Text a goldsmiths and banking

Once upon a time people used gold bullion as money. Wanting a safe place to store this bullion, people deposited it with goldsmiths – people who worked with gold and had guarded vaults for storing it safely – and picked it up when it was needed for making payments.

Two developments turned goldsmiths from safe keepers into bankers. First, people found that, instead of physically handing over gold as a means of payment, they could give the seller of goods a letter of transferring the ownership of the gold held by the goldsmith. This letter was what today we would call a cheque. Once cheques became acceptable in payment of purchases, people felt that the gold at the goldsmith’s was as good as gold in their pocket. The amount at the goldsmith’s for safekeeping was called a deposit. Since letters of gold ownership were more convenient to carry around than heavy gold, the invention of deposits made the payments more efficient. Second, and of greater significance, the goldsmiths noticed that they had a lot of gold lying idle in their values. People changed titles of ownership much more frequently than they came to withdraw gold from the vaults.

The goldsmith realizes some of the gold in the vault can be lent to the firm, which will eventually repay it with interest. Although the goldsmith is temporarily short of gold, it is unlikely that all the people who have previously deposited gold will suddenly ask for it back at the same time. The reserves are the amount of gold immediately available to meet depositors’ demand. The reserve ratio is the ratio of reserves to deposits.

Modern Banking. The goldsmith bankers were an early example of a financial intermediary. A financial intermediary is an institution that specializes in bringing lenders and borrowers together. In what sense are banks financial intermediaries standing between lenders and borrowers? A bank is a business and its owners or managers aim to maximize profits. A bank makes profits by lending and borrowing. To get money in, the bank offers favourable terms to potential depositors. British clearing banks offer interest on sight deposits only to important customers, but they usually offer free chequing facilities to people whose sight deposits or current accounts do not fall below a certain level. They do not charge directly for the expenses of clearing and processing cheques. And they offer interest on time deposits.

Next, the banks have to find profitable ways to lend what has been borrowed. Most is lent out as advances of overdrafts to households and firms, usually at interest rates well in excess of the rate simultaneously being paid to the bank customers with time deposits. Some is used to purchase securities such as a long-term government bonds. Some is more prudently invested in liquid assets. Although these do not pay such a high rate of interest, the bank knows it can get its money back quickly if people start withdrawing a lot of money from their sight deposits. And some money is held as cash, the most liquid asset of all.

What economic services does the bank provide? It is transforming household loans to the bank into bank loans to a wide range of people – governments wishing to finance a budget deficit, firms borrowing to build a new factory, and individuals borrowing to start a new business or buy a new home. The bank is using its specialist expertise to acquire a diversified portfolio of investments though depositors merely observe that they get an interest rate on their time deposits or free chequing facilities. Without the existence of the intermediary, depositors would have neither the time nor the expertise to decide which of these loans or investments to make. That is the economic service that the bank as an intermediary provides.

Modern banks create money by granting overdraft facilities, issuing sight deposits in excess of the cash reserves in the bank vaults. Without depositing any cash, some people are told they now have money in their bank accounts. These bank accounts are money because people can write cheques against them and use them as a means of payment.

Banks actually create money when they lend it. Here's how it works: Most of bank's loans are made to its own customers and are deposited in their checking accounts. Because the loan becomes a new deposit, just like a paycheck does, the bank once again holds a small percentage of that new amount in reserve and again lends the remainder to someone else, repeating the money-creation process many times.

Most of us store our money in banks. While the first banks were simply places to safely deposit money, today's banks function quite differently. Our banking system is dependent on lots of money moving around a whole lot. Banks reward people who move money through their accounts, allowing them to borrow even more money to buy ever more expensive cars, houses, and businesses. Because banking and so much of the rest of life in our society is so dependent on large stores of money moving around, those without money or those with little money are kept out of the economic system. People living on their own land, producing or trading for most of their daily needs, are considered economically unproductive for the most part, despite the material and social richness of their lives. In contrast, business people who may be millions of dollars in debt, are considered wealthy simply because they are moving a lot of money through the system.

Match a line in A with a line in B (as in the text).

A	B
1. meet 2. remain 3. reach 4. become 5. borrow 6. issue 7. write 8. maximize 9. grant 10. offer	a) sight deposits b) cheques c) acceptable d) more money e) terms f) stable g) a record h) profits i) demands j) overdraft facilities

Match up the words with a close meaning.

1. deposit 2. transfer 3. vault 4. convenient 5. prudent 6. diversity 7. wealthy 8. despite 9. grant 10. acquire 11. change

a) put down, lay, store for safekeeping b) safe, storehouse, depository c) suitable, handy, easy d) careful e) rich f) in spite of g) gain, obtain, receive, get h) present, subsidize, agree i) alter j) variety k) change position, move

Try to remember the translation of the following word combinations.

advertizing	expert	специалист по рекламе
technical		технический эксперт
court		судебный эксперт
commodity		товаровед
credit		специалист по кредитам
enterprise	efficiency	эффективность предприятия
labour		производительность труда
performance		уровень производительности
relative		относительная эффективность
manufacturing		эффективность производства
domestic	borrowing	внутренний заем
external		внешний заем
bank		банковский заем
long-term		долгосрочная ссуда
short-term		краткосрочная ссуда
call	deposit	вклад до востребования
demand		бессрочный вклад
fixed		срочный
long-term		долгосрочный
general		обычный

Suggest 5 word combinations with each of the following terms and translate them.

Cheque, debt, portfolio, trade.

Match up English word combinations with Russian ones in the same meaning, remember them paying attention to prepositions.

1. once upon a time 2. over time 3. after all 4. instead of s-th 5. to be short of s-th 6. to turn into s-th 7. to aim to s-th 8. to ask for s-th 9. to charge for s-th 10. cheques against money 11. to be dependent on s-th 12. at the expense of s-th 13. to result in s-th 14. through payments 15.by far

a) просить о чем-то b) нацелиться на что-то c) чеки вместо денег d) за счет чего-либо e) однажды f) привести к чему-либо g) просить за что-то (назначить цену) h) вместо чего-либо i) испытывать дефицит в чем-либо j) превратиться во что-либо k) посредством платежей l) в конце концов m) зависеть от чего-либо n) гораздо, значительно o) со временем

Match the definitions and try to remember them.

1. Bank	is (are)	a) an agreement by contract to pay money in case of misfortune.
2. Credit		b) money paid for the use of money.
3. Deposit		c) an institution which accepts deposits, makes business loans, and offers related services.
4. Loan		d) something lent for temporary use.
5. Bond		e) a type of savings account that pays higher interest rates .
6. Real estate		f) a certificate of debt issued by a government or corporation guaranteeing payment of money.
7. Account		g) a sum of money kept in a bank which may be added or taken from.
8. Interest rate		h) an official paper showing the permission to do something.
9. License		i) buying goods when they are wanted and paying for them later.
10. Insurance		j) some property in land and houses.

Think about the definitions to the following terms, write them down and try to remember.

Goldsmiths, reserves, mortgage, clearing, security.

Translate 3 paragraphs into Russian beginning from “Next, the banks have …”

Look through the text again and answer the following questions.

1. What is the history of cheque’s appearance?

2. How was the amount at the goldsmith’s called?

3. Why was keeping some-other’s gold profitable?

4. How do bank owners and managers try to maximize profits?

5. What do profits depend on?

6. What economic services does the bank provide?

7. Can people have money in their banks accounts without depositing any cash? How?

8. What people are called economically unproductive?

9. Why are business people called economically productive in spite of their debts?

Summarize the information of the text and render its essentials.

Render the text into English.