Forms of Money

Read the text and do the tasks that follow.

A great variety of commodities (wheat, salt, gold, silver) have served at one time or another as a medium of exchange in economies based on the division of labour. This form of money is generally referred to as commodity money. At the same time other forms of money developed. They are referred to as credit money or money without material value because their value as a means of payment is greater than their intrinsic value. For instance, the paper on which a 100 banknote is printed is worth much less than the banknote’s face value. This is also true of most of the coins used nowadays. In addition to the notes and coins in circulation, ‘cashless’ means of payment were introduced.

These include checks, transfer orders and credit cards, which have become more and more popular in recent years. The progress made in computer technology has led to new forms of cashless payments. These forms of money which were mentioned above can be subsumed under the terms ‘cash’ or ‘notes and coins’ and ‘deposit’ or ‘giro’ money.

Deposit or giro money is a form of money that has only gained great importance in the recent past. It is created by deposits held at banks on current accounts, giro or sight deposit accounts, on which the holder can draw at any time by check or giro transfer. In contrast to notes and coins, these are cashless means of payment, which are created by the banks themselves within the framework of cashless payment transactions by using deposits for lending. The amount granted to the borrower is credited to a current account and thus becomes book money, which serves as the basis for further lending if these funds remain within the banking system (payments to creditors). But banks’ ability to create book money is limited. It mainly depends on payment habits: the greater the preference for payment in cash, the more restricted the possibilities for banks to create deposit money. To ensure the solvency of the banking system and for monetary policy reasons, banks are moreover required to hold a certain percentage of their liabilities as deposits with the central bank. This obligation limits banks’ lending power and their ability to create book money.

Vocabulary focus

Ex. 1. Give a word for each of the following definitions.

1. A product that can be sold to make a profit.

2. The value or cost shown on the front of something such as a stamp or coin.

3. To move money from the control of one account or institution to another

4. A small plastic card that you use to buy goods or services.

5. An amount of money that is paid into a bank account.

6. A business deal.

7. A form of money that is created by deposits held at banks on current account, giro or sight deposit accounts, on which the holder can draw at any time.

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Words or reference: deposit, to transfer, face value, commodity, credit card, deposit or giro money, transaction.

Ex. 2. Study the following words and word combinations. What are their Russian equivalents?

Money, make money, to be in the money, get one’s money’s worth, to have money to burn, blood money, danger money, hush money, pocket money, money for old rope, raise money.

Translate the sentences below. Pay attention to the words in bold.

1. Many oil-rich countries have money to burn.

2. I always insist on getting my money’s worth.

3. She seems to be in the money.

4. He made good money when he worked.

5. He deserves to get danger money for that risky job.

6. Do you have any money on you?

7. When he was ten, his pocket money was $5 a week.

8. It was just money for old rope.

9. Take it away! This blood money of yours!

COMPREHENSION

Ex. 1. Answer the following questions.

1. What do you know about commodity money?

2. What form of money has its value as a means of payment greater then its intrinsic value?

3. What are the forms of cashless payments?

4. What is deposit or giro money?

5. How is book money created?

6. What obligation limits banks’ lending power?

Ex. 2. Translate the text below from Russian into English and say whether it can be a summary of Text 3.

Депозитные (или жиро) деньги приобрели большое значение за последние годы. Источником жиро денег являются депозиты на текущих счетах, а также жиро или депозитные счета до востребования. Способность банка создавать безналичные средства платежа зависит от того, отдается ли предпочтение выплатам в виде наличных денег или нет. Правительство с помощью инструкций и распоряжений ограничивает способность банков к созданию безналичных денег. Банки обязаны держать определенный процент своих пассивов в качестве депозитов.

Ex. 3. Read the following text and discuss whether near-moneys can be considered as a form of money.