Banking. Monetary systems, their main elements (Western model) (lecture notes)

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Banking. Monetary systems, their main elements (Western model) (lecture notes)

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Monetary systems, their main elements (Western model)

The monetary system is a form of organization of monetary circulation in the country, which has developed historically and is enshrined in national legislation. Monetary systems were formed in the 16-17 centuries. with the emergence and establishment of the capitalist mode of production, although some of their elements appeared in an earlier period. As commodity-money relations and the capitalist mode of production develop, significant changes occur in the monetary system.

The type of monetary system depends on the form in which money functions: as a commodity - a universal equivalent or as signs of value. In this regard, the following types of monetary systems are distinguished:

▪ systems of metal circulation, in which the monetary commodity directly circulates and performs all the functions of money, and credit money is exchanged for metal;

▪ systems of circulation of credit and paper money, in which gold is forced out of circulation.

Depending on the metal, which in a given country was adopted as a universal equivalent, and the base of monetary circulation, bimetallism and monometallism are distinguished.

The modern monetary system includes the following elements: monetary unit; price scale; types of money; emission system; state or credit apparatus.

An integral part of the monetary system is the national monetary system, although it is relatively independent.

A monetary unit is a legally established monetary unit that serves to measure and express the prices of all goods. The monetary unit is usually divided into small multiples. Most countries have a decimal division system.

The official scale of prices lost its economic meaning with the development of state-monopoly capitalism and the cessation of the exchange of credit money for gold. As a result of the Jamaican currency reform of 1976-1978. the official price of gold and the gold content of monetary units have been cancelled.

The types of money that are legal tender are mainly credit bank notes, as well as paper money (treasury notes) and small change. If in industrialized countries, as a rule, they do not issue government paper money in the narrow sense of the word (treasury notes), then in some developing countries they are common.

The emission system in developed capitalist countries means the issuance of bank notes by central banks, and treasury notes and coins by treasuries in accordance with the legally established emission law. The main channel for the issue of money in these countries is deposit-check issue: an increase in deposits in customer accounts and, accordingly, the mass of checks servicing the payment turnover. Commercial banks and other credit institutions participate in it (Shevchuk D.A. Fundamentals of Banking. - Rostov-on-Don: Phoenix, 2006).

Due to the fact that monetary policy is closely connected with credit policy, under the conditions of modern capitalism, state monetary and credit regulation of the economy is carried out. Since the 70s, many industrialized countries have introduced targeting, that is, setting targets in regulating the growth of money supply in circulation and credit, which are followed by central banks in their policies.

The characteristic features of modern monetary systems of industrially developed capitalist states are (Denis Shevchuk):

▪ abolition of the official gold content, collateral and exchange of banknotes for gold;

▪ transition to credit money that is not redeemable for gold, which is degenerated into paper money;

▪ issuing money into circulation not only through bank lending to the economy, but also to a large extent to cover government expenses (issue collateral is mainly government securities);

▪ predominance of non-cash turnover in money circulation;

▪ strengthening of state monopolistic regulation of monetary circulation.

Formed during and after the global economic crisis of 1929-1933. currency blocs ensured the preservation in developing countries of monetary systems dependent on metropolitan countries that controlled the issuing institutions and their operations. The size of the emission was determined by the state of the balance of payments, and not by the needs of the economy. During and after the Second World War, on the basis of pre-war currency blocs, currency zones were created, the characteristic features of which are: maintaining a firm exchange rate against the main currency; storage of national currencies in the banks of the hegemonic country; preferential procedure for currency settlements within the zone.

In the early 80s, in most small states, including island states, national monetary systems were created, ensuring the stability of which is the most important condition for the normal development of national economies.

Author: Shevchuk D.A.

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