Reading the attributes of money

Virtually all societies throughout the ages have used money. It has come in many forms, however. Pigs, cattle, jewels, ornaments and shells are just a few examples. On the South Pacific island of Yap, giant stone wheels are the local currency – hardly suitable as ‘small’ change! In times of war or in times of rampant inflation, cigarettes, nylon stockings, sugar, coffee and various other commodities have been used as money.

With the possible exception of Yapese stones, these items are all examples of commodity money. That is, they have value in themselves. Animals can be slaughtered for food; jewellery can be worn; coffee can be drunk, and so on. But although they can all be used as a medium of exchange, in most cases they are far from ideal.

So what are the features of an ideal form of money?

Acceptability

If money is to act as a medium of exchange, it must be generally acceptable as a means of payment. If commodity money is to be generally acceptable, it must have a recognized intrinsic value.

Durability

Money must last a reasonable length of time before deteriorating, certainly if it is to be used as a means of storing wealth. Stone wheels are very good in this respect. Fresh fish aren’t.

Convenience

It must be easy to use. In the case of money that physically changes hands, this means that it must be light and small to carry around and to hand over. In the case of bank accounts (or Yapese stone wheels), it must be easy to transfer ownership. This can be done conveniently by the use of cheques, standing orders, etc.

Divisibility

Money must come in different denominations so as to be able to pay for an item of any value, however large or small. Thus there is use for a 1p coin, for 20 notes and for the ability to transfer any amount from a bank account. In other words, money must come in a number of different denominations and forms. Is this respect, animals are a poor form of money. You could not exchange half a (live) pig.

Uniformity

Money of the same value must be of uniform quality. This applies particularly to the case where money has intrinsic value. People would be unwilling to part with a young fat cow as payment if it only had the same value as an old thin one.

Hard for individuals to produce themselves

This is an obvious requirement of paper money. It must be hard to forge.

In terms of commodity money, there would only be a problem of individuals producing it themselves if the monetary value of the item exceeded its intrinsic value.

Stability of value

If money is to fulfill its various functions (especially as a store of wealth and as a means of evaluating future payments), it must retain its value. Inflation, as we have seen, can be highly damaging to the economy. In terms of money produced by the state, the requirement here is that the government keeps its supply under control. In terms of commodity money, it must not be subject to violent fluctuations in supply. This is one reason why animals would be a poor form of money in many countries, especially those that are subject to drought.

Comprehension check

I. You’ve read about different commodities used as money. What is the most surprising, in your opinion? Do you remember/know what commodities were used as money in Old Russia?

II. Answer the following questions.

1. How long has money existed?

2. Has money always had the form of coins and banknotes?

3. What was the most curious item used as money, in your opinion?

4. How can you explain the term “commodity money”?

5. Is commodity money phenomenon of the past?

6. What are the main features of money?

7. Money must be light, mustn’t it? Why?

8. How do you understand the term “uniformity” of money?

9. Why should the government keep money supply under control?

10. Does Russian money correspond the characteristics of “ideal” money?

III. Complete the sentences.

1. The term “convenience” as applied to money means that …

2. Different items such as … have been used as money.

3. The use of commodity money increases in times of …

4. In general commodity money are not ideal, through it …

5. Stone wheels as a means … are very good in respect of …

6. Convenient money is money that is …

7. Some people try to … paper money which is illegal.

8. The government should keep money supply …

9. The quality of the same value must be …

IV. Translate into English.

1. Много различных предметов использовались в качестве денег.

2. Деньги можно определить как какую-либо вещь, принимаемую в обмен на товары и услуги.

3. В Британии монеты стали заменяться бумажными деньгами в середине 19 века.

4. Так как деньги являются средством хранения богатства, они должны быть долговечны.

5. Передача владения деньгами легко происходит при помощи чеков.

6. Деньги различного номинала нужны, чтобы заплатить за товар любой стоимости.

7. Подделка денег запрещена законом.

8. Если деньги не сохраняют свою ценность, это приводит к инфляции.

Word power

I. Give English equivalents for the following words and phrases from the text.

местная валюта, растущая инфляция, товарные деньги, внутренняя ценность, банковский счет, удобство, однородная качество, подделывать, контролировать, колебание, засуха, долговечность.

II. Match synonyms in columns A and B.

A. B.

commodities perfect

ideal comfortable

throughout to keep

to damage goods

deterioration rise and fall

to slaughter during

convenient to manufacture

fluctuation to do harm

to retain degradation

to produce to kill

III. Translate the following word chains, determine the part of speech and the way of word-building.

virtue – virtual – virtually

idea – ideal – ideally – idealize

accept – acceptable – accepted – accepting – acceptance

recognize – recognizable – recognized – recognition

nominate – denominate – nomination – denomination

form – uniform – uniformal – uniformally – uniformity

damage – damaging – damaged – damageable

Quick Reading

The text given below touches upon some facts from the history of English money.

Read the text quickly and answer the questions:

-Why did these forms of money have such names?

-When did they cease to be used?

The British Monetary System

On February 15, 1971 the traditional British monetary system was replaced by a simplified one based on decimals.

Although the old, non-decimal system is no longer used in Britain, we continue to meet references to it in books published before 1971, or dealing with events prior to that year.

The following coins went out of circulation long before 1971.

1.The Sovereign. The name derives from the Latin word “superanus”, meaning “supreme”, assimilated to “reign”, as the coin bore a representation of the king (or queen) enthroned (or reigning supreme).

A gold coin issued from the 15^th to the 17^th century, and then again (though as a smaller coin) from 1817 to 1917. Its value varied in early times, but was fixed at one pound in 1817.

2. The guinea. A gold coin current from 1663 to 1817 originally made of gold from Guinea in West Africa. Its original value was 20 shillings (or a pound), but from 1717 it was fixed at 21 shillings (or one pound one shilling). However, although the coin was no longer in circulation, “guinea” as a sum of money continued in use until 1971.

3. The crown. Originally a gold coin, first minted in 1526 and continuing in circulation until the late 17^th century. Its value was five shillings. Silver crowns were minted from 1551.

4. The farthing. The name comes from Old English “feorthing”, meaning “a fourth part”.

A small bronze coin, value a quarter of a penny. It gradually fell out of use during the first half of the 20^th century and ceased to be legal tender in 1960.

Talking Point

In groups of 3 or 4 discuss the following question. Try to give different points of view.

- How well does each of the following meet the seven requirements listed above:

grain, strawberries, gold, diamonds, meat, luncheon vouchers, insurance certificate?

Text 3

Pre-reading task

a) Discuss the following questions before reading the text.

1. Do you know what metals are used to make coins? Are there coins made of precious metals? Have you ever seen any of them? What is usually written on coins? (You can have a look at one of the coins you have).

2. In your opinion, what appeared first-coins or banknotes? Why do you think so? Is it more convenient to use credit cards? Why/why not?

b) Key words: coin, banknote, paper money, deposit, goldsmith, deposit, backing, loan.

Look up the key words in the dictionary to find out the exact meaning. Write them out.