2.1. Types of money

Money currently exists in the form of cash and non-cash money.

Cash exist in the form of coins, banknotes (credit money, bank notes) and treasury notes.

Sometimes cash also includes checks and plastic cards. However, checks and plastic cards only represent non-cash money in bank accounts. By themselves, they cannot perform all the functions of money and are therefore not cash.

Treasury notes - this is a type of money issued by states (issued mainly in the past by treasuries, hence their name) to cover their expenses (to cover the budget deficit). They did not have gold or commodity backing and were exchanged at the rate compulsorily established by the state. Currently, treasury notes have retained their circulation only in the USA and Belgium.

Treasury bills or “assignats” appeared in Europe and North America in the mid-18th century. In Russia - in 1769 under Catherine II and existed until 1843. In the USSR, treasury notes were issued until 1925.

Banknotes (bank notes, credit money) - This is paper money currently issued by the central banks of the world.

Banknotes appeared in the 17th century. At first, banknotes were issued by almost all commercial banks in the form of bills (debt receipts). For example, in Great Britain the first bankers were jewelers. They discovered that they could generate income by accepting gold and silver for safekeeping and issuing bills of exchange in return. Bankers and, accordingly, their bills enjoyed the trust of citizens, since promissory notes could be exchanged for gold and silver coins at any time. Therefore, over time, bills began to circulate on their own (transferred from one owner to another), representing precious metals. Gold and silver coins, with few exceptions, were kept by bankers for a long time. And bankers began to issue loans with interest. For convenience and to expand the circulation of their bills, bankers began to issue them in a convenient nomination. This is how banknotes appeared.

With the approval of banknotes as reliable representatives of precious metals, i.e. money, banks began to issue loans with their banknotes (hence the name - credit money).

Over time, in all countries, the right to issue banknotes in circulation in order to further increase their reliability passed by law exclusively to central banks. After this, banknotes acquired the function of national and world money.

Currently, the banknote is a perpetual obligation of the central bank, i.e. states. Thus, banknotes have a state guarantee, primarily in the form of all assets of the Central Bank, including the country’s gold and foreign exchange reserves. In addition, the foundation of this guarantee is the GDP (its volume and quality) of the country. Currently, banknotes are not exchanged for gold; they are backed by the assets of the Central Bank, including gold and foreign exchange reserves, as well as indirectly by GDP. Paper money that is not backed by gold reserves is called fiduciary money. And the monetary system is fiduciary. Currently, this includes all banknotes.

The number of banknotes issued is linked to the needs of the economy and the achievements of modern economic science.

Non-cash money are funds in bank accounts (account entries) used for non-cash payments, as well as accounts for payments by checks and plastic cards.

Check- this is a means of receiving cash from a current bank account, a means of circulation and payment for goods, repayment of debt, a means of non-cash payments.

A plastic card- this is a personal document (including electronic) that identifies the owner of a bank account and gives him the right to purchase goods and services in retail without paying in cash, and to receive cash from banks and ATMs.

Checking accounts in banks are money because they can be converted into cash at any time.

In addition, in the literature there is the concept of “almost money” or “quasi-money”. These include assets that can be quickly converted into money and put into circulation. These are savings accounts, time deposits, certificates of deposit and savings certificates, short-term government securities. The concept of “almost money” is vague and not precisely defined. These sometimes include bills of exchange from reliable banks, in particular Sberbank and Vneshtogbank.

The concept of surrogate money is also used in Russian literature. These include unreliable bills of exchange of companies, corporate securities, receivables from banks, etc.

Money is full-fledged money only if it performs all the functions of money.

The reliability and usefulness of money is currently determined mainly by the level of economic development of the country or group of countries (euro) issuing this money.

Non-cash money and non-cash payments are replacing cash and cash payments in all developed countries. In the United States, only a few percent of wage earners are paid in cash.

The advantages of non-cash money and non-cash payments are as follows:

Reducing distribution costs;

Acceleration of cash turnover;

Convenience;

Safety;

Transparency of non-cash payments (it is difficult to hide a payment transaction from the tax authorities).

In Russia, the share of cash circulation is still large and amounts to about one third of the total money circulation. The main reason is a significant sector of the shadow economy (according to various estimates - 25-50%) and the criminalization of the economy. Another reason is the dollarization of the economy. The population made and continues to make payments for large purchases in US dollars and euros. The circulation of cash dollars and euros in Russia is supported by high inflation and significant imports of goods. At the same time, the shadow turnover of foreign currency (share) is gradually decreasing.

Another Russian problem is the widespread use of corporate bills of exchange as money substitutes. In 1997, only 30% of payments were made using money, and the rest using bills. At the beginning of 2004, the volume of bill circulation, according to experts, was approximately the same as cash turnover (as of January 2004, about 1 trillion rubles). This largely determined the 3rd banking crisis of the summer of 2004. A lot of illiquid bills of crisis enterprises circulated. And they were no longer accepted in settlement transactions.

2.2. Monetary aggregates

The presence of different types of money, as well as “almost money,” led to the formation of groupings of money according to the degree of their liquidity.

Monetary groups are called monetary aggregates.

In Russia The following division of monetary aggregates is used.

M0 - cash. The structure of the cash money supply in circulation in the Russian Federation is presented in Table. 2.2.1.

Table 2.2.1. Structure of cash money supply in circulation

	Banknotes
Amount (million rubles)
Number of copies (millions)
Specific gravity by amount (%)
Share of banknotes (%)
Change since January 1, 2004 (million rubles)
Change since 01/01/2004 (%)
Source: Bank of Russia

M1 = M0 + settlement and current accounts + demand deposits = cash + non-cash money.

M2 = M1 + time deposits of enterprises and households in banks. The monetary aggregate M2 is called the money supply.

The monetary aggregate M2, as defined by the Bank of Russia, represents the volume of cash in circulation (outside banks) and balances in national currency in the accounts of non-financial organizations and individuals who are residents of the Russian Federation . Changes in monetary aggregates M0, M1 and M2 in 2000-05. are presented in table. 2.2.2.

Table 2.2.2. Dynamics of money supply in the Russian Federation

Money supply M2
including:
cash M0
non-cash funds M1

Source: Federal State Statistics Service

Continuation of the table. 2.2.2. Dynamics of money supply (M2), at the beginning of the year

	Money supply (M2) billion rubles	Including		Specific gravity MO to M2, %
		cash outside the banking system (MO), billion rubles	non-cash facilities, billion rubles

Money is a developing economic category. Since their inception, they have undergone significant changes, which is manifested in the transition from the use of some types of money to others, as well as in changes in the conditions of their functioning and in an increase in their role. The evolution of commodity production and the increase in the intensity of exchange led to the separation of natural (real) money from the total commodity mass as a universal equivalent. Their material basis was metallic money and, above all, gold (Fig. 1.2).

Natural (material) money, often referred to as real money, include all types of goods that were universal equivalents in the initial stages of the development of commodity circulation (livestock, grain, furs, etc.), as well as money made from precious metals (gold and silver bars and coins). Their characteristic feature is that they could exist not only as money, but also as a commodity. The nominal value of this type of money corresponded to its real value (the cost of gold, silver, etc.).

Fig.1.2. Main types of money

Metal money existed first in the form of ingots of a certain weight, and then coins. The use of natural money (including gold) as a universal equivalent had a number of significant advantages.

Natural money had its own value as a commodity. Therefore, at that time, a situation of discrepancy between the volume of money supply and the volume of goods and services on the market could not arise. If there was a surplus of money on the market, then gold and silver coins went out of circulation and became treasures. On the contrary, with an increase in the need for cash in circulation, gold coins were freely returned to circulation from the treasure. Thus, silver and gold coins showed the ability to adapt quite flexibly to the needs of circulation without prejudice to the owners of the money.

Silver and gold money having its own value, were not subject to depreciation. However, among the features of this money, in comparison with other equivalents (cattle, furs, grain), it can be noted homogeneity of the monetary material, its divisionbridge, safety from damage. Besides limited gold productionthat and silver was an obstacle to the uncontrolled emission of money, andthat means inflation.

The noted advantages of gold and silver money led to the fact that by the beginning of the 20th century. was established in industrialized countries of the world golden monetarism, in which the leading role belonged to gold, and silver was considered a less valuable metal. It was usually used to mint change coins, which were characterized by higher circulation and erasure rates.

Gold circulation existed in the world until the First World War, when the warring countries, to cover their expenses, began to issue symbolic money in the form of various signs of value and substitutes for natural (real) money.

The emergence of symbolic money was caused by a number of objective reasons:

Firstly, gold mining did not keep up with the pace of expanded reproduction of goods and did not meet the full need for money;

Secondly, gold monometallism did not have the necessary level of elasticity. Gold circulation proved unable to expand and contract rapidly;

Thirdly, gold money is not able to service low-value trade turnover.

The possibilities for using gold money were limited. There was a need to replace them initially paper, and then credit as a higher form of development of the monetary system.

Paper money and various metal value signs are representatives of real money (Table 1.1). Historically, they emerged as substitutes for circulating gold coins. The objective possibility of circulation of paper and other symbolic money is due to the fact that money, as a universal equivalent, is a fleeting intermediary in the exchange of goods. In this regard, paper money and various coins (made of copper, aluminum and other metals) appear when, in frequently repeated transactions, the direct presence of the precious metals themselves becomes unnecessary. Relying on the strength of state power, it becomes possible to replace gold and silver in circulation with signs of value, first at the level of individual states, and then in world trade.

It should be emphasized that the nominal value of symbolic money is significantly higher than the cost of the material from which it is made. Consequently, the highest value of paper money lies precisely in its use for its intended purpose, and not in any other capacity. To ensure the introduction of paper money, they were initially issued by the state along with gold money and could be exchanged for precious metal at par at any time.

With the development of credit relations, with the implementation of purchase and sale with installment payments, credit money . They arose and operate along with gold money in the form of appropriately executed papers (banknotes, checks, bills) and entries in deposit accounts in banks. Credit money, being symbolic money, requires a state guarantee for its effective functioning. This guarantee is provided due to the presence of regulations and legislative acts regulating the procedure for the issuance and circulation of bills and banknotes, as well as rules and procedures for performing deposit transactions.

Table 1.1

Some characteristic features of high-grade coins and paper money

Gold and silver high-grade coins	Paper money
Real money	Representatives of real money
The face value of coins (marked on them) corresponds to the real value of the metal from which they are made	Issued by the state (treasury) and endowed with a forced circulation rate
Arose as a result of the historical development of commodity production	They appeared as substitutes for gold coins in circulation. The objective possibility of circulation of paper money is due to the fact that money, as a universal equivalent, is a fleeting intermediary in the exchange of goods
They are a measure of the value of all goods and are not subject to depreciation: excess money leaves the sphere of circulation, turning into treasures, and if there is a shortage, it is returned back	They act as signs of value: there is no mechanism for automatically removing them from circulation, which invariably leads to their depreciation
The limited production of gold and silver is an obstacle to the uncontrolled emission of money	The growth of the country's budget deficit causes an expansion in the issue of paper money. Its size depends on the state’s need for financial resources

During the formation of credit money, one state guarantee for its strength and stability was clearly not enough. For a long time, credit money existed on the basis of gold money and next to it, taking on an increasingly large part of the turnover of goods and capital. With the development of commodity-money relations, the essence of credit money undergoes significant changes. Under the dominance of capital, credit money does not express the relationship between goods on the market (T-D-T at ), and the ratio of money capital (D-T-D X ).

Features of credit money is that their release into circulation is usually linked to the actual needs of circulation. This involves the implementation of credit operations in connection with the actual processes of production and sales of products. This feature represents the most important advantage of credit money over paper money.

The main types of credit money: bill, banknote, bank deposits, check, electronic money, plastic cards, etc.

Bill of exchange is a written obligation of the debtor (promissory note) or an order from the creditor to the debtor (bill of exchange, often called a draft) to pay the amount indicated on it after a certain period of time to the creditor or a third party. Promissory notes and bills of exchange are a type of commercial bill. In addition to this there are also:

financial bills, i.e. debt obligations arising from the lending of a certain amount of money. Their variety is treasury bills, for which the debtor is the state;

"friendly" bills, which are issued for the purpose of mutual settlement during their subsequent accounting in the bank;

inflated bills, reflecting debt obligations that do not have real collateral.

Banknote - this is a debt obligation of a bank that has permission from the state to issue money. The appearance of banknotes was associated with the need to replace a debt obligation in the form of a commercial bill with a bill issued by a bank. Unlike a bill of exchange, a banknote, as a type of cash, is endowed with the ability to carry out an act of immediate payment, including in fractional parts. Over time, the assignment of the monopoly right to issue banknotes to the issuing (central) banks gave the banknotes a state guarantee.

Modern banknotes, although they are not exchangeable for gold, retain a commodity (credit) basis in a certain form. At the same time, because they are not redeemable for gold, they fall under the laws of paper money circulation. This is evidenced by the content of the bill portfolio of the central (national) bank, which is increasingly filled with government (treasury) obligations.

Bank deposits − deposits in banks for storing funds and securities of legal entities and individuals on a contractual basis. Deposits are the source of the formation of the loan fund of banks, used for issuing loans, carrying out factoring operations, making investments, etc.

Important in their meaning and consequences of the use of bank deposits are non-cash money . Their movement is recorded in credit institutions by recording in the accounts of participants in settlement transactions without the use of cash. The expanding use of such money is due to a number of its advantages, which include, first of all, a reduction in the costs of money circulation by reducing the costs of printing banknotes, sending them, counting them, and protecting them. Preventing the possibility of theft of banknotes is of considerable importance. A feature of non-cash money is that in transactions using it, the circulation of cash is replaced by credit transactions.

Checks − This is a written order from the owner of the current account to the bank to pay a certain amount of money to the check holder or to transfer it to another current account. The economic essence of a check is that it serves as a means of obtaining cash at a bank and acts as a means of circulation and payment through non-cash payments. Depending on the purpose, there are two types of checks: settlement and cash.

Monetary systems for a long time combined the functioning of a metal system consisting of gold in the form of bullion and coins, and a credit money system consisting of bills, checks, banknotes, deposit accounts in banks, etc. Gold played the role of a guarantor of preservation of value, in which the mechanism of communication and interaction of two systems (metal and credit) was ensured through the exchange of banknotes and deposits for gold. In cases where the credit system failed to cope with its tasks, especially during periods of crisis, gold came to the fore as a reliable guarantor of value. However, the role of gold as money is gradually being exhausted and it is being replaced from monetary circulation by credit money.

First, gold is forced out of domestic economic circulation, and then from international payments. Mechanization and automation of banking operations, the transition to the widespread use of personal computers led to the emergence of new methods of debt repayment using electronic money.

Electronic money − These are funds recorded in the computer memory accounts of banks. They are managed using special electronic devices. Such a system, according to many economists, represents a transition to a qualitatively new stage in the evolution of monetary circulation. In particular, the introduction of computers into banking contributes to the replacement of checks with plastic cards. Their use allows you to do without cash and opens up the opportunity for their owners to obtain a short-term loan from banks.

In addition to non-cash cash turnover, which occurs on the basis of replacing the movement of cash with credit transactions, in economic practice there are the so-called money of account, which do not make a turnover, but are used in mutual settlements. When making payments by offsetting mutual claims V in the amount of the counted amount, the money of account functions, but does not circulate. A similar use of money also occurs when barter is used, when the cost of mutual supplies is counted and only after that the unset amount is repaid.

Despite the features inherent in non-cash money, they have many common features with cash. This is manifested, first of all, in the same monetary unit of cash and non-cash money. The close connection between these types of money is expressed in the transformation of one into another. For example, cash, when deposited into any bank account, turns into non-cash money. And vice versa, when receiving funds from a current bank account, non-cash money turns into cash. The unity of these types of money is also manifested in the fact that the regulation of the volume of money in non-cash circulation and the mass of cash is carried out through credit operations.

In this article we will look at what types of money there are, what their essence is, look at some examples, and also trace the evolution of types of money.

Main types of money

Globally, there are two main types of money:

1. Real money, i.e. money, the nominal value of which corresponds to its real (intrinsic) value. An example of this type of money is money in the form of gold bars and coins (see). The vast majority of monetary systems of early eras functioned on the basis of real money (see).
2. Fiat money, i.e. money, the real value of which, as a rule, is significantly lower than its face value. For example, the cost of producing a 100 dollar bill is less than 10 cents. Fiat money is the basis of all modern monetary systems.

Money arose at a certain stage of the development of society (see), when in the commodity exchange process a certain intermediary commodity emerged, which began to serve as a universal measure or, so to speak, an equivalent to the value of the goods being exchanged. This is how the historically earliest type of money arose - commodity money.

Commodity money

In different historical eras and among different peoples, various goods and objects acted as money (i.e., intermediary goods): livestock, grain, salt, tea, tobacco, jewelry, arrowheads and spears, and there were also completely “exotic” objects , for example, Cowrie shells, etc. At a higher level of development of our civilization, the above items were replaced by precious metals - mainly gold and silver.

Commodity money(they are also quite often called real money, natural money, real money or real money) - this is a type of money, the role of which is a certain product that has an internal value and has a certain utility. Therefore, such a product can be used both as money and directly as a product (according to its main purpose). For example, salt could be used both as money (for carrying out barter transactions) and as a product for personal consumption - direct consumption, salting meat, curing hides, etc.

As exchange developed, the role of money was assigned to one commodity—precious metals (gold and silver). This was due to their physical and chemical properties, such as:

• portability (light weight contains great value - unlike, for example, salt);
• transportability (ease of transportation - unlike tea);
• divisibility (dividing a gold bar into two parts does not lead to a loss of value - unlike livestock);
• comparability (two gold bars of the same weight have the same value - unlike furs);
• recognition (gold and silver are easy to distinguish from other metals);
• relative rarity (which provides noble metals with a fairly high value);
• wear resistance (noble metals do not corrode and do not lose their value over time - unlike furs, leather, shells).

Based on precious metals, different types of monetary systems existed in different countries:

• (when only one metal was used as money - either gold or silver);
• (when both metals were used as money).

At first, precious metals were used in the form of ingots. Servicing the exchange required constant weighing and dividing of ingots. Therefore, in the 7th century BC. In ancient Rome, in the temple of the goddess Coin, ingots began to be given a flat shape, the weight of the metal was set, and a portrait of the ruler was minted. This is how the first coins and monetary circulation based on coins appeared.

Although commodity money has long gone out of use, at the moment, under certain conditions, some goods continue to perform the functions of money. For example, in prisons, prisoners have such goods as cigarettes; in places of military operations, weapons and ammunition can be used as money; in times of severe economic crises, sugar, salt, tea, matches, etc.

Commodity money went out of circulation due to the fact that it had a number of shortcomings. Typically this is:

• non-portable (not compact): took up a lot of space (large volume) - inconvenient for storage;
• heavy – inconvenient for transportation;
• indivisible (for example, live cattle);
• deteriorate during storage;
• too expensive to manufacture (since the real value of money (goods) must correspond to the nominal value, otherwise such a product will not be able to perform the functions of money);
• insufficient amount of money (goods) to meet the needs of the country's economy as production and the level of economic development grow.

Currently, investment coins made of precious metals, which have the force of legal tender within the country, can act as commodity money.

Rice. Types of money

Secured money

Secured money– evolutionarily the next type of money after commodity money. Secured money (also called change money, representative money) is money, the role of which is tokens or certificates that can be exchanged upon presentation for a fixed amount of a certain product or commodity money, for example, gold or silver. In fact, backed money is a representative of commodity money.

The emergence of secured money was primarily due to ease of use - convenience and greater safety of transportation, the absence of real damage and abrasion of gold during the circulation process.

It is believed that the first secured money appeared in Ancient Sumer, where figurines of sheep and goats made of baked clay were used for payment. These figurines could be exchanged upon presentation for live sheep and goats.

Credit money arises with the development of commodity production, when purchases and sales are carried out in installments (on credit). Their appearance is associated with where they act as an obligation that must be repaid on time.

A feature of credit money is that its release into circulation is linked to the actual needs of circulation. The loan is issued against collateral, which is certain types of inventory, and repayment of loans occurs when the balance of valuables decreases. Thanks to this, it is possible to link the volume of means of payment provided to borrowers with the actual need for money turnover.

Credit money does not have its own value; it is a symbolic expression of the value contained in an equivalent product. They are usually released into circulation by banks when performing credit operations. Credit money has gone through the following development path: bill of exchange, accepted bill of exchange, banknote, check, electronic money, credit cards.

There is another system for classifying money: cash And non-cash.

It is believed that this is historically the very first type of exchange equivalent. At different times, different peoples could use shells, domestic animals and their skins, and some standard valuables, such as spear tips, as money. At a higher level of development of civilization, gold and silver coins became such an equivalent. Commodity money is inconvenient for frequent circulation, as it is too heavy, indivisible, or deteriorates during storage. But most importantly, they are too expensive to manufacture. After all, the cost of their production must correspond to their face value, otherwise natural money will not perform the function of an ideal product, acting as an equivalent to the value of other goods. At the same time, as the economy develops, the need for money increases, which makes the state's monetary system too expensive. The cost of money in such an economy is always comparable to the size of GDP, that is, too many resources are directed not to the production of goods and services, but to the production of money, which reduces the overall production potential of the country.

Currently, commodity money is used as a store of value and for collections (buyment coin).

Secondly, secured, or representative money. These include banknotes that can be exchanged for a particular amount of the underlying real asset: gold, silver. Their appearance was primarily due to ease of use - convenience and greater safety of transportation, the absence of real damage and abrasion of gold during circulation, etc.

However, today, after the abolition of the gold standard, banknotes are no longer guaranteed in exchange for a fixed commodity and have become symbolic money, retaining the same name.

Thirdly, the so-called fiat, or symbolic money. These are modern banknotes. They are issued by central banks. The value of this money is determined by its quality, that is, how it performs its functions and the extent to which it is recognized as a means of payment by participants in economic processes. Fiat money actually has no intrinsic value, but acquires it due to the fact that it performs its functions. And besides, their value is based on the fact that the state recognizes them as legal tender on its territory and accepts them as payment of taxes.

The issuance of fiat money allows for two types of income: seigniorage and inflation tax. Seigniorage is profit due to the difference in price between the cost of manufactured money and its market, exchange value. Inflation tax is income received by a bank of issue or government by issuing additional money to finance its expenses. These actions cause inflation, which is why it is customary to call such profits inflationary.

It should be noted that, in addition to banknotes and coins, fiat money includes non-cash money in bank accounts, as well as electronic money.

Fourthly, modern economic science identifies credit money as a separate group.

There is another system for classifying money: cash and non-cash. Moreover, cash usually includes not only banknotes and treasury notes, but also such credit money as bills, checks and banknotes. Non-cash money includes entries in bank accounts, including payment plastic cards, credit plastic cards and electronic money.

Today, Russian rubles, like the main world currencies, are fiat money. The volume of money in circulation is usually called the money supply.

In Russia, monetary circulation and the issue of money are regulated by Article 75 of the Constitution of the Russian Federation, according to which “the monetary unit in the Russian Federation is the ruble. Money issuance is carried out exclusively by the Bank of Russia. The introduction and issue of other money in the Russian Federation is not allowed.”

Money surrounds people everywhere. This is a specific product that serves as an equivalent for assessing the value of other goods and services. Absolutely everything can be exchanged for money. This is the only object that is created in order to get rid of it sooner or later. A kind of financial asset is used to carry out purchase and sale transactions. It is impossible to imagine life in a civilized society without money. But once upon a time they did not exist at all.

When did money circulation begin?

Money in its classical form arose spontaneously. Even in ancient times, commodity circulation existed. People exchanged things and food. When a surplus of goods arose, a need arose for a special asset that, when put into circulation, could be exchanged for one or another product. Money became such an asset. The main functions of money are precisely circulation for the purpose of exchanging goods between consumers.

Since ancient times, the main property of money has been considered absolute liquidity. They can be fully exchanged for a product or service. At different times and in different countries, precious metals, feathers, cocoa beans, and livestock were used as money. Only over time did it become clear to people that it was better to make money with a constant weight and in a certain shape. Thus, coins familiar to many arose. The metal was most suitable for making a financial asset. It was easy to process and had good wear-resistant characteristics. The types and functions of money have changed over time. But their form has been preserved from ancient times. These are round coins or paper products.

The very first coins that were used as financial assets appeared in China in the 17th century BC. Money was made from an alloy of silver and gold. The functions of money were to exchange them for goods and services. Thus, barter was replaced by financial turnover. Paper money appeared much later, also in China. After all, it was in this country that paper first appeared. The first money was in the form of receipts for precious metals and stones, which were handed over to special shops for storage.

The essence of money

Money is the main component of the economy of any society. Financial relations between representatives of individual countries could not be established without a special asset. The wealth of an individual or society as a whole is expressed by money. The essence and functions of money are closely related. The basic nature of financial assets is that they can be used to assess the quality and demand for a particular product or service.

Today money is the universal equivalent. With the help of barter, of course, you can get the necessary goods. But it will not be possible to accumulate assets. It is no coincidence that money circulation appeared in ancient times, from which the division of society into classes began. It is money that divides people into poor and rich. The types and functions of money determine the development of the society in which it circulates.

In a market economy, money and its functions are constantly changing. Exchange rates depend on events that occur in a particular society, natural disasters. One type of money can strengthen or fall in relation to another type. Despite this, the scope of use of money is increasing every year. New types of financial assets are emerging. A striking example would be electronic money, with which you can pay for the same goods and services or increase your capital.

Main types of money

All types of money can be divided into two large subgroups. These are commodity finance and symbolic. The more specific types and functions of money may depend on the society in which it circulates. Based on the fact that they arose due to the need for commodity exchange, the main type is commodity finance. Money is a commodity that can evaluate the value of all other goods and services. For a long time, precious stones and metals were used as commodity money due to their properties.

Today, full-fledged money is used, the value of which fully corresponds to the actual value of the metal. Metal coins are produced in various denominations. This makes it much easier to pay for a particular product. The coin has established external characteristics. Money is made in a certain shape, with a specific design.

Trade money also includes paper money. The types and functions of money in this format are no different from coins. They were created with the aim of saving metal. Paper is much cheaper. But in modern society, it is almost impossible to counterfeit paper banknotes. They are manufactured in a special way by state enterprises. The highest quality dyes and paper are used. The difference between the real and nominal value of paper money is huge. Thanks to this, the share premium of the state treasury is generated. Money can cover the budget deficit.

Paper financial assets have a special economic nature. They are almost always unstable. There cannot be a permanent fixed exchange rate. The issue of money is not regulated by trade turnover. This is why inflation occurs.

Credit money

The total volume of services received, contracts and obligations concluded is all credit money. The essence, functions, types of this financial asset are determined by the agreement of the two parties. In any case, the essence of the loan is to return the money with interest. Credit finance can be issued in the form of banknotes, electronic money, bills or checks.

It is worth highlighting credit cards separately. They represent the key to the bank account where the money is located. The essence and functions of this type of money are the same as those of other types of credit finance. The only difference is that the loan agreement is drawn up one-time. It is possible to withdraw money from the account an unlimited number of times within the limit provided by the bank. The only thing you need to do is make the monthly minimum payment.

Money as a measure of value

Money is today the only instrument of economic relations in any society. The functions of financial assets cannot be implemented without the participation of people. By setting prices, the cost of a product or service is determined. Simply put, price is the value of a certain object in monetary terms.

Money performs the ideal function of a measure of value. In the modern world, banknotes of various denominations are issued. Thanks to this, you can set the most accurate price for a particular product. Under these conditions, barter loses its relevance.

At the same time, the function of circulation of money as a measure of value is performed virtually. After all, in order to determine the cost of a product and put a price tag on it, real financial resources are not needed. The seller sets the price independently, in his own mind. Likewise, in order to find out the cost of a product or service, it is not at all necessary to have real money on hand. All you need to do is study the price tag or price list.

Measuring the cost of various services and goods can be compared to measuring distance in meters. The monetary unit acts as a scale. In this way, the value of individual resources, services and benefits is determined. Prices in a particular market can be influenced by a huge number of contracts for the sale of goods and the provision of services. The more the demand for a particular economic object grows, the faster its value increases. It turns out that the main functions of money are closely related. The functioning of financial assets as a measure of value cannot be carried out without real money turnover. At the same time, money acts not only as a means of circulation, but also in the form of a means of payment.

Functions of money as a medium of exchange

Only real money can be used as a medium of exchange. The functions of money include the simultaneous circulation of goods and financial assets. The seller receives monetary assets, and the buyer at the same time becomes the owner of the desired product. In this case, the transaction is considered genuine only if the relevant documents are available. When purchasing real estate or expensive objects, a purchase and sale agreement is concluded. In stores with small goods, checks are used.

In the global economy, all functions of money are important. The means of circulation must be sold. If the seller does not use the proceeds to enter into an agreement with another commodity owner, the money will lose its value. Crisis phenomena in the economy are generated by a break in the purchase and sale chain. It was the inability to realize the function of money as a means of circulation that became the impetus for the emergence of paper funds. The amount of money did not meet the need for financial circulation. In this regard, history knows many cases of serious economic crises. In order for the function of a medium of exchange to be realized in full force, each product must be assigned a value equivalent to the weight part of a particular precious metal.

Metal coins perform the function of money more correctly as a means of circulation. It is worth considering that today the metal used to make coins is not of the highest quality. Money is erased and loses its original weight. In order for the function of money to continue to function correctly, low-quality coins must be disposed of promptly.

Money is a means of payment

For most people who do not understand economic nuances, money serves as a payment function in the first place. However, the buyer does not necessarily have to pay for the goods immediately. The function will be implemented even if a loan agreement is drawn up. There are often cases when the goods have already been paid for, but the owner cannot yet use them (custom-made furniture). In this case, money also acts as a means of payment. To pay taxes, rent, and salaries, employees also need financial resources. This is where the functions of money are expressed. The means of payment can be either real or virtual. Electronic money has recently become increasingly popular. People purchase goods via the Internet and pay for services through special services. At the same time, it is not at all necessary to have a certain amount of money in your wallet. The main thing is that a bank account is opened.

Another possibility of an economic crisis is associated with the function of money as a means of payment. This has become especially true with the development of the credit sector. It often happens that the payer does not have funds at the end of the loan agreement. He cannot meet his financial obligations. At the same time, many commodity owners buy goods from each other on credit. The insolvency of one economic entity leads to the insolvency of another. A striking example is banking institutions. If one customer fails to repay the loan, the financial institution will not be able to return the deposit funds to the other customer.

Money as a store of value

Financial assets that are not involved in circulation and are not used as payments can become the object of accumulation and increase in wealth. People have understood the functions of money since ancient times. But it was not always possible to implement them correctly. While accumulating wealth, many simply devalued money. Inflation, economic crisis, war can cause great wealth to lose its value.

Saving money at home is not practical. In ancient times, people kept treasures and gold coins in chests. Thus, the money lay motionless and was withdrawn from commodity circulation. It was not possible to increase wealth in this way. The one who does not keep money, but puts it into economic circulation, does the right thing. A smart entrepreneur who spends a certain amount on developing his business only increases his money. The functions of money as a means of accumulation are fully realized.

The accumulation of money today is a prerequisite for the development of any production. At the same time, the state functions normally, inflation does not hit the pockets of citizens. All money and its functions are closely interconnected. Finance - as a means of circulation - can simultaneously act as a means of accumulation. The main thing is to approach the issue of saving money wisely.

What is world money?

The country's development is impossible without international economic relations. All heads of state must understand what functions money performs. Moreover, each individual country can have its own currency. On the world market, many monetary units are losing their power. If a state does not have high economic development, its currency will not be in demand.

In the international market, the currencies of individual developed countries (US dollar) are most often used. In addition, artificially created currencies may be used. A prominent representative is the euro. World money and its functions are closely related to finances that operate within a particular state. The only difference is that money circulation occurs at the international level. In the international market, not only individual states, but also private organizations and structures can act as sellers and buyers.

Modern monetary system

Today, paper money is widely used. The functions of money determine the degree of development of a particular state. If they are fully implemented, an economic crisis can be avoided.

Modern paper money has its own distinctive features. First of all, this is the abolition of the gold content. Paper cannot act as an equivalent to precious metal. Gold left the international settlement system.

Over the past few decades, the monetary system has been characterized by a decrease in cash capital and an increase in the amount of electronic money. At the same time, gold today practically no longer fulfills its monetary functions.

Whatever functions of money are provided for, they are necessarily regulated by the relevant government body. The financial condition of the country as a whole and its position in the international market depend on its work.