Amount of money in circulation (outside banking system) is determined using the already familiar equation of the quantity theory of money:
where M is the amount of money in circulation, V is the velocity of circulation of money, which is understood as the number of revolutions that one monetary unit (1 dollar, 1 pound, 1 ruble) makes on average per year, P is the general price level (GDP deflator), Y is real GDP.
The product PY is nominal GDP. The equation shows that given the fact that each monetary unit makes a certain number of revolutions per year, the amount of money in circulation must correspond to the value of GDP at current prices (i.e., nominal GDP). This means that each year there must be enough money in the economy to pay for the value of the GDP produced in that year's prices. It is no coincidence that this equation is also called the equation of exchange or Fisher’s equation (American economist Irving Fisher proposed a mathematical formula for determining the amount of money in circulation, although the quantity theory of money itself was first proposed by Italian economists back in XVII century and received special development in the 18th century in the works of D. Hume and C. Montesquié and in the 19th century in the works of D. Ricardo).
If more money is put into circulation (the money supply increases) or the velocity of money circulation increases, then in order to maintain equality of the right side of the equation to the left side, the price level must increase, and this is nothing more than inflation. The velocity of money circulation (especially in the long term) is a fairly stable value. It may change either due to major technological improvements in banking (for example, the emergence of ATMs led to an increase in the speed of circulation of money), or as a result of government intervention in banking sector, what in developed countries practically not observed, since the central bank, which controls the activities of commercial banks, has
independence from the government.
At small (up to 10%) rates of change in the quantities included in this equation, the following equality can be obtained:
M (%) + UV (%) = UP (%) + DY (%)
The amount of money supply can change quite often. It is regulated by the central bank, which has a monopoly right to issue money. Money emission is the release of additional money into circulation. An increase in the supply of money serves as a factor in stimulating aggregate demand and an important tool for stabilization (countercyclical) policy. Graphically, the growth in the supply of money is depicted by a shift to the right of the aggregate demand curve (Fig. 7-1). However, the consequence of the issue, which follows from the equation of the quantitative theory of money and can be seen on the graph, is inflation. And if in the short term an increase in the price level (from P 1 to P 2) is combined with an increase in production volume (from Y 1 to Y 2) (Fig. 7-1 (a)), therefore, in a recession caused by a reduction in aggregate demand, this measure can be used as an economic stabilizer, then in the long run there is only an increase in the price level (from P 1 to P 2), and the volume of production does not change (Y*) (Fig. 7-1 (b)). The reason for a serious issue is usually the need to finance a large government budget deficit in conditions where other methods of financing are not available, which is typical for developing countries and countries with economies in transition. However, the growth of the money supply does not affect real output, does not lead to economic development, and its consequence is only high inflation, which complicates the economic situation in these countries.
Emissions have a particularly negative impact on the economy in conditions of stagflation (Fig. 7-1 (c)). If the economy is initially at point A, then a reduction in aggregate supply (a leftward shift in the short-run aggregate supply curve from SRAs 1 to SRAs 2) leads to a decrease in output (from Y 1 to Y2) and an increase in the price level (from P 1 to P 2) (point B). An increase in the money supply under these conditions leads to an increase in production volume (for example, a return of the economy to the initial volume of output equal to Y 1), but at the same time increases inflation (an increase in the price level from P 2 to P 3) (point C), namely inflation is main problem in a situation of stagflation. As a result, compared to the initial situation, the increase in the price level will be P 1 - P 3.
Rice. 7-1. The impact of money emission on the economy
Money emission, the impact of money emission on inflation
Emission - issue - emission - release of funds and securities into circulation.
The issue of funds is regulated by law and carried out by the state, which distributes this function between the central bank and the treasury. The Central Bank issues credit money - bank notes (banknotes). The Treasury issues treasury notes and change coins.
The release of banknotes into circulation in all forms leads to an increase in the money supply in circulation. Main forms of emission:
1) issue of credit money - banknotes;
2) deposit - check issue;
3) issue of securities.
According to the Constitution of the Russian Federation, money emission, i.e. The release of money into circulation in the Russian Federation is carried out exclusively by the Central Bank Russian Federation(Clause 1, Article 75). The monetary unit in the Russian Federation is the ruble. The introduction and issue of other money in the Russian Federation is not allowed. The Constitution of the Russian Federation, while entrusting the Bank of Russia with the function of issuing money into circulation, does not limit the powers of the Bank of Russia to any one form of issue. The Bank of Russia issues money in cash and non-cash forms.
The Bank of Russia carries out, in accordance with the procedure established by the legislation of the Russian Federation, the issue into circulation and withdrawal from circulation of banknotes on the territory of the Russian Federation. Non-cash issue of money is carried out in the process of deposit and loan operations. The Bank of Russia regulates cash and non-cash issues by means of monetary policy. The use of money emission directly to finance the state budget deficit of the Russian Federation is prohibited.
In order to limit the ability of commercial banks to carry out deposit emission, the Constitution of the Russian Federation grants the exclusive right to carry out money issue in all its forms to the Bank of Russia. However, in the Federal Law, the monopoly function of the Bank of Russia to issue money is limited only to the issue of cash. Similarly, the function of the Bank of Russia to organize their non-cash circulation is limited and not provided for by current legislation (Article 29 of the Federal Law). Non-cash, like cash, monetary circulation is subject to regulation in federal legislation. But this area of money circulation is not regulated by banking or other legislation. The procedure for issuing non-cash money and organizing its circulation by any government body of the Russian Federation or the Bank of Russia is not defined by law.
Abroad, the issue of money is carried out by central (issuing) banks and treasuries (the former issue credit money - banknotes, the latter - treasury bills and change coins). Deposit-check emission, which serves as the basis for non-cash payments, is carried out by commercial and central banks. The issue of securities (shares and bonds) is carried out by joint-stock companies, as well as the state.
The central (issuing) bank in most countries is owned by the state. But even if the state does not formally own its capital (USA, Italy, Switzerland) or partially owns it (Belgium - 50%, Japan - 55%), the central bank performs the functions of a government body. The Central Bank has a monopoly right to issue banknotes - the main component of the cash supply. It stores official gold and foreign exchange reserves, carries out government policy, regulating the monetary sphere and foreign exchange relations. The Central Bank participates in the management of public debt and provides cash and settlement services to the state budget.
The main passive operation of the central bank and one of the forms of emission is the issue of banknotes, the acceptance of deposits of commercial banks and the treasury, and operations for the formation of equity capital.
1. Fiduciary issue - issue of banknotes, banknotes, unsecured by reserve precious metals(primarily gold) issuing bank. Historically, the issue of banknotes was allowed only if there was a gold reserve, however, this rule was gradually abandoned. Nowadays fiduciary emission is dominant.
The main source of central bank resources in most countries is the issue of banknotes. At the present stage, the issue of banknotes is not backed by gold. Gold backing of banknotes has been abolished, although in some countries it formally continues to operate.
Central bank loans can be credited to commercial bank and treasury accounts maintained at the central bank. In this case, it is not the banknote issue, but the deposit issue of the central bank.
The source of resources for central banks are deposits from the treasury and commercial banks. Commercial banks may place part of their cash reserves in non-interest bearing accounts with central banks, including
mandatory. In a number of countries, required reserves are credited to special accounts, usually interest-free. This procedure applies, in particular, in Russia. Central banks can also open fixed-term fixed-term accounts for commercial banks. interest rate. Typically, the bank's equity capital accounts for no more than 4% of liabilities.
2. Another form of issue is deposit-check issue. Produced by commercial banks and serves as the basis for non-cash payments. In terms of volume, deposit-check emission significantly exceeds the emission of cash.
3. Also one of the forms of issue is the issue of securities.
The procedure for issuing equity securities, unless otherwise provided by the legislation of the Russian Federation, includes the following stages:
The issuer's decision to issue equity securities;
Registration of issue of issue-grade securities;
For the documentary form of issue - production of securities certificates;
Placement of issue-grade securities;
Registration of a report on the results of the issue of securities.
The issue of money can lead to inflation.
Inflation is a crisis state of the monetary system that arose in the middle of the 18th century in connection with the huge production of paper money. The term “inflation” literally means “swelling” and has long been associated with the depreciation of money and rising commodity prices. However, the practice of foreign countries shows that inflation can occur with a relatively stable money supply.
Modern inflation is associated not only with a fall in the purchasing power of money as a result of rising prices, but also with a general unfavorable state economic development countries. It is caused by the contradictions of the production process generated by various factors in the sphere of production and sales, as well as money circulation, credit and finance.
The following factors influence inflation:
Issue of paper money;
The growth of the money supply exceeds production processes;
Rising costs and prices for goods;
Inflationary expectation.
It is necessary to distinguish between internal and external causes of inflation. External - reduction in revenues from foreign trade due to falling fuel prices. Internal ones consist in the lag of consumer industries with a higher development of heavy industry.
There are two types of inflation.
1. Demand inflation. Traditionally, inflation occurs when there is excess demand. The demand for goods is greater than the supply of goods due to the fact that the manufacturing sector is not able to meet the needs of the population. This excess demand causes prices to rise. A lot of money with a small number of goods.
2. Cost inflation. This phenomenon is expressed in rising prices due to rising production costs. Depending on the rate of price growth in the market, inflation is distinguished:
Creeping, with an annual rate of price growth of 3-4%. Such inflation is typical for developed countries, which view it as a stimulating factor;
Galloping, with an average annual rate of price growth of 10-50% (sometimes up to 100%), which prevails in developing countries;
Hyperinflation, with annual rates of price growth exceeding 100%, is characteristic of countries in certain periods when they are experiencing a radical change in their economic structure.
Under the influence of inflation, the economic situation in the country is worsening, because:
Production volume decreases as price fluctuations and increases make production development prospects uncertain;
There is a flow of capital from production to trade and intermediary operations, where the turnover of capital is faster and there is more profit, and it is also easier to evade taxation;
Speculation is expanding as a result of sharp and uneven price changes;
Credit transactions are limited, since no one believes in debt;
The state's financial resources are depreciating.
The main form of stabilization of the monetary system is the anti-inflationary policy of the state through monetary reform and government regulation inflationary process. Currency reform is a complete or partial transformation of the monetary system, carried out by the state with the aim of streamlining and strengthening monetary circulation. It is carried out using various methods (nullification, restoration, devaluation, denomination) depending on economic situation country, the degree of depreciation of money, state policy through the adoption of a one-time legislative act.
Nullification is carried out by canceling the old depreciated monetary currency and introducing a new one.
Restoration involves restoring the previous gold content of the currency and increasing the gold rate.
Devaluation is a decrease in the exchange rate of the national currency in relation to foreign ones.
Revaluation is an increase in the exchange rate of the national currency in relation to foreign ones.
Denomination is a reduction in the face value of the money supply in circulation by exchanging banknotes for new ones in the proportions of their depreciation, i.e. method of crossing out zeros.
Shock therapy is a type of confiscatory monetary reform. It includes the exchange of paper money at a deflationary rate, a complete or partial freeze bank deposits population and entrepreneurs, widespread use of free pricing.
State regulation of the inflation process means a set of government measures aimed at limiting price increases and stabilizing the monetary system through deflationary and income policies.
Deflationary policy includes methods of limiting money demand by reducing government spending, increasing interest rates on loans, increasing tax pressure, and limiting the money supply. But it does not contribute to economic growth. Income policy involves control and complete freezing of prices and wages or setting strict limits on their growth.
The issue of funds is regulated by law and carried out by the state, which distributes this function between the central bank and the treasury. The Central Bank issues credit money - bank notes (banknotes). The Treasury issues treasury notes and change coins.
Emission- emission is the release of funds and securities into circulation.
The concepts of “issue of money” and “issue of money” are ambiguous.
As a result of banks' lending operations, new money comes into circulation. That is why the credit nature of money emission is one of the basic principles of organizing the state’s monetary system.
The release of money into circulation occurs constantly. Non-cash money is issued when commercial banks provide loans to their customers. Cash is released into circulation when, in the process of cash transactions, banks issue it to customers from their cash desks. At the same time, clients repay bank loans and hand over cash to bank operating cash desks. However, the amount of money in circulation may not increase.
Emission refers to the release of money into circulation, which leads to a general increase in the money supply in circulation. There is the issue of non-cash and cash money (the latter is called the issue of money into circulation).
In a market economy, the emission function is divided: the issue of non-cash money is carried out by the system of commercial banks, the issue of cash is carried out by the state central bank. The primary issue is non-cash money. Before cash appears in circulation, it must be reflected in the form of entries in the Deposit Accounts of banks.
Factors determining money emission:
· increase and expansion of the commodity mass, production growth under the influence of an increase in the number of small producers, market orientation of large industries; activity and organization of trade, increasing product supply and reducing damage and loss of goods; expanding the structure of the commodity market by introducing to the market goods whose purchase and sale were previously prohibited, etc.;
· price increases (not associated with changes in the properties and quality of goods and services), speculative transactions; inadequate tax policy in the absence of competitive conditions for pricing; the emergence of intermediaries who often do not complete the processing and movement of goods; strengthening of monopolies and the influence of the criminal environment, artificially inflating prices and suppressing attempts to reduce them, etc.;
· decrease in the speed of money turnover: increase in the share of cash in the structure of the money supply and savings of the population; poor organization of trade, shortages and inadequacy of the range of product offerings, slowing down commodity and, accordingly, money turnover; political and administrative restrictions that limit the possibilities for using savings; general risks, etc.
Conditions that are formed under the influence of these, as well as a number of other factors, almost invariably cause money emission.
The release of banknotes into circulation in all forms leads to an increase in the money supply in circulation. Main forms of emission:
· issue of credit money - banknotes;
· deposit - check issue;
· issue of securities.
According to the Constitution of the Russian Federation, money emission, i.e. the release of money into circulation in the Russian Federation is carried out exclusively by the Central Bank of the Russian Federation (clause 1, article 75). The monetary unit in the Russian Federation is the ruble. The introduction and issue of other money in the Russian Federation is not allowed. The Constitution of the Russian Federation, while entrusting the Bank of Russia with the function of issuing money into circulation, does not limit the powers of the Bank of Russia to any one form of issue.
The introduction of other monetary units on the territory of the Russian Federation and the issuance of monetary surrogates are prohibited.
The Central Bank has a monopoly right to issue banknotes - the main component of the cash supply. It stores official gold and foreign exchange reserves, carries out government policy, regulating the monetary sphere and foreign exchange relations. The Central Bank participates in the management of public debt and provides cash and settlement services to the state budget.
The main passive operation of the central bank and one of the forms of emission is the issue of banknotes, the acceptance of deposits of commercial banks and the treasury, and operations for the formation of equity capital.
1. Fiduciary issue - issue of banknotes, banknotes, unsecured by the reserve of precious metals (primarily gold) of the issuing bank. Historically, the issue of banknotes was allowed only if there was a gold reserve, however, this rule was gradually abandoned. Nowadays fiduciary emission is dominant.
The main source of central bank resources in most countries is the issue of banknotes. At the present stage, the issue of banknotes is not backed by gold. Gold backing of banknotes has been abolished, although in some countries it formally continues to operate.
Central bank loans can be credited to commercial bank and treasury accounts maintained at the central bank. In this case, it is not the banknote issue, but the deposit issue of the central bank.
The source of resources for central banks are deposits from the treasury and commercial banks. Commercial banks can deposit part of their cash reserves, including mandatory ones, into interest-free accounts with central banks. In a number of countries, required reserves are credited to special accounts, usually interest-free. This procedure applies, in particular, in Russia. Central banks can also open time accounts with fixed interest rates for commercial banks. Typically, the bank's equity capital accounts for no more than 4% of liabilities.
2. Deposit check issue. Produced by commercial banks and serves as the basis for non-cash payments. In terms of volume, deposit-check emission significantly exceeds the emission of cash.
3. Issue of securities. The procedure for issuing equity securities, unless otherwise provided by the legislation of the Russian Federation, includes the following stages:
The issuer's decision to issue equity securities;
Registration of issue of issue-grade securities;
For the documentary form of issue - production of securities certificates;
Placement of issue-grade securities;
Registration of a report on the results of the issue of securities.
The Bank of Russia issues money in cash and non-cash forms.
Issue of cash
The issue of cash is its release into circulation to increase the amount of cash in circulation.
Previously, under the administrative-distribution system, the volume of emissions served as an object of directive planning by the state and could not be exceeded. In a market economy, there is no directive planning, but central banks predict the size of the expected issue, using forecasts of cash turnover of commercial banks and our own analytical materials. In this case, it is important not only to establish the optimal predicted emission value, but also its distribution among individual regions of the country.
Cash issuance is carried out decentralized . This is due to the fact that the need of commercial banks (it is this that determines the size of the issue) for cash depends on the need for it of legal entities and individuals served by these banks, and it is constantly changing. Therefore, each time importing money from the Center to satisfy this need would not only be impractical (due to multiplying circulation costs), but also impossible.
Cash issuance is carried out by the Central Bank of the Russian Federation and its regional cash centers containing reserve funds and working cash.
The reserve funds of the RCC store a stock of banknotes intended for their release into circulation in the event of an increase in the need of the economy of a given region for cash. These banknotes are not considered money in circulation, they do not move, do not accumulate in the form of treasure, do not serve as a means of payment, therefore they are reserve. To the cash register Cash is constantly coming in and out from commercial banks. Money in the working cash register is in constant motion; they are considered money in circulation.
If the amount of cash receipts in the account of commercial banks exceeds the established limit for a given RCC, then the money is withdrawn from circulation and transferred to the reserve fund. When a commercial bank needs cash, the reverse process occurs. From the account of a commercial bank, within the limit of its free reserve, the RCC issues the required amount of cash. RCC discusses com. bank for free.
Cash issuance occurs as follows. Let us assume that the majority of commercial banks served by the RCC have an increasing need for cash, but the flow of money into their operating cash desks does not increase equivalently. In this case, the RCC will be forced to increase the release of cash into circulation. To do this, the RCC requests permission from the Central Bank of the Russian Federation, and upon receipt, transfers cash from the reserve fund to the working cash register of the RCC.
For this RCC this will be an emission operation. However, when one RCC issues money, another RCC may withdraw cash from its circulating cash within the established limit. Therefore, the actions of one RCC cannot be used to judge emissions throughout the country, which in this case covers most regions. The Board of the Central Bank of the Russian Federation draws up a daily balance sheet based on information from the RCC network: where cash was issued, where it was withdrawn, and only there this information can be obtained.
Money issued by the RCC in circulation will go to the operating cash desks of commercial banks. Where will they be issued to the clients of these banks, i.e. will go to the cash registers of enterprises or directly to the population. In this case, money is debited from clients' accounts upon demand.
Issue of non-cash money
The Central Bank controls the volume of money supply in the country. The amount of money in circulation is defined as the sum of cash and bank deposits. By providing loans, commercial banks increase the money supply. The task of the Central Bank is to limit or expand, with the help of its monetary policy, the ability of commercial banks to issue credit money, depending on the volume of money supply in this moment considered necessary.
Commercial bank reserves refer to the amount of money available to immediately meet the demands of depositors. The ratio of the amount of reserves to the amount of deposits is called the reserve norm (reserve norm). The ability of banks to influence the amount of money circulating in the economy is regulated by central banks through a system of required reserves , providing for the deposit by credit institutions with the Central Bank of a certain part of the funds raised by them. Required reserves are one of the main tools for implementing monetary policy by central banks. By obliging banks to deposit part of the funds they raise, the Central Bank thereby limits the lending capabilities of banks and regulates the overall liquidity of the banking system. By changing the reserve ratio, the Central Bank maintains the volume of money supply in circulation in the country at a certain level.
The amount of free reserve of an individual commercial bank consists of its capital; attracted resources; centralized loan provided to him by the Central Bank; interbank credit minus contributions to the centralized reserve at the disposal of the Central Bank and the resources of the commercial bank itself.
The ability of the commercial banking system to “create money” depends on the size of the country's legal reserve requirements. The lower the amount of required reserves, the large quantity money can be created by the banking system.
Commercial banks can increase the money supply, but one commercial bank cannot do this; only a system of commercial banks can increase the amount of money , using the mechanism of bank deposits.
Issue of securities
Open market operations are the purchase and sale of government securities by the Bank of Russia, short-term transactions with securities with then a reverse transaction. The limit on open market operations is approved by the Board of Directors. The purchase of securities means the release of money into circulation, the sale of securities means the withdrawal of money from circulation. This is the most powerful and effective method regulation of monetary circulation, which is used more often than other methods in world practice.
Money in economic circulation in market conditions has existed and always exists. The issue of inferior money is of a credit nature. The release of money into circulation occurs constantly. Non-cash money is issued when commercial banks provide loans to their customers. Cash is released into circulation when banks issue money to customers from transaction desks. At the same time, clients can repay bank loans and deposit money with the bank. Thus, the amount of money in circulation may not increase.
Emission - This is the release of money into circulation when the total money supply increases.
Because before cash appears in circulation, it must be reflected in the form of entries in the deposit accounts of commercial banks. The main purpose of issuing non-cash money— meeting the additional needs of market entities for working capital.
Lending is one of the ways to release non-cash money into circulation. Loans are issued only within the limits of the resources available to banks, which are a combination of their own, borrowed and borrowed funds. With the help of these funds, only the usual need for working capital can be satisfied. As prices or production rise, an additional need for money arises, and this necessitates emission. In a command economy, emissions were carried out on the basis of credit plans. An increase in the money supply should only be carried out when it goes into the real sector of the economy. The growth of emissions is due to the needs of commodity circulation and the state. In Russia, the main reason for the increase in the money supply in last years is the huge federal budget deficit, which in 1992-1994. was largely repaid by the release of money into circulation while a simultaneous reduction in commodity turnover due to a drop in production growth rates.
Emission system— the legally established procedure for the issuance and circulation of banknotes.
The modern monetary system of countries with a market economy is characterized by the development and predominance of non-cash circulation in monetary circulation, while a simultaneous reduction in cash circulation.
Consists of cash and non-cash turnover. Cash is represented by banknotes and small change. Non-cash money is funds in accounts in commercial banks and the central bank, i.e. demand deposits (deposits) or perpetual deposits (deposits). There is a close relationship between cash and non-cash money, which is determined by those that carry money in economic circulation, as well as by their constant transformation (transition) into each other.
- this is the release into circulation of new government (paper money) and (credit money).
There are two types of money emission: budgetary and credit.
The issue of money is one of the main elements. For a long time, the issue of money was a monopoly of the state, but with development (from the end of the CIC century), commercial banks began to issue ( and ), and through the system of rediscounting bills they began to issue banknotes.
The government issue of money is called treasury or budgetary, and banking - credit.
The state issues new money for financing your expenses(usually covering), and the banks - issuing loans.
Budget issue, without specific funding needs economic growth, has a secured, non-inflationary nature.
Credit and banking issues are always directly related to the needs of economic expansion and therefore non-inflationary(Table 1).
Money issuance process
The procedure for issuing money - it is necessary to distinguish between the initial and secondary issue of money.
Primary issue- money is released into the economy in non-cash form, in the form of entries in bank accounts, when a client receives a bank loan in the form of a loan, it follows that non-cash money is equal to credit money.
Secondary emission— issuance of money in cash, when, at the request of bank account holders, they are cashed out, i.e. banks convert non-cash money into cash.
Structure of the process of issuing money by issuer (who can create money?)The release of money into circulation is called emission. IN modern conditions The issue is carried out by the state represented by the treasury and the central bank, as well as commercial banks and other special financial institutions. Modern money is characterized by a variety of forms, which is associated with a variety of commodity, monetary and financial transactions used in economic life. In this regard, it is required high degree differentiation of money with their simultaneous interchangeability and transformation into each other (for example, through the mechanism of accounting and rediscounting of bills).
The release of money into circulation - emission, being a monopoly right (initially of the state and other feudal lords, and subsequently only of the state), is associated with the receipt of emission income. This income is called “seigniorage”. It has a solid historical record, and its usual form was the defacement of coins in the Middle Ages. The privilege of minting coins was one of the most important in those days, as it provided great income. Subsequently, the issue of paper money was also accompanied by a large share premium. This income also arises for the modern state when issuing small change coins.
Government loans — modern version money issue, when the state issues its securities, and against them additional issue of banknotes is carried out.
Due to the inflationary nature budgetary emissions carried out mainly to cover state budget deficit, another mechanism is currently being used to cover government expenditures that are unbalanced with government expenditures: government loans. In this case, banknotes issued for the amount of government loan bonds by the central bank are hidden inflation.
Share premium
When issuing money, the issuer has share premium, as the difference between the face value of issued money and the costs of their production, operation and liquidation (if necessary).
Types of money issue
The unity of the forms of money as the most important element of the economy is achieved by a special organization of the processes of issuing money into economic circulation and withdrawing it from circulation, which are carried out by the national banking system - the central bank and commercial banks.
In a market economy, emissions are divided into two types:
- issue of cash (carried out by the central bank);
- the issue of non-cash money (carried out by commercial banks) is primary.
Let's consider release of money into circulation and withdrawal from circulation by the central bank. Its money consists of cash (banknotes and loose change) and non-cash money (deposits from commercial banks). The mechanism for issuing money into circulation and withdrawing it from circulation is based on the operations of the central bank with commercial banks.
The issuance, or creation, of money by the central bank occurs when loans are made to commercial banks. Along with lending, other central bank operations also play a major role in the release of money into circulation. Thus, in countries with developed market economies, these include the purchase of government securities (USA, Germany and the UK) and the purchase (rediscount) of bills of leading national companies (Japan). For Russia and other countries with developing economies, the acquisition of freely convertible currency (US dollars and euros) from exporting enterprises and commercial banks plays an exceptional role.
It should be noted that there is no release of money into circulation in the case when commercial banks hand over banknotes to the central bank and small change in order to increase the money in the correspondent account for the subsequent use of money in non-cash form, only the structure changes. The central bank withdraws money from circulation when it sells its assets or returns previously issued loans.
In modern monetary systems, along with central bank money, non-cash money of commercial banks. The money of commercial banks includes deposits of the non-banking sector in these banks. These deposits represent monetary demands clients to their banks and, accordingly, the obligations of banks in relation to their clients.
Commercial banks issue money into circulation when carrying out credit and cash transactions. So, when bank clients receive a cash loan or withdraw cash from their deposit, cash is released into circulation. Thus, there is a regular entry into economic circulation and withdrawal from it of money in the form of banknotes and permanent deposits (deposits) of the central and commercial banks. The basis of this process are credit operations carried out in connection with satisfying the real needs of the economy for means of circulation and payment. The flow of money into circulation channels and its influx into circulation is called the release of money into circulation, which is the process of transfer by banks to legal and individuals certain amounts of money in cash and non-cash forms as a result of credit transactions.
It is necessary to distinguish between concepts such as “issue of money” and “issue of money”. The issue of money is not always accompanied by an increase in the money supply in circulation, since there are also reverse processes - withdrawal of money (repayment of a loan, depositing money into deposit accounts, withdrawal of old money). In this case, the structure of the money supply changes.
Money emission is the release of money leading to a general increase in the money supply, in circulation. Money emission is divided into emission of non-cash and cash money. The issue of cash is the issue of money into circulation. As a rule, central banks are responsible for issuing cash.
Money is an integral element of economic turnover. The issuance of money, in cash or non-cash form, occurs constantly to satisfy market needs. Emission is the release of money into circulation.
The bank provides a loan to the client - Non-cash money is put into circulation. The bank client withdraws money from the account and receives it at the bank cash desk - turnover is replenished with cash. Conversely, when borrowers repay loans or depositors deposit funds into accounts, cash flow decreases.
Emission concept
The word "emission" came to us from Latin language, in translation emissio- release, emitto- release.
An issue is the release of money and/or securities into circulation. In developed countries, central banks and treasuries have the exclusive right to issue money. Banks of issue issue credit money, and Treasury Department is engaged in the issue of treasury bills and coins.
Each specific country has its own emission system, which determines the rules for issuing banknotes, as well as the size of the issue of cash, its norms and forms of security.
Forms of issue
The main forms of emission include the following:
- Money issue
- Deposit check issue
- Issue of securities
According to the legislation of the Russian Federation, only the Central Bank has the right to issue and withdraw banknotes from circulation. Deposit check issuance is the basis of non-cash payments; the right to produce it belongs to both the Bank of Russia and commercial banks.
Money issue
Monetary, or fiduciary issue, is the issue of banknotes (in Russia - rubles). At the moment, the money issue does not have gold backing.
Although previously, banknotes were released into circulation only when it was covered by gold reserves.
The issue of cash in Russia is subject to the following principles:
- Optional collateral (the relationship between gold and ruble has not been officially established).
- Monopoly and uniqueness (only the Central Bank of Russia can issue cash into circulation).
- Unconditional obligation (the ruble is the only means of payment in Russia established by law).
- Unlimited exchangeability (no restrictions on exchange amounts).
Legal regulation, both the issue and withdrawal of money from circulation, is the responsibility of the Board of Directors of the Central Bank.
Issue of non-cash money
Deposit-check emission can be carried out either by the Central Bank or privately. This form of emission is the basis of non-cash payments. Deposit check issue exceeds the volume of cash emission.
Typically, the issue of non-cash money occurs during the issuance of loans. Due to issued loans, the so-called bank multiplier increases, increasing the money supply.
The issue of non-cash money also occurs at the moment when it is used as a means of payment for a product or service. And if the bill is repaid, the additional issue is liquidated, that is, credit compression occurs.
Issue of securities
This financial instrument, used to solve specific tasks. Shares and bonds can be issued both by the state and authorities, and by private companies that have the right to do so. The procedure for placing securities on the territory of the Russian Federation is determined by law.
In most cases, securities are issued in order to attract additional capital. The issuer may also issue a batch of securities to form the initial authorized capital of the joint-stock company.
The issue of securities can be carried out with the aim of replenishing equity capital with non-borrowed or borrowed investments.
Joint-stock companies operating in various fields, as well as government agencies, have the right to issue securities. Securities of foreign companies can also be placed on the Russian foreign exchange market.
Thus it happens constant transformation of cash into non-cash and vice versa. The money supply is formed with the participation of the Central Bank, commercial banks and financial organizations, as well as individuals.
Video about the issue of securities
The competent operation of the banking system is designed to regulate the structure of money circulation, thereby satisfying the needs of all market participants.