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Another way a bank could create claims against itself was to issue bank notes. In London, goldsmith bankers introduced bank notes about the same as they introduced checks. Bank notes were pieces of paper that promised to pay the bearer a specific amount in gold when presented to the issuing bank for redemption. Whereas only the individual to whom the deposit was directed could redeem checks, notes could be redeemed by anyone who held them. Notes redeemable for gold or another valuable commodity are called fiduciary money. Fiduciary money was often «as good as gold» since the bearer could, upon request, redeem the note for gold. In some ways fiduciary money was better than gold because it took up less space and was easier to carry.
The amount of fiduciary money issued depended on the bank's estimate of the proportion of notes that would be redeemed for gold. The greater the redemption rate, the fewer notes could be issued based on a given amount of gold reserves. Initially, these promises to pay in gold were issued by private individuals or banks, but over time governments developed a larger role in their printing and circulation. The tendency to redeem notes for gold depended on the note holder's confidence in the bank's willingness to do so upon request.
Once fiduciary money became widely accepted, it was perhaps inevitable that governments would begin issuing fiat money, which consists of notes that derive their status as money by power of the state, of fiat. Fiat money is money because the government says it is money. Fiat money is not redeemable for anything other than more fiat money; it is not backed by a promise to pay something of intrinsic value. You can think of fiat money as mere paper money. It is acceptable not because it is intrinsically useful or valuable but because the government requires that it be accepted as payment. Fiat money is declared legal tender by the government, meaning that creditors must accept it as payment for debts. Gradually, people came to accept fiat money because of the belief that others would accept it as well. The money issued in the United States today and, indeed, paper money throughout most of the world is now largely fiat money.
The Value of Money
Why does money have value? As we have seen, various commodities served as the earliest moneys. Commodities such as corn or tobacco had value in use even if for some reason they became less acceptable in exchange. The commodity feature of the money bolstered confidence in its acceptability. When paper money came into use, acceptability was initially fostered by the promise to redeem it for gold or silver. But since most paper money throughout the world is now fiat money, there is no promise of redemption. So why can a piece of paper bearing the image of Alexander Hamilton and a 10 in each corner be exchanged for a large pepperoni pizza or anything else selling for $10& People accept these pieces of paper because they believe others will do so. Fiat money has no value other than its ability to be exchanged for goods and services now and in the future. Its value lies in people's belief in its value.
The value of money is reflected by its purchasing power—the rate at which money is exchanged for goods and services. The higher the price level is, the fewer goods and services can be purchased with each dollar, so the less each dollar is worth. The purchasing power of each dollar can be compared over time by accounting for changes in the price level. To measure the purchasing power of the dollar in a particular year, first compute the price index for that year, then divide 100 by that price index. For example, the consumer price index for 1986 was 328, using 1967 as the base year. The value of a 1986 dollar is therefore 100/328, or about SO.30 measured in 1967 dollars. Thus, a 1986 dollar buys less than one-third the goods and services purchased by a dollar in 1967.
Too Much and Too Little Money
Money serves as a medium of exchange, a standard of value, and a store of wealth. One way to understand these functions of money is to look at situations in which money did not perform these functions well. Money may not function well as a medium of exchange because there is too little money, too much money, or because the price system is not allowed to operate. With prices growing by the hour, money no longer represented a stable store of wealth, so people were unwilling to hold money. With rapidly rising prices, relative prices also became distorted, so buyers and sellers had difficulty knowing the appropriate price of each good. Thus, money became less useful as a standard of value—that is, as a way of comparing the price of one good relative to another. Money still served as a medium of exchange, but as larger and larger amounts of money were needed to carry out the simplest purchases, money became more cumbersome. Exchange demanded more time and energy. In short, when there is too much money, the economy becomes less productive than when there is an appropriate amount of money.
On the other hand, if there is too little money in the economy or if the price system is not allowed to function, the economy may be reduced to barter, and, as we have seen, barter is inefficient. For example, just after World War II money in Germany became largely useless because, despite tremendous inflationary pressure in the economy, occupation forces imposed strict price controls. Since prices were set well below what people thought they should be, sellers stopped accepting money, forcing people to use barter. Experts estimate that because of the lack of a viable medium of exchange, the German economy produced only half the output that it would have produced with a smoothly functioning monetary system. The German «economic miracle» that occurred after 1948 can be credited in large part to that country's adoption of a reliable monetary system. It has been said that no machine increases the economy's productivity like properly functioning money. Indeed, it seems hard to overstate the value of a reliable monetary system. Consider in the following case study a more contemporary example of the official currency failing to serve well as a medium of exchange.
store — хранить
coin — монета
note — банкнота
barter — бартер
equal — равный
precise — ценный
token — знак, жетон
profligate — расточать деньги
revenue — доход
sovereign — суверенный, монарх
claims — требования
debasement — понижение
bearer — обладатель, носитель
alloy — сплав
ascertained — redeemable — возмещаемые
dime — 10 центов
commodity — товар
fiduciary — попечитель, доверенное лицо, конфиденциальный
currency — валюта
bolster — поддерживать
confidence — уверенность
acceptability — приемлемость, валидность
value — ценность
cash — наличные деньги
fiat money — декретные деньги
consumer price index — индекс
Money in voyage
Card, Check or Cash?
The range of financial instruments available on the market is constantly expanding, allowing you leave that fat wallet back home while traveling. Payment cards offered by banks are a convenient and secure way to pay at home and abroad. You can use cards of one of the international networks to pay for goods and services, as well as to withdraw money from ATMs, whose number is growing in the country. Traveler's checks are also a convenient instrument giving you easy access to cash in almost every country of the world.
Traveling with a card Visa, Eurocard/MasterCard, Diners Club and American Express cards are widely accepted wherever tourists are frequent guests. You can pay with them at more than 1000000 stores and service points. Most of them are found in big cities. Although those numbers are growing, it is still a bit risky to travel across the country with just a credit card. If, for example, on the road you need to get some gasoline, you have to pay cash at some stations. If plastic money is all you have, you have to look for other gas stations, for example, Shell or Statoil, which accept it.
Money from the wall
Only a few years ago, the possibility of withdrawing money from an ATM was a novelty in our country, and many people treated cash cards with suspicion. At present, bankers say, people are much more willing to use them. Thanks to such «electronic tellers» you have access to your money 24 hours a day, without the need to fill out bank forms or wait in line. There are several thousands ATMs in our country today.
The ATMs are no longer used only for money withdrawals. Recently, some banks have offered additional services. For example, some ATMs also accept deposits and banking operation orders transfers, payments, etc. The holders of Maestro cards can deposit cash and checks or submit banking operation orders in special envelopes in ATMs. The deposited cash or checks are transferred to any account indicated by the client, to a Visa Classic account (either denominated in U.S. dollars or national currency), or to pay off the balance on a Partner card. You can also open a long-term deposit account, request a new banking operation or change a temporary one into a permanent one, make a transfer or other transaction regarding your account. A TM deposit envelopes and order forms are available from bank branches, and the envelopes can also be obtained from ATMs.
ATMs can also accept loan applications, cash checks, sell insurance, open bank accounts, change the card's PIN, and even sell tickets for different events, postal stamps, telephone cards and public transportation tickets. The range of services depends on the bank or company owning the ATM.
But be careful: You have to make sure that the ATM you're using accepts your card. In countries where ATMs can be found on every street that problem doesn't exist, since the machines accept all cards and not only those issued by the bank owning the given machine.
In our country as well, most ATMs accept cards from international payment systems, regardless of the issuer.
Keep in mind that you have to pay a commission of several percent of the transaction when withdrawing money from a machine owned by another bank than the card issuer or by the Euronet network.
Traveler's checks sold in different amounts and denominations can be bought at most banks in our country. You can exchange them for cash in money exchange offices and most banks abroad. They arc also accepted by shops, restaurants and hotels.
Banks offer American Express, Thomas Cook, MasterCard, Citicorp Citibank NA, Visa Interpayment checks and others. Banks sell them denominated in the most popular currencies, like US dollars, Euros and British pounds. The most popular checks are lower-value ones, like $20, $50, or 20-100 Euro.
The client purchasing or cashing checks has to show some ID. Checks are issued to a specified bearer, and they can only be used by the person whose name is on them. When cashing a check, you bye to sign it in the presence of the given institution's employee. That prevents checks from being used by third parties.
Every bank charges commission for the sale and cashing of checks. It usually doesn't exceed 1 percent of their face value. If you haven't used all your checks, you can return them to the bank or deposit them on a foreign currency account.
If you run out of money
Money transfers abroad usually reach the addressee in two days. If the transfer order is placed before 11 a.m. (in some banks, before 1 p.m.), it will be sent the same day. The transfer time may be longer, up to seven days, it" the foreign bank is not a correspondent of the native bank, or if they haven't signed a so-called SWIFT agreement. SWIFT is an international system created by banks in order to accelerate the flow of information on bank transfers.
You can send cash express by Western Union, an American company with thousands of branches all over the world. WU transfers take from five to 15 minutes, since only information about money is sent; the company settles the transaction with a cooperating bank later, without the client's participation. An additional advantage of WU is that you can collect your money without an ID, which may save you if your passport is lost or stolen.
range — выбор, круг
wallet — кошелек
expand — расширяться
network — сеть
ATM — банкомат
cash — наличные
denomination — номинал
gasoline — бензин
retailer — розничный торговец
value — стоимость
flow — поток
bearer — держатель, владелец
withdrawal — снятие денег со
deposit — депозитный счет
transfer — перевод
payment — платеж
account — счет
to cash — обналичить
ID — удостоверение личности
employee — работник
accelerate — ускорять
secure — безопасный
commission — комиссия
A bank plastic card is a commonly and widely used tool of cashless payments, the so-called electronic purse, with the help of which one can pay for goods and services and withdraw cash from ATMs all over the world.
Bank plastic cards are divided into various types depending on the opportunities they provide, maintenance conditions and additional services. With regard to the above features the cards are subdivided into the most expensive and prestigious "golden" cards — Visa Gold, platinum and black cards, universal "classic" cards Visa Classic and MasterCard, cheap "electronic" cards Visa Electron, Maestro and virtual Visa Internet.
Cards are also divided into 2 groups — debit cards and credit cards. Debit cards allow their holders use only the money they have on their account. Credit cards give an opportunity to use bank credit if your are short of money on your account. And of course bank charges fees for using credit. The amount of credit provided depends on the type of the card.
Holders of VISA and Mastercard cards enjoy all the opportunities provided by the payment system Visa International irrespective of the account currency.
Visa Gold Mastercard Gold
The name of the card speaks for itself: Visa Gold is a prestigious golden card for successful people who appreciate comfort and deserve special attitude. The card will provide all the conveniences of an ordinary payment card and additional opportunities among which is insurance by the largest international company International SOS Assistance and emergency assistance during traveling all over the world, legal services and etc. Maintenance fee of Visa Gold per year amounts to USD 100, per two years — USD 150. Provisional deposit amounts to USD 500. Interest reward accrued on Visa Gold card account and provisional deposit is 4.8% per annum.
For Visa Gold cardholders Visa Electron is issued free of charge.
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