Paper money and banknotes. The difference between banknotes and commercial bills and paper money
3. Features of the classic banknote, its differences from paper money and modern banknotes.
The basis of monetary circulation is made up of banknotes and various coins that have the status of national monetary units.
Modern banknotes have lost the property of being exchangeable for full-fledged money. Modern banknotes belong to the category of inferior money (the face value and internal value do not match).
A monetary system based on inferior money requires constant control and regulation by the government and the Central Bank. Bad money potentially poses a threat to inflation - one of the goals of monetary policy is to keep inflation within certain limits. In monetary circulation, non-cash payments, mainly in electronic form, are increasingly predominant.
Banknote in the most general interpretation, it is a simple bill of exchange of the issuing bank. Its relationship with the bill of exchange was especially clear at the first stage of development, when it took the form of a so-called classical banknote.
Historically, the “classical” banknote arose from a receipt from medieval bankers about taking gold from merchants for safekeeping and about the obligation to return it on demand. As the wealth of banks grew, their receipts (banknotes) began to enjoy such trust that they began to be accepted in payment on a par with gold coins. Gradually, such receipts acquired a strictly established form and abstraction as important features of a bill of exchange and began to linger in circulation for a long time, without returning gold to the bank for payment. This circumstance made it possible for bankers to issue their banknotes to merchants in an amount that exceeded the value of gold accepted for safekeeping, i.e. go from complete to partial coverage of banknotes. Banknotes not covered with gold began to be issued to entrepreneurs instead of commercial bills. From then on (the end of the 17th century) the actual history of the “classical” banknote begins.
The characteristic features of a “classic” banknote are:
Its issuing bank instead of commercial bills;
Mandatory exchange for gold at the first request of the owners;
Double collateral: gold (the bank's gold reserves) and commodity (commercial bills that were in the bank's portfolio).
Thanks to these features, the banknote differed significantly from a commercial bill. If the latter has a private guarantee, which is provided by the capital of one or a group of enterprises, then the banknote is a public guarantee, which is based on the capital of all entrepreneurs, which are stored in banks. Banknotes, unlike bills of exchange, are perpetual obligations not associated with specific trading operations. They can be issued in any banknotes and be in circulation for any period of time, which makes it possible to use them to pay for all possible payments. These advantages gave the note a special quality - general circulation, which the bill did not have.
The double security of the “classic” banknote guaranteed its reliability, constant value, normal circulation and high elasticity of circulation. Self-regulation of the circulation of banknotes was achieved through the provision of commercial bills. By issuing loans secured or discounting bills, the bank increased the number of banknotes in circulation, and when paying bills, the banknotes were returned to the bank, which was ensured by the urgency and indisputability of the commercial bill.
The issuance of bills in close connection with trade operations ensured the consistency of the issue of banknotes with the real needs of turnover - as these needs grew, the issue of banknotes increased, and vice versa. Nevertheless, the issuance of banknotes against commercial bills did not always ensure automatic adaptation to the needs of circulation. This was predetermined by a number of circumstances: the accounting of financial bills, including treasury bills, a decrease in prices for goods and the acceleration of the circulation of banknotes, as a result of which the need for money decreased when the bills matured, etc. In all these cases, there was a threat of the appearance of excess banknotes and their impairment. This could be prevented by the free exchange of banknotes for gold: excess banknotes were presented at the bank for exchange for gold.
The period of the “classical” banknote ended with the complete cessation of its exchange for gold after the global economic crisis of 1929-1933. Under the new conditions, the banknote lost its gold backing and its ultimate guarantee of constant value - exchange for gold. This brought modern bank money much closer to paper money, since it removed the internal brake on its depreciation.
However, it is not just a matter of stopping the exchange of banknotes for gold. In modern conditions, I tested deformations and a mechanism for automatically regulating the issue of banknotes based on promissory notes. First of all, along with commercial ones, treasury bills and government bonds began to be used much more widely to ensure the issuance of banknotes. Since the state's obligations are not real assets, lending them by the issuing bank significantly complicated the connection of the issue with the real needs of turnover. A sharp decrease in the share of commercial bills and an increase in treasury bills and state bonds in ensuring the issue of money means its reorientation from the needs of trade turnover to the needs of the state treasury. Through the satisfaction of the latter, banknotes fall into the sphere of commodity circulation, while they only partially satisfy its needs, and partially turn out to be superfluous, nevertheless they remain in circulation. From this point of view, the mechanism for issuing banknotes becomes similar to the mechanism for issuing paper money. This also brings the modern banknote closer to treasury notes.
At the same time, such a banknote does not completely lose its specific features of bank money, retains certain advantages in circulation compared to purely paper money and is the most common form of cash in countries with developed market economies. Its main features and advantages are that even to cover state expenses, it is not issued directly and irrevocably, but through lending against Treasury debt obligations. This seemingly insignificant detail of the emission mechanism is of fundamental importance. It provides that the state, as an economically independent subject of monetary circulation, can take part in the issuing mechanism on an equal basis with commercial enterprises if it strives to ensure the balance of its financial economy and is able to timely repay its debts to the issuing bank. In this regard, the problem of regulating public debt, maintaining its volumes at economically justified levels, establishing broad democratic control over its formation, including limiting its size, as well as over the relationship between the treasury and the central bank of issue, becomes important.
It is very important that these two bodies, which are located on opposite sides of the emission source, do not become “two pockets on one and therefore the same state jacket,” which are controlled by “one hand.” In this case, money will always freely “migrate” from the bank’s “pocket” to the treasury’s and the difference between banknotes and treasury notes will finally disappear. To prevent this, most countries have legally established a clear demarcation between the central bank of issue and the state treasury, removing the bank from the subordination of the government and making it an independent state conductor of monetary policy.
A balanced policy regarding government debt and the payment of income on government bonds ensures market demand for these securities. This allows the central bank, through regulating its portfolio of such securities, to influence the mass of banknotes, selling them on the stock market to reduce them, and buying them to increase their number in circulation.
The mechanism of self-regulation of banknote circulation through ensuring their issue with commercial bills has not lost its importance. However, its effect has changed significantly. Bank loans against commercial bills began to be issued primarily in deposit form rather than in banknote form. Therefore, issuing banks, through this mechanism, regulate the amount of deposit money in circulation, indirectly influencing the circulation of banknotes.
It is simply impossible to imagine modern life without money today. Even the most ardent opponents of material wealth are forced to deal with them. You can refuse electronic payments and not use credit cards, but none of us will most likely be able to live without paper money.
Banknote concept
There are several of them. The simplest of them defines banknotes as being made from paper using paint. From the point of view of classical economic theory, a banknote is a form of credit money. They are issued by the central bank of a particular country, which in the vast majority of cases is one of the institutions of state power.
However, in terms of its economic content, a banknote is not an absolute synonym for paper money. These two concepts have a number of significant differences.
- Banknotes are issued only by a bank, while paper money can be issued by the Treasury or the Ministry of Finance.
- Banknotes are backed by gold or bills of exchange. In most cases, paper money is not backed by anything.
- The banknote is issued to ensure trade turnover. The purpose of issuing paper money is to cover budget deficits.
Types of money
A banknote is one of the forms of existence of money. One, but far from the only one. At different times and under different conditions, different types were used.
All money can be roughly divided into full-fledged and incomplete. The first are those that have their own real value - this is the cost of their production, and it is equal to their face value. This type includes commodity money, which was widely used for barter exchange at the dawn of monetary circulation, and metal coins, silver and gold.
More than 9.5 billion rubles were put into circulation. Already by November 1, 1917, the volume of paper money amounted to 19.5 billion rubles, and the purchasing power of the ruble was slightly more than 8 kopecks. The Provisional Government was forced to issue banknotes in denominations of 250 and 1000 rubles. “Kerenki,” as the banknotes formally denominated in gold rubles were popularly called, in fact had no backing. They walked throughout the country until the very end of the Civil War.
With the advent of Soviet power, the construction of communism began in the country. And communism and money, as you know, are two completely incompatible things. But everyone understands perfectly well that the state simply cannot exist without them. And the new government found a way out of the situation: they issued “account signs.” In essence, it was the same money, only “with a different sauce.”
Monetary reforms of the USSR of the twentieth century
During the Great Patriotic War, the country was relatively stable, despite all the difficulties. This was achieved by introducing a card system and establishing fixed prices for goods. But a strong reduction in the mass of goods inevitably led to the formation of a large amount of excess money in circulation. In addition, in the difficult post-war years, the country was literally flooded with counterfeit banknotes. This seriously complicated the process of economic recovery. Therefore, in 1947, a decision was made to carry out a monetary reform, as a result of which 10 old-style rubles were exchanged for 1 new ruble.
Another reform was carried out in the mid-twentieth century. It was then that “Khrushchev candy wrappers”, or simply “candy wrappers”, as the 1961 banknotes were called, came into circulation. They got this name for their small size, comparable to a candy wrapper. This money existed until the 90s and ceased to exist along with the entire country, of which it was, among other things, a symbol.
Banknotes of modern Russia
The extremely difficult economic situation and high inflation of 1991-1993 led to the decision to issue 50 and 100 ruble banknotes. But this led to an even greater jump in prices. Gradually, “wooden rubles,” as banknotes of any type were popularly called, turned into paper in the literal sense of the word. Their purchasing power was falling at warp speed.
The reform carried out in 1998 implied the strengthening of the ruble by 1000 times. It was carried out more gently compared to the reforms of the 40s and 60s. Firstly, there were no clear deadlines within which the population had to exchange the cash in their hands. Secondly, “old” and “new” banknotes had the same circulation throughout the country throughout 1998.
Modern banknotes of the Bank of Russia are banknotes manufactured using the most advanced technologies in the field of protecting their authenticity. To prevent the appearance of counterfeits, the Central Bank constantly introduces into circulation new modifications of existing samples, the protective functions of which are strengthened from time to time.
Today, banknotes in denominations of 10, 50, 100, 500, 1000 and 5000 rubles are in circulation.
US dollar - world currency
The US dollar has long become a generally accepted international means of payment. It is firmly included in the number due to the fact that the United States was the last to abolish the gold standard of its currency. This happened only in 1971, while European countries did this at the beginning of the twentieth century, during the Great Depression.
The functions of the Central Bank in the United States are performed by the Federal Reserve System. It is she who has the right to issue and issues cash banknotes into circulation. The US dollar in circulation comes in denominations of 1, 2, 5, 10, 20, 50 and 100. There are also bills of 500, 1000, 5000 and even 10,000 dollars, but these are used only for internal transactions of the Federal Reserve and the US Treasury.
Money circulation dates back several centuries. During this time, many interesting and truly amazing facts related to cash have accumulated. The most interesting banknotes in the world - what are they?
The largest banknote by denomination was issued in Hungary in 1946. Its value is one billion billion (that is, 1021). The diameter of the Universe, by the way, is 1023 km.
The largest banknote in terms of purchasing power is in circulation in the UK. Its face value is 1 million pounds sterling. Two such banknotes are known to exist.
The smallest denomination banknote was in circulation in the USSR. for 1 kopeck, which was issued by the State Bank for internal payments.
A banknote is a form of existence of cash, without which the modern monetary system simply cannot exist. Despite the development of non-cash payments, we are unlikely to be able to completely abandon paper money in the near future.
Which are produced by countries.
Originated in the 16th-17th centuries. With the transfer to the Central Bank of the Russian Federation of the right to issue banknotes with the obligation to exchange them for gold, this form of money becomes universal legal tender. Banknotes began to be issued into circulation not as evidence of the subject’s contribution, not as substitutes for gold coins, but as ordinary paper money.
- by urgency. A promissory note is a debt obligation. A banknote is a perpetual debt obligation;
- under warranty. The promissory note is issued by individuals and has an individual guarantee. The banknote is issued by the Central Bank of the Russian Federation and has state guarantees.
Classic banknote different from paper money:
- by origin. Paper money arose from the function of a medium of exchange. Banknote from the function of means of payment;
- by repayment. Banknotes upon expiration of the term of the bill under which they were issued are returned to the Central Bank of the Russian Federation. Paper money does not return, but remains stuck in circulation;
- by dimension. Upon return, the banknote was exchanged for gold or silver. Paper money is not exchangeable. Modern banknotes fall under the laws of monetary circulation.
Banknotes are issued in three ways:
- by bank lending to the state or by providing loans to all credit institutions in the form of rediscounting bills;
- through bank lending to the government secured by government securities;
- in exchange for foreign currency.
Features of modern banknotes
Banknote - a debt obligation addressed to the bank that issued it. Modern banknotes are issued by the central (issuing) bank. The first banknotes in Europe were issued by the Swiss Bank of Issue. State regulation of banknote issue was first formed in England in 1694. Initially, the banknote had double security:
- a commercial guarantee, since it was issued on the basis of commercial bills purchased from bill holders;
- a gold guarantee ensuring its exchange for gold.
Such banknotes were called classic and had high stability and reliability, which was based on the possibility of exchanging the banknote for goods or coins made of gold and silver. The classic banknote was a receipt containing a requirement for the issuing bank to issue a certain number of coins to its bearer. Classic banknotes, the issue of which was initially of a private nature, had a credit and deposit nature.
The credit nature of banknotes was reflected in the process of their issuance when accounting for commercial bills (Fig. 1.5). Banks bought (discounted) commercial bills from bill holders in exchange for banknotes. Thus, a commercial loan was transformed into a short-term bank loan, and the banknote was a credit note secured by commercial debt obligations.
Rice. 1.5. Scheme of issuing classic banknotes in the process of accounting for commercial bills (1-6 - order of operations)
The deposit nature of banknotes originates from the circulation of deposit tickets, which represent an obligation of the bank or depository office to issue to the bearer of the ticket a certain number of coins deposited. An example of such analogues of banknotes are:
- deposit tickets for receiving silver coins, issued by the Deposit Office, established in Russia in 1840. Deposit tickets were endowed with the right of circulation and use in all payments. The issue of tickets was 100% backed by silver;
- credit notes (credit rubles), issued at the end of the 19th century. in order to accumulate gold reserves in exchange for gold coins, gold and silver bars, handed over to the exchange fund of the State Bank of the Russian Empire. In accordance with the monetary reform of 1895-1897. provided for the issue of credit notes backed by gold and private commercial bills;
- metal deposit receipts that were in circulation from 1886 to 1895 and ensured the influx of gold coins, foreign currency exchangeable for gold, and foreign trade commercial bills (drafts) paid in gold into the State Bank of the Russian Empire.
Classic banknotes as representatives were characterized by legally established provisions for their issue. Depending on the security, three types of banknotes were distinguished:
- banknotes with full coverage were fully backed by coins minted from precious metals and were freely exchanged for coins at the market rate. The issue was limited by the gold reserves of the issuing bank;
- Partially covered banknotes were backed by precious metals and commercial bills, were redeemable for gold, and were issued by the state bank in accordance with the issuing right granted to it. It is characteristic that during the period of gold monometallism, most national banks of issue issued banknotes with partial coverage, which is confirmed by the data in Table. 1.1.
Table 1.1. Degree of coverage of banknote circulation with gold in the leading countries of the world in 1895-1913, %
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Germany |
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Austria-Hungary |
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Holland |
Uncoated banknotes had no direct backing and were not redeemable for gold or silver coins. The issue of such banknotes is called fiduciary.
Modern banknotes are backed by the totality of assets (property) of the issuing bank.
Characteristic features of banknotes in contrast to other forms of credit money:
- act as a perpetual debt obligation of the issuing bank;
- have a state guarantee;
- arose from the function of money as a means of payment;
- under the conditions of gold monometallism, banknotes were freely exchanged for gold, in contrast to irredeemable paper money.
Modern banknotes are not redeemable for gold, but retain their credit basis. Banknote issuance channels are as follows:
- bank lending to the economy;
- bank lending to the state;
- increase in official foreign exchange reserves.
Coins made from monetary alloys - billon coins - are issued as change for banknotes. In the practice of cash circulation, three types of change coins are used - main, fractional, and combined. A coin of the same name as a monetary unit is called basic(for example, a one ruble coin). A coin that forms part of a monetary unit is called fractional(50, 10 or 5 kopecks). A coin that combines several coin units is called national team(for example, 2 or 5 rubles).
Banknote - this is a special type of credit money issued by the issuing bank of the country and is a perpetual debt obligation and is guaranteed by the central bank, which in many countries is state-owned.
In the era of the gold coin standard, a note was nothing more than a bill of exchange to the banker, by which the bearer could at any time receive actual money, and with which the banker substituted private bills. This characteristic of the banknote related to its classical form. The classic banknote had the following characteristic features:
issued by the issuing bank in exchange for commercial bills;
was legally backed by gold and was exchanged for gold;
had double security (bills - commodity and gold).
The listed features of the classical banknote were reflected in the following patterns of its circulation:
1) the circulation of a classic banknote took place in a vicious circle. This is due to the fact that banknotes were issued as a loan against a commercial bill, and repayment took place by repaying this loan;
2) a classic banknote is stable by nature. This was ensured, firstly, by issuing commercial bills in order of accounting, which were backed by specific commodity transactions, and secondly, by the fact that banknotes surplus to circulation were returned to the issuing bank by exchange for gold.
The classic banknote was fundamentally different from paper money:
*by origin - the emergence of paper money is associated with the peculiarities of the function of money as a means of circulation, the appearance of a banknote is associated with the function of money as a means of payment;
*according to the sources of issue - paper money is issued by the state treasury, banknotes - by the issuing bank;
*according to circulation patterns - a classic banknote circulates in a closed circle and returns to the issuing bank, paper money does not have such a return mechanism, they “get stuck” in circulation channels;
*by exchange - a classic banknote could, if necessary, be exchanged for metal, paper money could not.
With the collapse of the gold coin standard system during the First World War, the exchange of banknotes for gold ceased in most countries, which led to the loss of the gold backing of banknotes and their stability. In addition, the bill security of the banknote issue deteriorated significantly, since the bill portfolio of the issuing bank increasingly consisted of treasury bills and other government debt obligations. All this indicates the features of modern banknotes, which differ significantly from classic ones.
Consequently, a modern banknote is characterized by the following properties:
it does not have gold backing and is not exchangeable for gold;
the issue is carried out not only in the order of lending to trade turnover, but in the order of bank lending to the state.
Based on the above, three channels for issuing modern banknotes can be distinguished:
1) bank lending to the economy, which ensures the connection of money circulation with the dynamics of reproduction;
2) bank lending to the state in the form of purchasing a bank and government securities;
3) release against an increase in official foreign exchange reserves, as a rule, in countries with a positive balance of payments.
A modern banknote is paper money in the broadest sense. However, it cannot be completely identified with paper money in its classical form. A modern banknote retains its credit nature, and the vast majority of its issue is carried out in the manner of bank lending to the economy.
Consequently, the modern banknote has a dual nature: essentially it is a product of the merging of paper and credit money, or paper money in the broad sense. Therefore, in economic theory, a distinction is usually made between paper money in the narrow sense - treasury notes, which from the very beginning acted as signs of gold, and paper money in the broad sense - banknotes - signs not only of gold, but also of credit.
Another type of credit money is a check. Check circulation arose and developed during the evolution of credit operations, the centralization of the banking system and the concentration of temporarily free funds in the current accounts of commercial banks.
Check - This is a monetary document in a prescribed form containing an unconditional order from the owner of an account on credit to the institution to pay the holder of the check a specified amount.
Checks are:
registered (to a specific person without the right of transfer),
warrants (with the right of transfer by endorsement),
bearer (can be transferred without endorsement),
settlement (used only for non-cash payments),
accepted (for which the bank gives acceptance, or consent to make payment within the specified period), etc.
The check has a certain form and details. It is a private obligation, and its circulation period is limited by legislative acts, therefore, to ensure the guarantee of payment of a check, the acceptance of checks by reliable banks is of great importance.
When making payments by checks, the following entities enter into economic relations with each other: - Recipient of the check - a legal entity or individual who makes payment using a check and signs it;
- Recipient of the check - an enterprise that is the recipient of funds under the check; - Issuing bank - a bank that issues a checkbook (payment check) to an enterprise or individual.
The check contains the following elements:
a) the name "payment check";
b) the name of the owner of the checkbook and his account number;
c) the name of the issuing bank and its MFO number;
d) identification codes of the drawer and recipient of the check;
e) name of the check recipient;
f) the order of the drawer to the issuing bank to pay a certain amount;
g) purpose of payment;
h) day, month and year of drawing up of the check, place of drawing up of the check;
i) signatures of the drawer and seal impression.
A check that does not contain any of the specified details is considered invalid and is returned to the drawer’s bank without execution.
Federal Agency for Education
Novosibirsk State University of Economics and Management
Department: Monetary relations
Banknote
Student: Prosvetova
Svetlana Gennadievna
Group number: MOP-81
Name of specialty:
Organisation management
Literature
1. Banknote: concept, main features
There are several concepts of the word "banknote". A banknote, as we understand it in everyday life, is cash embodied in paper and paint. If we consider this concept from the perspective of the world economy, a banknote is a form of credit money, which has a number of differences from paper money. Let's look at each of the definitions.
A banknote is, in the broad sense of the word, a monetary sign made of paper, thick fabric (usually silk), metal or plastic, usually rectangular in shape;
in a narrow one, a bank note of a large denomination (as opposed to a treasury note of a small denomination or a small change, which replaces a small coin).
Banknotes were previously issued by both public and private banks and financial companies, currently by the central banks of states and are required to be accepted throughout their territory along with coins.
The oldest banknotes are Chinese. They began to be produced back in the 8th century. In the USSR, starting from 1924 and up to 1992, paper banknotes in denominations of up to 10 rubles (one chervonets) were issued by the Treasury and were called State Treasury Notes, from 10 rubles and above - by the State Bank and were called Tickets of the State Bank of the USSR.
From a scientific point of view, a banknote is credit money issued by the Central Bank by rediscounting bills and lending to various organizations and the state. Initially, banknotes were issued by commercial banks and represented a bank bill. Their appearance was associated with the need to replace a debt obligation in the form of a commercial bill with a bill issued by a bank that had higher credibility than its predecessor. Unlike a bill of exchange, a banknote was a type of cash that could carry out an act of immediate payment, including in fractional parts. Over time, the consolidation of the monopoly right to issue banknotes to issuing (banks) gave the banknotes a public state guarantee. At the same time, they turned into perpetual debt obligations with universal negotiability, that is, they turned into mandatory legal tender throughout the territory of a particular state.
The first banknotes as a type of credit money became known from the end of the 17th century. and had double security: gold, since the gold reserves of the issuing banks ensured their exchange for gold, and commodity, since their emission was carried out on the basis of commercial bills. Such banknotes were called classic and were highly reliable and stable. In this regard, classic banknotes were able to perform the function of simple preservation of value inherent in full-fledged money, through the mechanism of their exchange for precious metal (gold, silver). Under conditions of free exchange of banknotes for gold, the number of changeable banknotes in circulation must be equal to the amount of gold required for circulation. Moreover, each banknote was a representative of the amount of gold indicated on it.
Unlike classic ones, modern banknotes lack both types of security: free exchange for gold has ceased; in the sphere of bill circulation, financial obligations predominate. Currently, the issue of banknotes is under the full control of the state, which assumes full responsibility for the operation of the monetary system.
2. The difference between a banknote and a bill and paper money
When comparing certain concepts, first of all you should understand what and with what we will compare. In the first section I gave a definition of the concept of “banknote”, now let’s look in more detail at what a “bill” and “paper money” are.
A bill of exchange is a written promissory note in a form strictly established by law, giving its owner (the holder of the bill) the indisputable right, upon the maturity of the bill, to demand from the debtor (the drawer) payment of the specified amount of money. The bill has the following features:
1. Abstractness – an obligation without specifying the reason for its occurrence;
2. Indisputability – there is no possibility of refusing to pay the obligation;
3. Negotiability – the ability to transfer a bill of exchange to third parties.
The main differences between a banknote and a bill of exchange are that:
1. For a bill of exchange, the debtor is a company, an individual, for a banknote - the Central Bank (issued);
2. Banknotes have a public guarantee in the form of resources stored in the bank, therefore they act as public credit money, which has a special quality - universal negotiability. A bill of exchange has only a partial guarantee and is not a universal means of payment.
3. Banknote is a perpetual obligation. The circulation of bills of exchange is limited by the period of their payment.
Paper money is banknotes (signs of value), endowed with a forced denomination, usually not exchangeable for metal and issued by the state to cover its expenses. The main properties of paper money are:
1. Lack of intrinsic value;
2. The issue of paper money is associated not only with the real needs of circulation, but also with growing unproductive expenses
3. The mechanism of spontaneous regulation of monetary circulation does not apply to paper money, since paper money does not perform the function of a treasure.
4. Possibility of depreciation due to violation of the law of monetary circulation.
The main differences between banknotes and paper money are:
1. Subject of issue - banknotes were issued only by the bank; paper money may, in addition to the bank, be issued by the State Treasury or the Ministry of Finance;
2. Security - paper money is not exchangeable for metal and, as a rule, is not backed. Banknotes at the time of issue are backed by gold or bills of exchange;
3. The difference in the procedure and order of issue - the classic banknote was issued in order to credit trade turnover, paper money was issued initially to cover the budget deficit.
The transition of the issue of banknotes to state control is gradually blurring the line between banknotes and paper money. Technically, the banknote is executed on paper and in the sphere of circulation replaces metal coins. Therefore, it is perceived as paper money, acting as a substitute for gold. This is also facilitated by the fact that the volume of banknote issue is determined not only by the total value of bills presented for accounting, but also by the amount of settlements in that area of commodity circulation where bills are not valid and cash is used. The sphere of banknote circulation turns out to be the area where metal circulation and the circulation of credit money act together, through the same instrument of circulation. Since a banknote replaces a bill, it is credit money; since it simultaneously replaces gold in circulation, it is a representative of metallic money. If the government issues irredeemable banknotes into circulation, they become government paper money. This also leads to the concepts being confused, since we are talking about the same form of money, only in relation to different circumstances. When there is a healthy circulation of money, the bank note serves as a form of credit money intended to perform primarily the function of a medium of exchange. But when the state abuses its right to issue, suspends or stops the exchange of banknotes for gold due to certain circumstances, the banknotes degenerate into state paper money, which has no strong connection with either metallic or credit money.
3. Main directions of production of modern banknotes
Currently, modern banknotes are issued in three areas: bank lending to the economy, government lending, and an increase in official gold and foreign exchange reserves.
The gold coin standard collapsed with the onset of the general crisis of capitalism, when the 1st World War of 1914-1918 broke out. It was replaced by paper money circulation. After World War I, in 1924-28, an attempt was made to restore the Gold Standard, but not in its previous form, but in the form of a gold bullion and gold exchange standard. The circulation of gold coins could not be restored due to the lack of gold reserves and their uneven distribution between countries. Large amounts of banknotes were exchanged for gold bars weighing 12-14 kg (in Great Britain, France) or for foreign currency, exchanged, in turn, for gold bars (in Germany, Belgium, etc.). Gold was completely forced out of domestic circulation in all countries except the United States, where it remained until 1933. The exchange of banknotes for bullion was carried out, as a rule, only if it was necessary to repay the balance of payments deficit by exporting gold. However, these modified forms of the Gold Standard did not last long. Their complete collapse was caused by the global economic crisis of 1929-1933, as a result of which paper money circulation was established in all capitalist countries, including the United States, with its inherent phenomena of inflation, rising commodity prices, sharp fluctuations in exchange rates, etc. In 1931 the Gold Standard was abolished in Great Britain and Japan, in 1933 in the USA, in 1935 in Belgium and Italy, in 1936 in France, Switzerland and the Netherlands.
After the cessation of the free exchange of banknotes for gold, it was never resumed.
Literature
1. http://ru.wikipedia.org/
2. Great Soviet Encyclopedia
3. Leontyev V.E., Radkovskaya I.P. Finance, money, credit and banks: Textbook. – St. Petersburg: Knowledge, IVESEP, 2003. -384 p.
4. Shmyreva A. I. Money. Credit. Banks: Educational and methodological complex. - Novosibirsk: NSUEM, 2008. -132 p.