Topic 2. Issue and release of money into economic circulation

Issue of non-cash money

Cash emission.

Money supply and its elements.

Concept, essence and types of money issue

The concepts of “issue of money” and “issue of money” are unequal concepts.

Issue of money turnover happens all the time. At the same time, the amount of money in circulation does not increase.

Under emission of money is understood such release of money into circulation that will lead to a general increase in the money supply in circulation.

l Main purpose of the issue –– meeting the additional needs of the economy for Money ah for expansion of production, formation of working capital.

lEmission can be of two types: budget (treasury), credit (banking).

lTo finance the deficit state budget The treasury issues treasury notes –– budget issue . It is determined not by the needs of real economic turnover, but by the size of the budget deficit.

lBut a significant part of the money is created by commercial banks as a result of credit operations.

lThis process is called bank issue and occurs through an increase in cash balances in bank accounts, the issuance of banknotes and the creation of electronic money.

There are two forms of credit emission: deposit (non-cash) and cash (banknote).

lIn accordance with the Banking Code of the Republic of Belarus, the National Bank has a monopoly right to issue. The issue of money is carried out by the National Bank through the release of non-cash and cash money into circulation. Cash is issued into circulation in the form of banknotes and coins.

Money issuance is carried out by the National Bank through short-term (up to one year) refinancing of banks in order to

maintaining the liquidity of the banking system of the Republic of Belarus and stability money circulation, purchases by the National Bank of freely circulating on money market state valuable papers and carrying out operations in both the domestic and foreign money markets aimed at increasing gold and foreign exchange reserves. The issue of money for long-term (over one year) refinancing of banks is prohibited.

2. Issue of non-cash money

l Non-cash money issue –– this is an increase in the volume of funds in bank accounts in the process of banks conducting active operations (operations related to the placement of their credit resources). Emissions without in cash always precedes cash.

National Bank issues non-cash money when it buys foreign currency, precious metals and stones, as well as government securities freely tradable on the money market or in the short-term (up to one year) refinancing of banks or the banking system as a whole and the stability of monetary circulation, when providing loans to the government of the Republic of Belarus , local governments.

Money issued by the National Bank is credited to the appropriate accounts: correspondent accounts of banks, the Main State Treasury Ministry of Finance of the Republic of Belarus, its territorial bodies or local budgets. In the future, these funds either remain in circulation and are used for payments as non-cash payments, or are transformed into cash.

After the National Bank has issued a certain amount of money, banks are included in the emission process. Their participation is due to the existence of the multiplier effect (banking, credit, monetary, deposit multiplier). Bank multiplier is a mechanism for increasing the money supply in deposit accounts compared to the initial amount of money in the process of movement of non-cash funds through the system of commercial banks.

3. Cash emission

l The issue of cash represents their release into circulation, which increases the amount of cash in circulation.

l Technically emission – is a write-off of funds from reserve funds National Bank into its working cash registers.

In market conditions, the Central Bank predicts the size of the expected issue.

In particular, the volume of cash circulation is determined, the direction cash flows, placement of the money supply on the territory of the country, its aggregates. The National Bank, as an issuing center, is entrusted with the task of organizing cash circulation, including the production, issue, storage, withdrawal and destruction of cash banknotes.

The production of banknotes and their issuance includes the following steps:

l determination of the level of need for new banknotes;

lprinting banknotes and minting coins, establishing means of protecting banknotes from counterfeiting;

lorganization of storage of non-issued banknotes and coins;

ldirect release of money into circulation.

lTo determine the need for cash, banks make forecasts of the expected receipts of cash at their cash desks, as well as possible withdrawals of money from their cash registers. The forecast of cash turnover is made based on the analysis of data from business entities served, individual entrepreneurs, population.

lThe consolidated forecast is compiled by the Central Bank (NB), using data from the forecast of the main directions of socio-economic development of the country, additional data is involved (statistical, forecast of retail trade turnover, volume paid services population, data from communications and insurance authorities).

The National Bank ensures the publication of descriptions of cash in official media, which gives the public the opportunity to distinguish genuine signs from counterfeits.

4. Money supply and its elements

lThe most important object of regulation by the central bank is the amount of money or money supply in circulation.

Broad money supply is the totality of funds intended for payment for goods, works and services, as well as for the purpose of accumulation by non-bank financial institutions, commercial and non-profit organizations, individual entrepreneurs, individuals – residents of the Republic of Belarus in Belarusian rubles and foreign currency.

According to world standards, the expansion of money supply aggregates occurs as the degree of liquidity decreases.

Money supply aggregates M0, M1, M2, M2* are calculated in Belarusian rubles.

Unit M3 additionally includes translated and time deposits in foreign currency, funds in securities (except shares) in foreign currency, deposits in precious metals.

Unit M0 (cash)–– the most liquid part of the money supply. Includes banknotes and coins in circulation in the hands of individuals and in the cash registers of legal entities.

Unit M1–– aggregate M0 plus transferable deposits (balances of legal entities and individuals – residents of the Republic of Belarus on current, deposit and other demand accounts in Belarusian rubles).

Unit M2 –– (money supply in national definition) – aggregate M1 plus other deposits (time deposits), opening in banks for legal and individuals– to residents of the Republic of Belarus in Belarusian rubles.

Aggregate M2* (ruble money supply)–– aggregate M2 plus funds in securities (except for shares) of legal entities and individuals – residents of the Republic of Belarus in Belarusian rubles.

Aggregate M3 (broad money supply)–– aggregate M2* plus transferable and time deposits in foreign currency, funds in securities (except for shares) in foreign currency and deposits in precious metals of legal entities and individuals – residents of the Republic of Belarus.

Cash foreign currency is not included in the broad money supply due to the limited use of it as a means of circulation and payment and due to the impossibility of accurately assessing its volume.

The main initial guidelines for determining the aggregates of the money supply are the data from the consolidated balance sheet of the National Bank and the consolidated balance sheet of banks of the Republic of Belarus

There must always be a certain amount of money in circulation, which depends on the volume of GDP, the rate of economic growth, the degree of development of the banking system, financial markets, structure of money turnover, velocity of money circulation, monetary credit policy states. Additionally, one should take into account the size and structure of the population’s monetary income, the relationship between supply and demand for money.

To make it easier to study the material, we divide the article into topics:

Depending on the rate of price growth in the market, inflation is distinguished:

Creeping, with an annual rate of price growth of 3-4%. Such inflation is typical for developed countries, which view it as a stimulating factor;
galloping, with an average annual rate of price growth of 10-50% (sometimes up to 100%), which prevails in developing countries;
hyperinflation, with annual rates of price growth exceeding 100%, characteristic of countries in certain periods when they are experiencing a radical change in their economic structure.

Under the influence of inflation, the economic situation in the country is worsening, because:

Production volume decreases as price fluctuations and increases make production development prospects uncertain;
- there is a flow of capital from production to trade and intermediary operations, where capital turnover is faster and there are more profits, and it is also easier to evade taxes;
-speculation is expanding as a result of sharp and uneven price changes;
- are limited credit operations, since no one believes in debt;
- depreciate financial resources states.

The main form of stabilization monetary system is an anti-inflationary policy through monetary and government regulation of the inflation process. Currency reform is a complete or partial transformation of the monetary system, carried out with the aim of streamlining and strengthening monetary circulation. It is carried out by various methods (nullification, restoration, etc.), depending on the economic situation of the country, the degree of depreciation of money, state policy by adopting a one-time legislative act.

Nullification is carried out by canceling the old depreciated monetary currency and the introduction of a new one.

Restoration involves restoring the previous gold content of the currency and increasing the gold rate.

Devaluation - depreciation national currency in relation to foreigners.

Revaluation is an increase in the exchange rate of the national currency in relation to foreign ones.

Denomination is a reduction in the face value of the money supply in circulation by exchanging banknotes for new ones in the proportions of their depreciation, i.e. method of crossing out zeros.

Shock therapy is a type of confiscation monetary reform. It includes exchange paper money at the rate, full or partial freezing bank deposits population and entrepreneurs, widespread use of free .

Issue of securities

State regulation of the inflation process means a set of government measures aimed at limiting price increases and stabilizing the monetary system through deflationary and income policies.

Deflationary policy includes methods of limiting money demand by reducing government spending, increasing interest rate for credit, strengthening tax pressure, limiting the money supply. But she doesn't help economic growth. Income policy involves control and complete freezing of prices and or the establishment of strict limits on their growth.

The purpose of issuing securities is to attract the required amount of funds in the shortest possible time. Emission can be primary or additional. The primary issue of securities is carried out upon the establishment of a joint stock company. An additional issue is carried out if the company needs to attract additional financial resources. Additional issue of shares can be carried out after approval general meeting the results of the previous issue, changes due to the actual sale of previously issued shares and the redemption of unrealized shares. In addition, with an additional issue of securities, shareholders are the owners of voting rights. Shares have a pre-emptive right to purchase them.

In accordance with Federal law RF “O” issue-grade security is any security, including uncertificated paper, which is simultaneously characterized by the following features:

Secures a set of property and non-property rights that are subject to certification, assignment and unconditional implementation in compliance with the forms and procedures established by law;
posted in releases;
has equal volume and terms of exercising rights within one issue, regardless of the time of acquisition of the security.

In accordance with this law, equity securities in Russia are shares and bonds.

A share is an issue-grade security that secures the rights of its owner (shareholder) to receive part of the profit of the joint-stock company in the form of participation in management joint stock company and for part of the property remaining after its liquidation. A business firm can issue common and preferred shares.

A bond is an issue-grade security that secures the right of its holder to receive from the issuer of the bond within the period specified by it and the percentage of this value fixed in it or other property equivalent. The issuing company may issue bonds with a single maturity or bonds with a maturity in series within certain periods.

Issue-grade securities may be issued in one of the following forms:

Registered securities in the documentary form of issue (registered documentary securities);
registered securities in uncertificated form of issue (registered bearer securities).

When a business firm makes a decision to issue securities, the following main activities are first carried out:

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Underemissions is understood as the release of money into circulation, which leads to a general increase in the money supply in circulation. The emission will occur only when the release of money into circulation exceeds its return to banks.

There are two type of emission :

1.Non-cash issue represents an increase in the volume of funds in bank accounts in the process of banks conducting active operations.

Issue of non-cash money with a two-level banking system based on the mechanism of the banking (credit, deposit) multiplier.

Bank multiplier is the process of increasing (multiplying) money in the deposit accounts of commercial banks during the period of their movement from one commercial bank to another.

2.Issue of cash represents their release into circulation, which increases the amount of cash in circulation.

Currently, cash emission is carried out in the form of issuing banknotes and coins into circulation. Difference between nominal value banknotes or coins and the actual costs of their production is calledshare premium , which is fully transferred to state revenues.

In the Russian Federation, cash issuance is carried out by cash settlement centers (RCCs) of the Bank of Russia. The RCC has:

reserve fund, a working cash register into which cash is received from the reserve

5. CASH TURNOVER AND ITS STRUCTURE

Under money turnover refers to the process of continuous movement of money in cash and non-cash forms. Money circulation serves the interaction of individual subjects of economic relations throughout the entire process of reproduction.

Money turnover - an integral element of a broader concept payment turnover. Payment turnover is the movement of means of circulation and payment existing in a given country. It includes not only the movement of money, but also the movement of non-monetary means of payment, i.e. non-cash transactions carried out using bills, checks, bank cards.

It is necessary to distinguish between the concepts " money turnover" and "money circulation". Money circulation is part of money turnover, this is the movement of money in cash.

The structure of cash flow can be determined according to various criteria:

By the nature of the relationships served by money, allocate the following types cash turnover: Commodity– serves the processes of production and sale of products, works and services; Non-commercial– serves the fulfillment of financial obligations and other non-commodity payments.

Depending on the subjects(money flow channels) can be distinguished: Interbank money turnover (money movement between central bank and commercial banks, between commercial banks); Bank money turnover (money movement between banks and their clients); Interfarm money turnover (money movement between legal entities, between legal entities and individuals); Household turnover (money circulation between individuals); Money circulation between banks and financial institutions; Money turnover between financial institutions and the population. Depending on the form of money functioning in it differentiate : Non-cash money turnover; Cash turnover.

Cash turnover is the movement of cash banknotes: paper money, small change, banknotes, which is organized by the state represented by the central bank.

Issue of money

Emission of money (from the French émission - release) - release of new money into circulation, increase in the circulating money supply.

Emission is the release of money into circulation, which leads to a general increase in the money supply in circulation. Issues can be cash or non-cash.

Issue of cash

Cash emission is carried out through additional issuance of banknotes and coins into circulation.

The release of cash into circulation occurs when cash transactions when banks issue cash from their cash desks to customers (payment of wages, loans to the population in cash, etc.), as well as when the central bank replaces old banknotes with new ones.

Issue of non-cash money

The banking system must provide the national economy with funds in the amount necessary for its normal functioning. An increase in the economy's need for money due to the growth of the national product, an increase in the price level or for other reasons leads to the need for a corresponding increase in the money supply on the part of banks, that is, for them to issue money.

The release of non-cash money into circulation is carried out daily in the process of banking operations. The release of non-cash money into circulation is carried out during lending operations, when banks provide loans to their clients in non-cash form.

However, not every issue of money into circulation leads to an increase in the money supply, that is, it is an issue. When conducting cash and loan banking operations, not only money is issued, but at the same time it is returned to the banks. Thus, along with issuing cash, banks at the same time accept cash (collection of revenue from trading enterprises, accepting cash as deposits, etc.), and along with issuing loans, they return previously issued loans. Emission will occur only when the release of money into circulation exceeds its return to banks. Thus, unlike emission, the release of money into circulation does not always lead to an increase in the money supply.

Non-cash money emission represents an increase in the volume of funds in bank accounts in the process of active operations by banks.

Non-cash issue of money is primary in relation to cash issue. The bank issues cash to customers if they have funds in their bank accounts, and within the limits of these funds. At the same time, non-cash funds are debited from the client’s account for the amount issued. To increase the volume of cash issued from bank cash desks, it is necessary that the balances in bank accounts first increase, that is, that non-cash emission occurs.

The relationship between the issue of non-cash and cash money

Cash and non-cash money have a single nature and are closely interrelated. In the process of their functioning, they can change from one form to another. Cash turns into non-cash money when it arrives at bank cash desks and is credited to the accounts of economic entities. Non-cash money turns into cash when bank clients withdraw part of the funds from their accounts and receive them in the form of cash.

The unified nature of cash and non-cash money determines the unity and interconnection of their emission processes. In particular, in modern conditions, both cash and non-cash issues are of a credit nature, that is, additional means of payment, regardless of their form, come into circulation on the basis of credit transactions.

It goes like this. The main function of banks is the accumulation of available funds and their subsequent placement on a repayable basis. Banks lend funds accumulated in deposits to business entities, the state and the population, becoming their creditors. As a result of this, deposits multiply (multiply) and the total amount of funds in the accounts of economic agents increases. The latter use what they received on credit additional funds to make your payments. Thus, the debt claims of banks on borrowers are transformed into a means of payment - the so-called “monetization of credit” occurs, that is, its transformation into additional funds in circulation.

Issue of non-cash money. As already noted, non-cash issuance is carried out in the process of banks conducting their active operations. At the same time, an increase in the non-cash money supply in circulation can occur during active operations of both the central bank and commercial banks.

However, it should be noted that at present there is no common point of view among economists regarding the role of the central bank in the non-cash issue of the banking system. The main positions can be summarized as follows:

Non-cash issuance is carried out mainly by the central bank; Commercial banks for the most part can only redistribute non-cash money created by the central bank. The ability of commercial banks to create new deposits, that is, non-cash money, is strictly limited by the amount of funds they have in their correspondent account in central bank;

Non-cash emission is carried out not only by the central bank - commercial banks create a non-cash money supply in the process of their active operations in almost the same way as the central bank. The Central Bank would have a monopoly on non-cash issues only if the required reserve ratio was 100%. With the existing partial reserve provision of deposits, commercial banks can create non-cash money, the volume of which exceeds the initial increase in their credit resources;

All non-cash issues are carried out by the system of commercial banks.

Non-cash funds that make up the monetary base of the central bank are secondary in nature, since they are its obligations to the banking system. In the process of lending, the central bank does not create the money supply, but redistributes the reserves of some banks for the temporary use of other banks or the government.

Accordingly, there are different points of view on the extent to which the central bank can control and regulate the volume of non-cash emission (that is, the supply of non-cash money) and, in particular, the extent to which the central bank can control the growth of certain components of the monetary base.

The most common view is that both the central bank and commercial banks take part in the process of non-cash issuance: if the central bank does not provide additional funds to commercial banks to maintain cash circulation and increase reserves, non-cash issuance by commercial banks will be severely limited or stop altogether .

Thus, the basis for the non-cash issue of the banking system is to increase the monetary base of the country's central bank.

The central bank can increase the monetary base by providing loans to commercial banks and the government, as well as by purchasing foreign currency. By carrying out such operations, the central bank increases its assets. Accordingly, its liabilities increase - cash in circulation and commercial bank reserves.

So, the size of the monetary base, and therefore the size of the central bank’s monetary resources, depends on the volume of its active operations. When, in the process of carrying out these operations, the central bank's liabilities increase, its resources, which it can use to carry out active operations, increase accordingly. Thus, the active and passive operations of the central bank are closely interrelated. In a certain sense, we can say that the central bank itself creates credit resources for its operations. The Central Bank exercises control over the monetary base by regulating its active and passive operations, but this control cannot be complete. For example, the central bank is not able to accurately predict and regulate the amount of its loans to commercial banks, since it depends not only on the decisions of the central bank on the advisability of issuing loans, but also on the decisions of the commercial banks themselves and their financial situation. Control over the level of gold and foreign exchange reserves depends on the exchange rate regime in the country. At fixed exchange rate To maintain it, the central bank is often forced to carry out foreign currency purchase and sale operations, which can lead to an undesirable change in the level of foreign exchange reserves.

Bank multiplier

As already noted, in the process of non-cash issue, along with the central bank, commercial banks participate, which create non-cash money when they carry out active operations.

The volume of non-cash funds created by commercial banks depends on the amount of excess reserves that they use for active operations. For commercial banks, reserves in accounts with the central bank are liquid assets, and for the central bank they are liabilities, which it must return upon their first demand. The more significant the excess reserves of commercial banks, the more additional non-cash money supply they can issue into circulation, all other things being equal.

It should be noted that the maximum volume of loans that can be issued by one commercial bank is limited by the amount of its excess reserves. This is due to the fact that funds issued on credit are used by customers for payments and transferred to accounts in other banks, which leads to a corresponding decrease in the excess reserves of that bank. If we consider the banking system as a whole, then the excess reserves of one bank, getting into the accounts of another bank in the process of lending and payments, increase the volume of deposits, and therefore the excess reserves of the latter. Due to this, the second bank, in turn, can increase lending volumes, which will ultimately lead to an increase in the third bank's excess reserves. As a result, there is a multiple expansion of deposits, called deposit (or credit) multiplication.

So, the increase in deposits in the banking system occurs as a result of an increase in the value of the total excess reserves of commercial banks. While in accounts with the central bank, these reserves increase due to active operations of the central bank, leading to an increase in the monetary base, as well as due to an increase in the volume of deposits12 of economic agents into the accounts of commercial banks.

Let's consider how an increase in the reserves of commercial banks leads to a multiplication of deposits, that is, non-cash issues of commercial banks.

For clarity and simplification of the animation model, we introduce a number of assumptions:

Commercial banks do not hold excess reserves but use them to make loans to their customers;

All commercial banks lend the full amount of their excess reserves;

Funds held in deposit accounts in commercial banks are not converted into cash and do not remain in the hands of clients;

Funds issued on credit are credited to the current (settlement) accounts of borrowers;

All funds lent by one bank, as they are spent by borrowers, are transferred to deposit accounts in another bank and stored there, increasing its excess reserves.

The mechanism of the simplest deposit multiplier model can be seen in the following example.

Let's say the central bank increased the excess reserves of the banking system by providing a loan to Bank-1 in the amount of 100 million rubles.

As a result, Bank-1's excess reserves increased by 100 million rubles.

Bank-1 issues a loan for this amount to its client, thereby increasing the volume of deposits in the banking system by 100 million rubles. The client of Bank-1 transfers the funds received on credit to his supplier to another bank (Bank-2) in payment for the goods supplied. As a result, Bank-1 has no excess reserves left, and a deposit in the amount of 100 million rubles. moves to Bank-2.

After the funds from Bank-1 were transferred to the supplier, the amount in his current account in Bank-2 increased by 100 million rubles. Accordingly, Bank-2 deposits increased by the same amount. The bank views these funds as excess reserves that can be loaned out, since the supplier does not intend to use them for payments. Thus, the total volume of deposits of the banking system increased by 100 million rubles.

As noted earlier, the central bank uses the mandatory reserve mechanism to regulate the volume of money supply in the economy. Let's say the required reserve ratio is set at 10%.

In this case, out of 100 million rubles. of additional deposits received by Bank-2, it transfers 10 million rubles to the required reserve fund of the central bank. He lends the remaining amount of 90 million rubles, which will be his excess reserves, to his client. The latter uses the funds received to make payments for purchased goods, while the loan amount is transferred to Bank-3.

As a result of this transfer, the amount of funds raised by Bank-3 will increase by 90 million rubles, and the total increase in deposits in the banking system (taking into account the deposit created in Bank-2) will be 190 million rubles.

Bank-3 of the received 90 million rubles. additionally raised funds 9 million rubles. contributes to the required reserve fund, and the remaining excess reserves in the amount of 81 million rubles. used for further lending.

As a result of the process under consideration, the increase in the total amount of deposits in the banking system will continue until all excess reserves are transferred to the required reserve fund.

It is obvious that a one-time increase in excess reserves of the banking system by 100 million rubles. in the process of deposit multiplication leads to a total increase in deposits of the banking system by 1 billion rubles. At the same time, the volume of multiplied deposits depends on the size of the mandatory reserve requirement.

A similar process of expanding the deposits of the banking system will occur if the central bank increases the free reserves of a commercial bank not by providing it with a loan, but as a result of purchasing securities or foreign currency from it.

The considered process of multiple expansion of deposits of the banking system indicates the existence of a mathematical relationship between the increase in excess bank reserves and the increase in the total volume of deposits of the banking system. This dependence is expressed by the concept of a bank (deposit) multiplier.

Banking (deposit) multiplier is a coefficient showing how many times the total volume of deposits in the banking system will increase with an increase in excess reserves of commercial banks.

In order to determine the maximum volume of deposit growth (AD), it is necessary to multiply the amount of excess reserves additionally received by the banking system by the amount bank multiplier:

AD = 100 million rubles. 10 = 1000 million rubles. (1 billion rubles).

However, in reality, the value of the bank multiplier is usually less than that which can be calculated using the above formula. In practice, each bank maintains some amount of excess reserves and its customers withdraw cash from their accounts. This means that the multiplier depends not only on the required reserve ratio set by the central bank, but also on other factors that the central bank cannot directly control.

It should be noted that with a decrease in excess reserves of the banking system, there is a multiple reduction in bank deposits. Excess reserves of the banking system may decrease, firstly, due to the actions of the central bank aimed at limiting the growth of the money supply: increasing the required reserve rate, reducing the volume of lending to commercial banks, increasing the interest rate on loans to commercial banks, selling securities and foreign currency to commercial banks . Secondly, excess reserves of commercial banks may decrease due to the fact that their clients will prefer, for some reason, to withdraw part of their deposits and turn them into cash.

Cash turnover consists of the turnover of cash and non-cash money.

Cash– banknotes and coins. Non-cash money– funds in accounts with the CB and the Central Bank (demand and time deposits). In Europe, they are called giro money (from the Italian giro - circle, turnover), which means their circulation within the banking system.

Serving economic turnover, money is constantly released into circulation and withdrawn from circulation.

It is necessary to distinguish between the concepts of “issue of money” and “issue of money” that are similar in content, but not identical.

Issue of money into circulation is a stable, constant process of transfer by banks to legal entities and individuals of cash and non-cash money as a result of credit transactions. It is not always accompanied by an increase in the money supply, since there is a reverse process - withdrawal of money (payment of court, deposit of cash at the bank). In addition, an increase in money in circulation does not occur when cash is deposited with a commercial bank - only a change in the structure of the money supply occurs.

To assess the state of the national monetary system, it is important to know the real change in the money supply, the indicator of which is emission- is the issue of money, leading to a general increase in the money supply in circulation.

Highlight:

§ issue of non-cash money;

§ issue of cash (issue of money in circulation)

Issue of money into circulation carried out:

a) Central Bank:

When purchasing assets. when he pays with his own money (i.e., issues obligations); assets – securities, currency.

When providing loans to commercial banks.

Thus, money, i.e., the Central Bank’s obligations to partners under these transactions, is released into circulation in the non-banking sector.

The most widespread are the Central Bank's credit operations, which characterizes the Central Bank's money as credit money, and the national monetary system as a system of credit money.

Other operations of the Central Bank play a major role in the release of money into circulation:

§ in developed countries - this is the purchase of government securities or early purchase (rediscount) of bills of leading national companies;

§ in developing countries (and in the Russian Federation) - purchasing dollars and euros from exporters and commercial banks.

Seizure The central bank withdraws money from circulation when it sells assets to business entities or returns previously issued loans to it. At the same time, the money returns to the Central Bank and its debt on transactions to partners is reduced.

b) Commercial banks:

§ when purchasing assets from clients (securities, currency);

§ when issuing loans

The bank uses the balance of its operating cash for this, or exchanges funds from its deposit with the Central Bank for cash - banknotes. Thus, there is a change in the cash money supply due to a reduction in Central Bank reserves.

Emission is carried out :

a) Central Bank– cash and non-cash.

This process must be carried out carefully, since the stability of the national currency, its purchasing power, price stability in the economy and balance in the money and credit market.

b) Two-tier banking system– Central Bank and Commercial Bank – through the banking animation mechanism – non-cash only.

It is believed that primary is the emission non-cash money, because before cash appears in circulation, it must be reflected in the form of entries on deposit accounts KB.

home purpose of the issue non-cash money – meeting the additional needs of business entities in working capital. This need is satisfied through loans. But banks provide loans only within the limits of their available resources - equity and deposits.

An increase in production, prices for resources and goods causes an additional need for money by the economy and population. This causes an objective need for a mechanism for issuing non-cash money.

Issue of non-cash money.

Given the existence of a two-tier banking system (CB and CB), the emission mechanism operates on the basis of the banking (credit, deposit) multiplier.

Bank multiplier- this is the process of increasing (animation, from the Latin multiplicatio - multiplication) money in the deposit accounts of commercial banks during the period of their movement from one commercial bank to another.

The difference in the terminology of “banking”, “credit”, “deposit” multiplier comes down to differences in the positions of their consideration (Lavrushin):

§ Bank multiplier characterizes the animation process from the perspective of the subjects of animation (the system of commercial banks);

§ Credit multiplier characterizes the basis of the animation process - it is carried out only as a result of lending to the economy.

§ Deposit multiplier characterizes the object of the animation - money in the deposit accounts of commercial banks.

If deposits are the only form of money, then the bank multiplier can be called the money multiplier.

The bank multiplier mechanism is directly related to bank reserves.

All commercial banks accepting deposits from business entities and the public are required to form and place on their accounts with the Central Bank established by law sums of money – required reserves, which are security for the requirements of depositors. Their size is reserve rate(reserve ratio) – equal to the ratio of the amount of reserves to the amount of deposits, expressed in %. Required reserves are one of the instruments of monetary policy of the Central Bank.

CB resources remaining after reserving funds in the Central Bank are called free (excess) reserve.

Free reserve is the totality of CB resources that are this moment time can be used for active operations (Lavrushin). This concept came to the Russian Federation from Western economic literature. But it is not entirely accurate. In fact, the free reserves of commercial banks are their liquid assets. From the definition it follows that this concept refers to resources, i.e. CB liabilities.

The amount of free reserve of an individual bank is equal to:

Cp = K + PR + CC + MBK – OCR – JSC, Where

K – capital of a commercial bank;

PR – attracted resources (funds in deposit accounts);

CC – centralized loan provided to a commercial bank by the central bank;

ICB – interbank loan;

OCR – contributions to the centralized reserve at the disposal of the Central Bank;

Ao - resources invested in active operations commercial bank.

Let us consider the mechanism of the bank multiplier using a conditional example, assuming the following assumptions:

§ required reserve ratio R =20%

§ at the initial moment, commercial banks do not have free reserves;

§ banks strive to invest all free reserves in active operations (only lending as an example);

§ Each KB has only two clients.

2 3 5 6 8 9 11 12 14

KB clients

Rice. 1. Banking multiplier diagram

In practice, there is a constant process of formation and withdrawal of deposits in commercial banks.

Accordingly, there is an increase and decrease bank loans, counter movement of free reserves in the banking system. At the same time, required reserves are formed. Taking into account the continuity and interconnection of these processes, they can be characterized by one term – credit and money turnover. In the figure, it is presented as the movement of deposits and OR, as well as the movement of SR - their counter fragmentation and unification within the banking system.

1. The Central Bank issues a centralized loan to KB1 (KB1 does not have its own for lending) in the amount of 1000 and KB1 has a free reserve of 1000;

2. KB1 credits Client 1 within the free reserve balance (FR) – 1000;

3. Client 1 from his current account (where the 1000 credit was credited) pays the account of Client 2, which is opened in KB2. In KB2, as a result of this operation, CP = 1000 appears;

4. KB2 is obliged to make contributions to the OCR (mandatory centralized reserve in the Central Bank) in the amount of the required reserve rate = 20%, i.e. 200. Thus, KB2 has available funds 1000 - 200 = 800;

5. KB2, pursuing the goal of extracting maximum profit, invests this money: credits Client 3 for 800;

6. Client 3 pays Client 4, whose account is opened with KB3. Thus, KB3 has CP = 800 (i.e., funds transferred to the account of Client 4);

7. from these funds (800), KB3 makes contributions to the ORC in the amount of 20% (i.e. 160). Thus, in KB2 the reserve disappears, and in KB3 it appears;

8. KB3 issues the remaining part (800 – 160) = 640 on credit to Client 5, who pays Client 6 by transferring money to his account opened with KB4. Thus, in KB3 the reserve disappears, and in KB4 it appears, etc.

The money in the accounts of all even-numbered clients (2, 4, 6, 8...) remains untouched - these are their permanent deposits. Thus, it is obvious that the total amount of money in the current accounts of these clients will ultimately amount to a value many times greater than the original 1000 (Client 2 - 1000, Client 4 - 800, Client 6 - 640, Client 8 - 512, etc. .)

The size of the exchange of funds in customer accounts depends on the required reserve ratio.

The animation process is presented here in a formal form. The deposit initially created in KB2, through its subsequent transformation into a loan, creates a new deposit in the same bank, the size of which is less than the original one by the amount of the required reserve. Then the same thing happens in other banks.

The final table data are the sums of four infinitely decreasing processions with the same denominator (1-R).

To calculate the sums, the formula for the sum of an infinitely decreasing geometric sequence is used

S=α1/(1-q), Where

α1 - 1st member of the sequence;

q is the denominator of the sequence.

Table 1

Multiplicative expansion of the credit and deposit base of the banking system

Bank	Received reserves and new deposits	OR(R=20%)	Wed	New loan
Central Bank Bank 1
Bank 2		1000·R=200	1000(1-R)=800	1000(1-R)=800
Bank 3		1000·R(1-R)=160	1000(1-R)²=640	640
Bank 4		1000·R(1-R)²=128	1000(1-R)³=512	512
Bank 5		1000·R(1-R)³=102.4	1000(1-R) ​​4=409.6	409,6

Loss of excess reserves occurs only in individual commercial banks; the banking system as a whole does not lose excess reserves.

Designations:

SR – free (excess) reserves;

Or – required reserves.

Fig 2. Credit and deposit turnover in the banking system.

When they move between banks, there is only a consistent decrease in free reserves by the amount of required reserves - their fragmentation. This process can continue until the amount of the initially received reserve is completely exhausted, i.e., the natural economic limits are exhausted - the amount of money that can no longer be used for lending or acquiring assets. In our example, this is an infinitesimal value.

In practice, a situation is possible when banks will not be interested in expanding lending, and business entities will reduce their need for loans. Then the last free reserve will simply “freeze” in the account of one of the commercial banks until the economic situation changes.

Thus, we can define: cartoonist– this is the maximum amount of new money (deposits, loans) that can be created by one monetary unit initial deposit (loan).

Mathematically, the multiplier (M) is the number by which the value of the deposit (loan) is multiplied to obtain its total possible increase as a result of the multiplicative expansion of deposits (loans).

M =1/R, Where

R – mandatory reservation rate. In our example, R = 20% = > M = 5, i.e. the money in deposit accounts can increase 5 times (i.e. 1000 x 5 = 5000).

Both expansion and contraction of the money supply can be multiplicative. Particular attention is paid to the increase, since the stability of the monetary system and the level of inflation largely depend on this.

The reverse process of multiplicative reduction occurs when deposits are withdrawn from commercial banks. If banks used all free reserves for lending or acquiring assets, then withdrawal of a deposit of 1000 (see diagram 1) will lead to the need to sell assets or reduce loan portfolio. This will lead to the withdrawal of excess reserves of 800 from other banks, etc. This will ultimately lead to a multiplicative reduction of deposits in the banking system by 5000. This is the main reason why banks today strive to attract maximum resources, including from the population.

Thus, the management of the banking multiplier mechanism and the issue of non-cash money is carried out exclusively by the Central Bank. The emission is carried out system banks. The Central Bank, managing this mechanism, narrows or expands the issuing capabilities of the bank. The lower the amount of required reserves, the more money can be created by the banking system.

Managing the issue of non-cash money is one of the most important functions of the Central Bank - the function monetary regulation.

Issue of cash.

Issue of cash- this is their release into circulation, which increases the total amount of cash in circulation.

The monopoly on the issue of cash belongs to the central state banking authority: in the Russian Federation - the Central Bank of the Russian Federation, in the USA - the Federal Reserve System.

Forecasting the size of banknote production and their distribution among the regions of the Russian Federation is the most important function of the Central Bank of the Russian Federation. For this purpose, the central office of the Central Bank and its territorial main departments (GU) carry out analytical work to summarize the data received from credit institutions cash flow forecasts and identifying the main trends in the development of monetary circulation.

The initial information is cash orders (plans) drawn up by clients of credit institutions and operational information on the dynamics of cash receipts at bank cash desks and their issuance.

Incoming part of the forecast Cash turnover is calculated based on the forecast of cash receipts from enterprises and organizations on their own or by collectors.

Expense part of the forecast cash turnover is predicted based on the forecast of bank clients’ expenses for paying salaries, travel expenses and other current expenses.

The amount of future release (withdrawal) of cash into circulation depends on the ratio of income and expenditure parts.

The issue of cash is carried out by the Central Bank of the Russian Federation together with its State Administration and is associated with:

§ With cash service economic entities and population of each region;

§ the need to increase the cash reserves of credit institutions.

For this purpose, the Central Bank of the Russian Federation, under its main departments (GU), creates settlement and cash centers (RCCs). In the RCC, working cash registers are opened and reserve funds are formed.

Reserve funds represent stocks of banknotes (banknotes and coins) intended for release into circulation when an additional need for cash arises. These banknotes are not considered money in circulation (not included in the calculation of the money supply), because . don't make any movements; are a reserve. They are being created by order of the Central Bank of the Russian Federation based:

§ the size of the cash register;

§ volume cash circulation;

§ storage conditions;

§ storage capacity.

Reserve funds are created for:

§ meeting the needs of business entities and the population for cash;

§ updating the money supply by removing damaged banknotes and coins;

§ maintaining the optimal banknote composition of the money supply for circulation needs;

§ reducing the costs of transporting and storing money, eliminating counter transportation of money between regions and the central storage.

Revolving cash register necessary for accepting cash from commercial banks with their subsequent crediting to permanent deposits in the RCC of the Central Bank of the Russian Federation, as well as issuing cash to them. Money in the cash register are considered money in circulation.

If the amount of cash received into the working cash register of the RCC > the amount issued from it, then the money is transferred from the working cash register to the reserve fund, i.e. the money is withdrawn from circulation. If on the contrary, then the RCC transfers the required amount from the reserve fund to the working cash register. For this purpose, the RCC receives special permission from the Central Bank.

Fig 3. Scheme of cash flow between banks, legal entities and individuals.

RCCs are required to issue cash to commercial banks free of charge within the limits of their free reserves. Money goes to operating cash desks CBs, from where they are issued to clients of these banks, i.e., they will go either to the cash desks of enterprises or directly to the population. In this case, money is debited from clients' accounts upon demand. (See Figure 3.)

Thus, cash is transformed from non-cash money held in deposit accounts and represents an integral part of the money supply created by the commercial bank as a result of the bank multiplier mechanism.

The release into circulation by one RCC does not mean the implementation of a cash emission, since this issue may be accompanied by the withdrawal of the same amount by other RCCs.

Receiving information from all RCCs in the country, the Central Bank of the Russian Federation draws up an emission balance, tracking the dynamics of the issue (withdrawal) of money (daily).

Thus, this procedure for organizing monetary circulation is an important tool for implementing the monetary policy of the Central Bank of the Russian Federation, aimed at protecting and ensuring the stability of the ruble.