jewellery and so on andalso had a guarded vault to keep it safe in. equity is usually referred to asstockholders 'equity or shareholders' equity. It is shown as the totalvalue of its stock, plus retained earnings that have accumulated to date.

By moving the above three terms algebraically, we obtain the standardform of the accounting equation:

Assets = liabilities + owners 'equity

(The assets are equal to the liabilities plus the owners' equity)

3. A BALANCE SHEET

A balance sheet (or statement of financial position), is a summary of afirm's assets, liabilities, and owners 'equity accounts at a particulartime, showing the various money amounts that enter into the accountingequation. The balance sheet must demonstrate that the accounting equationdoes indeed balance. That is, it must show that the firm's assets are equalto its liabilities plus its owners 'equity. The balance sheet is preparedat least once a year. Most firms also have balance sheets prepared semi -annually, quarterly, or monthly.

4. AN INCOME STATEMENT

An income statement is a summary of a firm's revenues and expensesduring a specified accounting period. The income statement is sometimescalled the statement of income and expenses. It may be prepared monthly,quarterly, semiannually, or annually. An income statement covering theprevious year must be included in a corporation's annual report to itsstockholders.

5. THE IMPORTANCE OF THE ABOVE TWO STATEMENTS

The information contained in these two financial statements becomesmore important when it is compared with corresponding information forprevious years, for competitors, and for the industry in which the firmoperates. A number of financial ratios can also be computed from thisinformation. These ratios provide a picture of the firm's profitability,its short-term financial position, its activity in the area of accountsreceivables and inventory, and its long-term debt financing. Like theinformation on the firm's financial statements, the ratios can and shouldbe compared with those of past accounting periods, those of competitors,and those representing the average of the industry as a whole.

Vocabulary

1. General Definition of Accounting

3. A Balance Sheet