I. Mind the following words and phrases.
1. Ñoin, credit, currency, purchasing power, constant store of value, measure, commodity, inflation, transaction, rapidity, provide, substitute. 2. In Great Britain the currency used is the pound sterling (£). In the USA (and many other countries) the currency is the dollar ($). The sign goes before the figure. $1 = 100 cents (c). 3. A sum of money is used with a verb in the singular. These days $ 50,000 is not a large sum of money. 4. I can’t afford (=don’t have enough money) to go on holiday this year. 5. The cost of living (=how much people have to pay for things) is very high in places like Sweden or Norway, but people still have a good standard of living (=the level of money and comfort people have).
II. Complete the blanks.
1. Our goods and services are sold for … . 2. The value of money is basically its value as a … of exchange. 3. Purchasing power depends on supply and … . 4. The condition when too much money is available is known as … . 5. The supply of money is the actual … in notes and coins. 6. The demand for money is related to the … with which business is done. 7. Money acts as a … of account. 8. Money is a … of value. 9. Money is a … of making … payment. 10. Credit money is a … with promises by the issuer to pay.
III. Form all possible combinations using the words of both columns.
| provide with valuable constant national purchasing paper issue sell | commodities money coins currency note store power goods |
IV. Say whether these statements are true or false, and if they are false say why.
1. Some values in the economic system are measured in terms of money. 2. The demand for money is related to the rapidity of the business. 3. Barter means the exchange goods for goods. 4. Paper money was invented in China. 5. Now people use cash only. 6. Purchasing power does not depend on demand. 7. If too much money is available its value increases. 8. Money has two functions. 9. Credit money are documents with promises by the issuer to pay an equivalent. 10. The value of paper money is fixed by the banks. 11. The role of money doesn’t depend on the state of development of an economy. 12. Money is necessary to make transactions simple. 13. Modern economies can’t function without money.
V. Answer these questions.
1. What does barter mean? 2. Where was paper money invented? 3. Who was to first to issue paper notes in Europe? 4. What notes were the beginning of paper notes in Europe? 5. What device is used instead of cash? 6. How do economists determine the value of money depend on? What is the most important function of money? 9. What does the role of money depend on? 10. What do you know about commodity money?
Unit 5
CENTRAL BANKING SYSTEM
Word list
Central banking system – ñèñòåìà öåíòðàëüíîãî áàíêà; interest – ïðîöåíò, ïðèáûëü; monetary system – äåíåæíàÿ ñèñòåìà; money supply – äåíåæíàÿ ìàññà; lender – êðåäèòîð; lender of last resort – ïîñëåäíèé êðåäèòîð â êðèòè÷åñêîé ñèòóàöèè, öåíòðàëüíûé áàíê; issue – îñóùåñòâëÿòü ýìèññèþ (äåíåã); intervene – âìåøèâàòüñÿ; oblige – îáÿçûâàòü, çàñòàâëÿòü; deposit – âêëàä; refinancing – ðåôèíàíñèðîâàíèå; board of governors – ñîâåò óïðàâëÿþùèõ; make sure – îáåñïå÷èâàòü, ãàðàíòèðîâàòü; accept – àêöåíòèðîâàòü; security – öåííàÿ áóìàãà; maintain accounts – âåñòè ñ÷åòà; lend – ññóæàòü; obligatory insurance – îáÿçàòåëüíîå ñòðàõîâàíèå; investment bank – èíâåñòèöèîííûé áàíê; savings bank – ñáåðåãàòåëüíûé áàíê; loan bank – ññóäíûé áàíê; bank of consumer credit (creditor bank) – áàíê-êðåäèòîð; branch bank – ôèëèàë áàíêà; release – ðàçðåøåíèå; assets – àêòèâû, ñðåäñòâà, êàïèòàë; contribution – âêëàä; joint-stock – àêöèîíåðíûé; grant – äàâàòü äîòàöèþ, ñóáñèäèþ; overdraft – êðåäèò ïî òåêóùåìó ñ÷åòó (îâåðäðàôò); letter of credit – àêêðåäèòèâ; depository – áàíê-õðàíèëèùå (äåïîçèòàðèé); license – ðàçðåøàòü, äàâàòü ëèöåíçèþ; account – ñ÷åò; safekeeping – õðàíåíèå; bill – âåêñåëü; intermediary – ïîñðåäíèê.
Text study
The central banking system is a major sector of any modern monetary system. It is of great importance to the fiscal policy of the national government and the functioning of the private sector.
Central Banks such as the Bank of England, the Federal reserve System of the US, the Bundesbank of Germany, the Central Bank of Russia, the National Bank of Belarus function for the government and other banks, not for private customers. Central banks are involved in the issue of money and maintain the country’s foreign currency reserves. Central banks act as bankers to governments as the designers of monetary and credit policies, and as lenders of last resort to commercial banks in the case of a financial crisis. In the countries with the developed market economy there are two-level bank systems. The system top level is presented by the central (issue) bank. At the bottom level the commercial banks subdivided into universal and specialized banks (investment banks, savings banks, savings and loan associations, banks of the consumer credit, branch banks), and not bank credit and financial institutes (the investement companies, investment funds, the insurance companies, pension funds, etc.) operate.
The central bank in the majority of the countries belongs to the state. But even if the state formally does not own its capital (the USA, Italy, Switzerland) or owns partially (Japan – 55%), the central bank carries out state structure functions. The central bank possesses a monopoly on release in the referce (issue) of banknotes. It stores official gold-currency reserves, regulates credit-and-monetary sphere and currency relations. By the position in credit system the central bank plays a role of “bank of banks”, i.e. stores obligatory reserves and available assets of commercial banks and other establishments, gives them loans, represents itself as “the creditor of ultimate authority”.
Commercial banks – the basic link of credit system. They carry out almost all kinds of bank operations. Historically developed functions of commercial banks are reception of contributions into current accounts, short-term crediting industrial and trade enterprises, realization of calculations between them. In modern conditions commercial banks managed to expand essentially reception of urgent and savings contributions, mid- and long-term crediting to create system of crediting of the population.
Commercial banks are created on the share or joint-stock beginnings.
A modern joint-stock bank is expected to supply the following services: to accept deposits, to provide cheque facilities, to collect and pay cheques, bills and dividends, to grant loans to customers and arrange for overdraft facilities, to open letters of credit, to issue travellers’cheques.
The National Bank of Belarus. The bank system of Belarus is two-level and consists of the National Bank of Belarus and commercial banks.
The National Bank is the central bank of Belarus and operates exclusively in the interests of Belarus.
The main objectives of the activity of the National Bank are:
1). protection and maintenance of stability of the Belarus rouble;
2). development and strengthening of the bank system of Belarus;
3). maintenance of effective, reliable and safe functioning of payment system.
The national bank performs the following functions:
1). develop the Republic of Belarus Monetary Policy;
2). issue money;
3). regulate money circulation;
4). arrange the functioning of the payments system of the Republic of Belarus;
5). act as the lender of last resort with respect to banks and provide refinancing thereof;
6). carry out foreign exchange regulation;
7). act as a central depositary of Government of the Republic of Belarus and local;
8). issue National Bank securities;
9). establish and exercise foreign exchange control;
10).carry out state registration of banks and non-bank financial institutions;
11).license banking activities;
12).establish banking operations rules and procedures.
The National bank of Belarus was created in 1922 under the name of “Belarusian Republican Bank” by the Soviet of People's Commissars of Beylorussia, but soon worked under the direction of the State Bank of the USSR. Undergoing reorganizations in 1959 and 1987, the bank appeared in its current form in 1990.
The Bank of England. Founded in 1694, the Bank of England is one of the oldest central Banks. It started as a commercial bank with private shareholders. It was privately owned until 1946. That year it was nationalized. The Bank of England offers a range of services to its customers. There are three important groups of customers: commercial banks, other central banks and the government. The government keeps its main banking accounts at the Bank of England, and Payments of taxes to the government and payments by the government for social security, defence and so on are made to and from accounts at the Bank.
The Federal Reserve System or “Fed”. It is an independent agency of Congress founded in 1913. It includes twelve federal reserve banks and a board of governors.
The Fed performs three major functions. It provides services to the banking system and the federal government, it stabilizes the banking system, and it controls the quantity of money in circulations. It also provides safekeeping for securities.