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Money: history, functions and forms.

Today we buy bread, clothes with money in a shop. These are goods: we exchange our money for goods which others sell to us. Today we travel on a train or bus. or maintain a bank­ing account, and we pay the charge or fee. These are services: we exchange our money for the services which others provide for us.

In a primitive community people obtain goods and services by barter. Trade by barter is the earliest form of trade, when people offer goods in exchange for what they want, that is they swap goods for other goods.

As primitive communities develop into more advanced societies people realize they need some commodity they can use in exchange for anything, some commodity that does not decay and remains valuable, some commodity with the help of which people can mea­sure the value of one thing against the value of another thing. Such commodity is money. Thus money is a necessary part of any civilized society, ft serves as:(1) medium of exchange; (2) a store of wealth; (3) a measure of value.

Money means coins, banknotes and cash in the bank account. We use it to make payments. Nowadays we know that the units of money must have certain qualities to be successful. They must be:

1. Standard.They must all be of the same kind.

2. Durable. They must be strong and long-lasting, so that they are a store of value and do not wear out easily.

3. Scarce.They must be difficult to come by to keep their value.

4. Acceptable.They must be accepted as a medium of exchange in a.

5. Portable.They must be easy to carry.

6. Divisible.It must be possible to divide the units of money of large value into smaller values.

In the past many things were used as the medium of exchange — corn, furs, rice, tobacco, salt tea, rum — there is no end to them. In time people realized that metals were superior to the commodities previously mentioned.

The Ancient Britons and Greek used iron, the Romans used cop­per but gradually silver and gold replaced them.

The advent of coinage is a step forward because coins are free from most of the disadvantages of earlier forms of money. The first coins are credited to China around about 1.000. B.C.

After coins came notes. The hardest problem for anyone with money then was to find somewhere safe to keep it. Gold and silversmiths had safes, because their trade was traffic in coin and bullion, and they needed somewhere secure to keep their stocks.

So it came about in the seventeenth century that goldsmiths took theses deposits for safe keeping. They issued a receipt. More and more people come to hold these receipts and they began to circulate for value among merchants. They come to be trusted and become usual in payment, as easier, lighter and quicker to handle than a lot of coin.

In the beginning people had to pay a fee for having money kept safe. Then goldsmith understood that some of his receipts were always out, circulating in the hands of the merchants. So the goldsmith always had some cash in hand, and he started to lend this out. This was the beginning of banks.



 

 

¹16. The Bank of England.

c) keeps accounts for overseas central banks

The first and most important function of a central bank is to advise the government on the making of the country's financial pol­icy and then help to carry it out which means carefully monitoring the money supply. Its business at first was to receive money on deposit, discount approved bills of exchange and lend against satis­factory security. At first this lending was nearly all to the govern­ment, and gradually the Bank came to perform other services on behalf of the government, and so to become regarded as 'banker to the government'.

Then The Bank of England was empowered to open country branches.

From the time of its foundation the Bank had strong links with the government and these strengthened over the centuries until in 1946 it was nationalised and became publicly owned.

The Bank of England is controlled by a Court of Directors — similar to a board of directors running a large public company — made up of the Governor, the Deputy Governor and sixteen direc­tors. They are all appointed by the Crown.

As the central bank of the United Kingdom, the Bank of Eng­land:

— Implements the monetary policy of the government. It decides what percentage of bank deposits is held as cash, and what per­centage may be lent.

— Acts as banker to the government. It administers exchange control and keeps the nation's gold and foreign currency reserves. The Bank keeps the government's banking accounts, manages the accounts and funds of various governmental departments.

— Acts as banker to the deposit banks. It keeps the accounts of other banks.

— Acts as lender of last resort to the discount houses.

Has about 90 accounts for overseas central banks.


Date: 2016-03-03; view: 1492


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