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History of money and banks

Plan

1. What mean “money” ?........................................................................................3

2. History of money and banks……………………………………………………4

3. Type of banks......................................................................................................5

4. Different types of money……………………………………………………….6

5. Ukrainian hryvnia and its history........................................................................7

 

What mean “money”?

Money is an intrinsic part of our life. By money we mean any commodity generally accepted in payment for goods, services, and debts. The main use of money is makes the trading process simpler and more efficient, but actually money has various uses in the modern world and various functions, such as:

1. means of payment

2. medium of exchange

3. standart of value

4. unit of account

5. store of value

6. standart of deferred payment

 

Money, as the medium of exchange, is used in one-half of almost all exchange. Workers exchange labour services for money. Poeple buy and sell goods in exchange for money. We accept money not to consume it directly but bacause it can subsequently be used to buy things we do wish to consume. Money is the medium through which people exchange goods and services. To see that society benefits from a medium of exchange imagine a barter economy.

 

A barter economy has no medium of exchange. Goods are traded directly or swapped for other goods. In a barter economy, the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

 

Trading is very expensive in a barter economy. People must spend a lot of time and effort finding others with whom they can make mutually satisfactory swaps. Since time and effort are scarce resources, a barter economy is wastful.

 

Although the crutial feature of money is its acceptance as the means of payment and medium of exchange, other functions are also in great importance. Money can also serve as a standart of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods and services. In this function money appears as the unit of account, is the unit in which prices and quoted and accounts are kept.

 

In Ukraine prices are quoted in hryvnia, in US – dollars, in majority European countries – euros. It is usually convinient to use the units in which the medium of exchange is measured as the unit of account as well.

History of money and banks

Let’s turn to the history and see how everything began, what is the background of money & banks.

 

In the past most societies used different objects as money. Some of these were valuable because they were rare and beautiful, others – because they could be eaten or used. Early forms of money like these were used to buy goods. They were also used to pay for marriages, fines and debts. But although everyday objects were extremely practical kinds of cash in many ways, they had some disadvantages too. For example, it was difficult to measure their value accurately, devide some of them into a wide range of amounts, keep some of them for a long time, use them to make financial plans for the future. For the reasons such as these, some societies began to use another kind of money, that is precious metals.



 

People used gold, gold bullion, as money. Those were dangerous times, and people wanted a safe place to keep their gold. So they deposited it with goldsmiths, people who worked with gold for jewellery and so on and also had a guarded vault to keep it safe in. & when people wanted some of their gold to pay for things with, they went & fetched it from goldsmith.

 

Two developments turned these goldsmiths into bankers. The first was that people found it a lot easier to give the seller a letter than it was to fetch some gold and then physically hand it over to him. This letter transferred some of the gold and they had at the goldsmith’s to the seller. This letter we would nowadays call a cheque. and, of course, once these letters or cheques, became acceptable as a way of paying for goods, people felt that the gold they had deposited with the goldsmith, was just as gold as gold in their own pockets. and as letters or cheques were easier to carry around than gold and a lot less dangerous, people started to say that their money holdings were what they had with them plus their deposits. So a system of deposits was started. The second development was that goldsmiths realized they had a great deal of unused gold lying in their vaults doing nothing. This development was actually of greater importance than the first.

 

Now let’s turn to the first bank loan and see what happened. A firm asked a goldsmith for a loan. The goldsmith realized that some of the gold in his vault could be lent to the firm, and of course he asked the firm to pay it back later with a little interest.

 

The goldsmith bankers were an early examples of a financial intermediary.

 

A financial intermediary is an institution that specializes in bringing lenders and borrowers together.

 

Banks are not the only financial intermediaries. Insurance companies, pension funds, and building societies also take money in order to relend it. The crucial feature of banks is that some of their liabilities are used as a means of payment, and are therefore part of the money stock.

 

Type of banks

There can be different types of banks.

Central banks supervise the banking system, the fix minimum interest rate, issue bank notes, control the money supply, influence exchange rates, & act as lender of last resort.

 

A commercial banks are businesses that trade in money. They borrow money from the public, crediting them with a deposit. The deposit is a liability of a bank. It is money owed to depositors. In turn the bank lends money to the firms, households or governments wishing to borrow. Commercial banks are financial intermediaries with a government license to make loans & issue deposits, including deposits against which cheques can be written.

 

In some European countries, notably Germany, Austria, & Switzerland, there are universal banks which combine deposit & loan banking system with share & bond dealing, investment advice, etc. Yet even universal banks usually forms a subsidiary, known as a financial house money – at several per cent over the base lending rate – for hire purchase or installment credit, that is, loans to consumers that are repaid in regular, equal monthly amounts.

 

In Britain, the USA & Japan, however, there is, or used to be, a strict separation between commercial banks & banks that do stockbroking or bond dealing. Thus in Britain, merchant banks specialize in raising funds for industry on the various financial markets, financing international trade, issuing & underwriting securities, dealing with takeovers & mergers, issuing government bonds, & so on. They also offer stockbroking & portfolio management services to rich corporate & individual clients. Investment banks in the USA are similar, but they can only act as intermediaries offering advisory services, & do not offer loans themselves.

 

In Britain there are also building societies that provide mortgages, i. e. they lend money to home-buyers on the security of houses & flats, & attract savers by paying high interest than the banks. The savings & loan associations in the USA served a similar function, until most of them went spectacularly bankrupt at the end of 1980s.

 

There are also supranational banks such as World Bank or the European Bank for Reconstruction & Development, which are generally concerned with economic development.


Date: 2015-12-24; view: 1413


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