IV. Communicative practice. Situations

1. A person trades in a car when buying another. Is the used car a medium of exchange? Is this a barter transaction?

2. In what sense do commercial banks create money?

3. Would it make sense to include travellers’ cheques in measures of the money supply? Season tickets for British Rail? Credit cards?

4. What effect do you expect the widespread adoption of credit cards on the precautionary demand for money by households? Explain. Be sure to take account of the demand for cash. Do you posses a credit card? Speak about your own experience.

5. Speak about your banking experience. How were you choosing the right bank? Is it quite safe to be a client of a commercial bank in Russia nowadays? Why? What is safer? What was the reason for success of numerous financial pyramids in Russia. Speak about one of such pyramids.

6. Suppose banks raise interest rates on time deposits whenever interest rates on bank loans and other assets rise. Will a rise in the general level of interest rates have a large or a small effect on the demand for time deposits?

7. Show why the following statement is incorrect: Consumers must have gone crazy. Their take-home pay is down yet their spending is up.

8. Role play a family talk. The problem is where to deposit money. Discuss if it makes sense at all to reserve money or you had better spend it as quickly as it is only possible.

9. Why are accountants in great demand? Would you like to be an accountant? Who could make a good accountant?

10. Why do many Russians prefer to keep money in dollars?

11. Make up a dialogue between a Ruble and a Dollar. Present it in three styles: romantic, humorous and detective. It could as well be a story from the point of view of a banknote (coin).

Russian Experience

1. Think and say:

a) Are there many rich people in Russia? Give an approximate figure.

b) How much money do Russian people keep on deposits?

2. Examine the data below and see if you were right.

3. Comment on the table.

4. Make a report “Living Standard in Russia”.

5. Read the text “The Battle of the Banks” and make a report “Banking in Russia”.

6. Read the text “History of Russian Money” and say everything you know about Russian money.

In October 1996, on the order of the Central Bank of Russia , the Institute for Socio-Economic Problems of the population, Russian Academy of Sciences, conducted a nationwide survey, the savings of the population of the Russian Federation.

Savings of “Very Rich” Families (Data of a quality interview)

Types of savings	Types of savings, %	Average for one family, thousand rbs.	Per capita Savings, Thousand rbs.
Accounts in Russian banks	21,0	115,5	48,0
Including corporate accounts	17,8	98,2	40,6
Securities	15,9	87,3	36,4
Cash	33,6	184,2	76,8
Total savings in Russia	70,5	387,0	161,2
Accounts in foreign banks	29,5	162,0	67,5
Including personal accounts	16,3	89,5	37,5
corporate accounts	13,2	72,5	30,2
TOTAL	100,0	549,0	228,7

The results of the survey show that in October 1996 the population’s domestic savings held on Russian territory amounted to 804.9 trillion rubles, or $141.2 billion.

Of the overall sum of domestic savings (not counting corporate investments, which are regarded by the respondents as personal savings — a purely Russian phenomenon), the banks account for a mere 13.4 percent (108 trillion rubles), and nearly half (49.9 percent, or 401.4 trillion rubles) is in the form of cash. Of this cash, 305.1 trillion rubles, or $53.5 billion, are in foreign currency.

The survey also explains why half of the savings are in cash. The population distrusts banks and financial institutions in general. This is not surprising, considering that 16 percent of the citizenry were victims of financial pyramids and bank failures.

This data conceals a glaring gap in their living standards: 71 percent of the population (the poor and those with low incomes) account for only 3.3 percent of total domestic savings, while 5 percent of the population (the rich and very rich) own 72.5 percent of this total. Moreover, more than half of the savings (52.9 percent) belong to a mere 2 percent of the population. And 5 percent of the population possess 82.5 percent ($44.1 billion) of the total amount of cash foreign currency.