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Unit Five
MONEY AND BANKING
I. All values in the economic system are measured in terms of
money. Our goods and services are sold for money, and that
money is in turn exchanged for other goods and services. Coins
are adequate for small transactions, while paper notes are used
for general business. There is additionally a wider sense of the
word “money”, covering anything which is used as a means of
exchange, whatever form it may take. Originally, a valuable metal
(gold, silver, copper) served as a constant store of value, and
even today the American dollar is technically backed by the store
of gold which the US government maintains. Because gold has
been universally regarded as a very valuable metal, national
currencies were for many years judged in terms of the so-called
gold standard. Nowadays however national currencies are considered
to be as strong as the national economies which support them.
Valuable metal has generally been replaced by paper notes.
Paper notes are issued by governments and authorized banks,
and are known as legal tender. Other arrangements such as ñhecks
(cheques) and money orders are not legal tender. They perform
the function of substitute money and are known as instruments of
credit. Credit is offered only when creditors believe that they have
a good chance of obtaining legal tender when they present such
instruments at a bank or other authorized institution. If a man’s
assets are known to be considerable, then his credit will be good.
If his assets are in doubt, then it may be difficult for him to
obtain large sums of credit or even to pay for goods with a check.
The value of money is basically its value as a medium of
exchange, or, as economists put it, its purchasing power. This
purchasing power is dependent on supply and demand. The demand
for money is reckonable as the quantity needed to effect business
transactions. An increase in business requires an increase in the
amount of money coming into general circulation. But the demand
for money is related not only to the quantity of business but also
MONEY AND BANKING
to the rapidity with which the business is done. The supply of
money, on the other hand, is the actual amount in notes and coins
available for business purposes. If too much money is available,
its value decreases, and it does not buy as much as it did, say,
five years earlier. This condition is known as inflation.
II. Banks are closely concerned with the flow of money into and
out of the economy. They often co-operate with governments in
efforts to stabilize economies and to prevent inf lation. They are
specialists in the business of providing capital, and in allocating
funds on credit. Banks originated as places to which people took
their valuables for safe-keeping, but today the great banks of the
world have many functions in addition to acting as guardians of
valuable private possessions.
Banks normally receive money from their customers in two
distinct forms: on current account, and on deposit account. With
a current account, a customer can issue personal checks. No interest
is paid by the bank on this type of account. With a deposit
account, however, the customer undertakes to leave his money
in the bank for a minimum specified period of time. Interest is
paid on this money.
The bank in turn lends the deposited money to customers
who need capital. This activity earns interest for the bank, and
this interest is almost always at a higher rate than any interest
which the bank pays to its depositors. In this way the bank makes
its main profits.
We can say that the primary function of a bank today is to
act as an intermediary between depositors who wish to make
interest on their savings, and borrowers who wish to obtain capital.
The bank is a reservoir of loanable money, with streams of money
flowing in and out. For this reason, economists and financiers
often talk of money being liquid,oroftheliquidity of money.
Many small sums which might not otherwise be used as capital
are rendered useful simply because the bank acts as a reservoir.
The system of banking rests upon a basis of trust. Innumerable
acts of trust build up the system of which bankers, depositors and
borrowers are part. They all agree to behave in certain predictable
ways in relation to each other, and in relation to the rapid
fluctuations of credit and debit. Consequently, business can be
done and checks can be written without any legal tender visibly
changing hands.
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III. You begin your relationship with a bank by opening a deposit
account, by giving information about yourself and by signing the
Master agreement (also called a signature card).
The bank officer enters the information on the computer system,
and gives you a card which you may use to identify yourself at
the bank’s branches. You may also use your card for electronic
banking services. For that you must select a personal identification
number (PIN) to use with the card when making deposits and
withdrawals at automated teller machines (ATMs).
A checking account allows to write unlimited checks without
per-check charges but your funds won’t earn interest on this
account. With most of checking accounts you may reduce the
monthly service charge if the bank receives a direct deposit to
your account. Otherwise the bank will charge a certain monthly
service charge regardless your account balance. Direct deposits are
electronic deposits of periodic payments — such as salary, pension
and other regular monthly income — into your checking account.
An interest checking account allows to earn interest, to write
unlimited checks without per-check charges and to pay no monthly
service charge for any statement period in which you maintain, say,
a $1,500 minimum balance in your checking account. Otherwise,
the bank will charge you a $9 monthly service charge for that
period. The monthly service charge may be reduced by $1 if the
bank receives a direct deposit to your account.
A time deposit account allows to earn interest at a fixed rate
on funds you leave on deposit for a specific period of time,
called a term. Interest rates are fixed for the term and are based
on rates in effect at the time you make the deposit. The bank
may automatically renew your account by reinvesting your funds
on the maturity date, which is the first day after the term ends.
The bank will reinvest both principal and interest unless you
elected to have your interest disbursed. The term for this reinvested
deposit is the same length as the previous term of your account.
The interest rate on the reinvested deposit is the rate the bank
offers on the maturity date for the amount and term of the
reinvested deposit. If the maturity date falls on a weekend or bank
holiday, the maturity date is extended to the next business day,
and your funds continue to earn interest over the weekend or bank
holiday.
These are few examples of personal deposit accounts you may
open with a bank.
Unit Five
MONEY AND BANKING
IV. Now assume that you have a farm and need $6,000 to buy
seed and fertilizer and to pay wages to labourers you must hire
to work on your farm. Assume further that you do not have the
cash you need, so you go to the only bank in your community to
borrow funds.
The bank loan officer tells you that if you want a loan, you
must put up collateral — property that is pledged by a borrower
to protect the lender’s investments. You have equipment valued
at $10,000, so you pledge this as collateral for a $6,000 loan.
To protect itself, a bank generally requires collateral in excess of
the amount borrowed. If the loan is for one year, you sign a note
payable to the bank stating that you will repay the $6,000 plus
12 percent interest ($720) at the end of the year.
If the bank were to give you $6,000 in currency, you could
easily buy the goods and services needed since people would
accept the currency without question. But if it were to do so, the
bank would restrict its own ability to make loans and thus to
make profit in the form of interest income. Suppose that the
bank has $100,000 in cash reserves. If it lends all this money at
12 percent interest, it will make only $12,000 per year in interest.
This limitation led banks to search for a more profitable method
of lending money.
Making a loan does not mean that the bank will pay the
borrower in cash out of its vaults. Rather, it makes a loan by
opening a new checking account for you and by crediting that
account with $6,000 (giving you a credit for the amount of the
loan). Then you write checks against the created checkable
deposit. As a result, the money supply increases to the extent of
the checkable deposit created. Checks, which are drafts against
the bank to pay the bearer a stipulated amount, serve as money.
They do not have to be accepted. Sometimes one can see signs
in restaurants saying “
they are overwhelmingly the most frequent means of payment.
People usually accept them in good faith in exchange for goods
and services. Today checks can often be written on savings accounts
as well as on checking accounts. Since the bank does not lend
currency, it might seem able to make an unlimited number of
loans in the form of checkable deposits. However, it has to keep
sufficient cash on hand to provide for those who want to redeem
1
the checks
.
WE DO NOT ACCEPT CHECKS”. But in fact
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154
Vocabulary List
I
money 1. деньги 2. pl (monies, moneys) виды денег; денежные
суммы
value 1. стоимость 2. ценность
in terms of money в пересч¸те на деньги, в денежном выра
жении
coin 1. монета 2. singl. ðàçã. деньги
transaction сделка, операция
a means of exchange средство обмена
a store of value средство сохранения стоимости, средство сбе
режения (как функция денег)
a constant store of value постоянное накопление стоимости
to back (paper money, currency) поддерживать, обеспечивать
(бумажные деньги, валюту)
store запас, накопление
the store of gold золотой запас
national currency национальная валюта
the gold standard золотой стандарт
to abandon (to get of f) the gold standard отказаться от золо-
того стандарта
to issue 1. выпускать, пускать в обращение, эмитировать 2. вы-
писывать (чек)
to issue paper notes (securities) выпускать бумажные деньги
(ценные бумаги)
to issue notes in excess выпускать банкноты в избытке
to issue a check выписывать чек
issue 1. выпуск, эмиссия 2. выписка (чеков, документов) 3. пред
мет спора или обсуждения
authorized уполномоченный, надел¸нный определ¸нными пра
âàìè
authorized banks (institutions) уполномоченные банки (ин
ституты)
legal tender законное плат¸жное средство, официально приня
тое государством
other arrangements çä. другие плат¸жные средства
check (àíãë. cheque [tʃek]) ÷åê
to pay with a check оплачивать чеком
to issue checks выписывать чеки
to write checks on a saving account выписывать чеки на сбе
регательный сч¸т
Unit Five
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MONEY AND BANKING
a money order плат¸жное поручение
substitute money заменитель денег, денежный суррогат
instruments of credit кредитные обязательства (векселя, чеки,
облигации)
assets средства, капитал, фонды
the value of money стоимость денег
a medium of exchange 1. средство обмена 2. средство обраще
ния (как функция денег)
purchasing power покупательная способность
to reckon подсчитывать, исчислять
to effect business transactions осуществлять деловые операции
circulation (of money, capital) обращение (денег, капитала)
to come into general circulation поступать в совокупное об
ращение
to put into circulation пускать в обращение
the demand for money спрос на деньги
the supply of money (money supply) 1. денежная масса, сумма де-
нег в обращении, количество денег в обращении 2. предложение денег
the quantity of business количество операций, объ¸м бизнеса
the rapidity of business скорость осуществления операций в биз-
íåñå
inf lation инфляция
155
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II
f low поток, прилив
f low of money (streams of money) поток денег
inf low of capital (capital f low-in) приток (перелив, движение) ка
питала
outf low of capital (capital f low-out) отток капитала
to f low перетекать, поступать (о ресурсах)
to f low into and out of the economy поступать в экономику
и изыматься из нее
to provide capital обеспечивать капитал
to allocate 1. ассигновывать 2. распределять, размещать
to allocate funds on credit распределять, размещать средства
среди за¸мщиков
safe-keeping хранение ценностей в банковском сейфе
guardian опекун, попечитель
possessions pl имущество, собственность
account ñ÷¸ò
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Unit Five
a checking account чековый сч¸т (текущий сч¸т в банке, до
пускающий выписку чеков)
a current account текущий сч¸т (тип сч¸та до востребова
ния, беспроцентный)
a deposit account депозитный сч¸т; àíãë. срочный депозит,
срочный вклад
a time deposit account амер. срочный депозит, срочный
вклад
an interest (interest-bearing) checking account текущий сч¸т
с выплатой процентов
a savings account сберегательный сч¸т
interest 1. процент, проценты 2. доля, участие
to pay interest on one’s deposit выплачивать проценты по
вкладу
to make interest on one’s savings получать проценты (про
центный доход) на свои сбережения
to make $12,000 per year in interest получить процентный
годовой доход в $12,000
to earn interest приносить процентный доход
to deposit (money) депонировать, класть деньги на хранение
deposit депозит, вклад, взнос
time deposit срочный депозит, вклад на срок
depositor депонент, вкладчик, владелец банковского сч¸та
rate 1. ставка, размер 2. тариф 3. темп, уровень 4. коэффи-
циент, показатель, степень
rate of interest (interest rate) процентная ставка, норма про-
цента
rate of exchange (exchange rate) валютный курс, курс валю
òû
intermediary [int
to act as an intermediary выступать в качестве посредника
savings pl сбережения, накопления
borrower çà¸ìùèê
to borrow занимать, одалживать
to borrow funds одалживать средства, капитал
to lend (lent) давать взаймы, одалживать
to lend money at 10% interest ссужать деньги под 10%
lender кредитор, ссудодатель
loan за¸м, ссуда, кредит
to grant a loan предоставлять за¸м
loanable money деньги, предоставляемые в кредит; ссужаемые
деньги
reservoir [!rez
ə!mi:djəri] посредник
əvwɑ:] резервуар, хранилище
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MONEY AND BANKING
liquid ликвидный, быстрореализуемый
liquidity ликвидность
to render useful делать полезным
trust доверие, доверительные отношения
f luctuation колебание, изменения (спроса, цен, курса)
III
157
the Master agreement общее соглашение двух сторон об основ
ных условиях договора
signature card карточка лицевого счета с образцом подписи
клиента
personal identification number (PIN) личный идентификацион
ный номер, присваиваемый владельцу пластиковой банков
ской карточки (ПИH)
withdrawal снятие денег со сч¸та, изъятие вклада
to withdraw снимать деньги, изымать вклад
to withdraw one’s money from an account снимать деньги со
ñ÷¸òà
to withdraw deposits изыматьвкладысосчетов
automated teller machine (ATM) автоматическая кассовая ма-
шина, банкомат
charge 1. цена, плата 2. сбор, начисление
service charge плата за общее обслуживание (которую банк
взимает с клиента)
per-check charge банковский сбор за обработку каждого
÷åêà
public utilities charge плата за коммунальные услуги
statement period отч¸тный период (за который начисляются
проценты и направляются клиентам выписки из банковско
го сч¸та)
term 1. срок, процентный период 2. семестр 3. pl условия
4. pl отношения 5. термин
statement выписка из банковского сч¸та
direct deposit прямой депозит (перевод зарплаты, пенсии и дру
гих сумм на сч¸т клиента электронным пут¸м)
account balance остаток средств на сч¸те (на конец уч¸тного
периода)
to renew возобновлять, продлевать, пролонгировать
to reinvest реинвестировать, инвестировать доходы от ранее
произвед¸нных инвестиций
maturity date дата платежа, погашения долга, срок истечения
договора
principal основная сумма вклада
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158
to disburse оплачивать, выплачивать
bank holiday нерабочий день банка
IV
collateral [kə!ltərəl] залог, обеспечение краткосрочного долга
to lend money on collateral ссужать деньги под залог
to put up collateral обеспечивать залог
to pledge 1. закладывать, отдавать в залог 2. ручаться
to pledge as collateral отдаватьвкачествезалога
pledge 1. залог 2. обещание, обязательство
to sign a note payable to the bank подписать банку вексель к
оплате
interest income доходввидепроцентов
cash reserves резерв наличных денег
vault [v
checkable deposit чековый депозит
draft (syn. a bill of exchange) переводной (на банк) вексель
bearer предъявитель (чека)
a stipulated amount обусловленная (оговоренная) сумма
to redeem checks погашать, выкупать, оплачивать чеки
ɔ:lt] банковское хранилище, стальной сейф
to write checks against the created checkable deposit выписы-
вать чеки за сч¸т созданного чекового депозита
Unit Five
Comprehension and Discussion Questions
I
1. What is money and what is its role as a means of exchange?
What metals served as a constant store of value?
2. What is the gold standard and why was it abandoned? What
backs national currencies now? Why do you think the US
government still maintains the store of gold?
3. Why has valuable metal been replaced by paper notes? Who
can issue paper notes? What is legal tender?
4. What are instruments of credit and what functions do they
perform? Can your name them?
5. In what case can one obtain large sums of credit and pay for
goods with a check?
6. What is purchasing power? What does it depend on?
7. How do we reckon the demand for money? What is it
related to?
MONEY AND BANKING
8. What is the supply of money? If there is too much money
in circulation, what can it lead too? What do we call this
situation?
II
1. What are banks closely concerned with and what is their main
function? What new functions have they acquired over time?
What was their primary function?
2. What are two basic forms in which banks receive money from
their customers? What accounts can one open with a bank?
In what case can a customer earn interest and issue checks?
3. How do banks make their profits? What does it mean for
a bank to act as an intermediary? Is it possible nowadays to
do business without any bank? If it is, can you explain how?
4. Why do you think trust is so important in banking? Can one
always rely on his partners in this business?
III
1. What is the procedure when you open a bank account? Does
it take you much time to do it? What should you sign? What
may happen later if your signature doesn’t coincide with that
of your signature card?
2. When do you prefer to use an automated teller machine? Is it
always a convenient way to deposit and withdraw money?
What should you be aware of while doing it?
3. What is a monthly service charge and what does it depend
on? How do your understand the term “account balance”?
4. Why do your think the bank changes its terms for deposits
so often?
5. On what conditions does the bank renew deposits and for
what period?
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IV
1. What is the usual procedure in the bank for making a loan?
How does the bank protect its investment? What is collateral
or pledge?
2. Why can’t the bank give loans in currency? What would
happen, if it were to do so?
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