THE WORLD’S MAJOR CURRENCIES
UNIT 6
MONEY and BANKING
MONEY
To have money is a good thing; to have a say over the money is even better.
YOUR VOCABULARY
Money
–is the coins or banknotes that you use when you buy something, or when you pay for a service.
Monetary
– means relating to money, especially the total amount of money in a country.
Monetarism
– is the control of country’s economy by regulating the total amount of money that is available and in use at any one time.
Monetarist
– means relating to monetarism.
Ex. 1. Study the following words and word-combinations. What are their Russian equivalents?
Money, make money, to be in the money, get one’s money’s worth, to have money to burn, blood money, danger money, hush money, pocket money, money for old rope, raise money.
Translate the sentences below. Pay attention to the words in bold.
1. Many oil-rich countries have money to burn.
2. I always insist on getting my money’s worth.
3. She seemsto be in the money.
4. He made good money when he worked.
5. He deserves to get danger money for that risky job.
6. Do you have any moneyon you?
7. When he was ten, his pocket money was 5 $ a week.
8. It was just money for old rope.
9. Take it away! This blood money of yours!
Ex. 2. There are many words in English with a “money component” in their meanings. Translate them into Russian. Use these words in your own sentences.
Cash, dosh, dough, the wherewithal, a fortune, a tidy sum, change, currency, means, assets, finances, resources, savings, income, benefit, alimony, fund, kitty, bribe, kickback, backhander, allowance, pension, earnings, capital.
Ex. 3. Give the derivatives of:
| value accept measure | vary consume convert | Agree check nominate |
Ask your neighbour as many questions using these words and their derivatives as you can.
Ex. 4. Translate the following text into Russian in written form.
Money Is a Spectrum of Assets
Currency and checkable deposits are readily convertible into one another. Together, they constitute money in the narrow sense.
In a broader sense, some other assets are also “money”. But they are often called near-moneys.Their values are known in the terms of money, and they can be easily converted into money, if this is desired.
The concept of near-moneys is important. For one thing, people who possess near moneys may feel wealthier than other people of the same income level who do not. Hence, people who hold near moneys are likely to have higher propensity to consume.
Money is more than just paper currency and coins. Money is a spectrum of assets. It ranges from currency and checkable deposits through various types of time deposits to financial claims against businesses and US Treasury.
LET’S READ AND TALK
Read the text. Then explain the meanings of the words and phrases which have been highlighted.
TE X T 1
MONEY
Money is used for buying or selling goods, for measuring value and for storing wealth. Almost every society now has a money economy based on coins and paper notes of one kind or another. However, this has not always been true. In primitive societies a system of barter was used. Barter was a system of direct exchange of goods. Somebody could exchange a sheep, for example, for anything in the market place that they considered to be of equal value. Barter, however, was a very unsatisfactory system because people’s precise needs seldom coincided. People needed a more practical system of exchange, and various money systems developed based on goods which the members of a society recognized as having value. Cattle, grain, teeth, shells, feather, salt, tobacco have been used. Precious metals gradually took over because, when made into coins, they were portable, durable, recognizable and divisible into larger and smaller units of value.
A coin is a piece of metal, usually disc-shaped, which bears lettering, designs or numbers showing its value. Until the eighteenth and nineteenth centuries coins were given monetary worth based on the exact amount of metal contained in them, but most modern coins are based on face value, the value that governments choose to give them, irrespective of the actual metal content. Coins have been made of gold (Au), silver (Ag), copper (Cu), aluminium (Al), nickel (Ni), plastic and in China even from pressed leaves. Gold proves to be the most popular. Since civilization began gold has been regarded as a symbol of power and wealth. In many societies gold was seen as a magic substance which could protect people against illness or evil spirits. Mankind never seems to have enough gold and the search for it has driven men mad. The need to search for gold has been compared to a disease, and is called ‘gold fever’.
An incredible variety of items have served as money at various times and places, but all can be classified as either commodity money or fiat money. Commodity money is valuable apart from what it will buy. Gold, for example, is useful in jewelry or dentistry, even when it is not used for money. But some money is useless except when treated as money. Certain pieces of paper of which you would probably like (e.g. 100 dollar bills) are example of fiat money. Use of fiat money is ultimately based on faith – faith in its purchasing power, in its general acceptability, and in the stability of the government that issues it.
Most governments now issue paper money in the form of notes, which are really ‘promises to pay’. Paper money is obviously easier to handle and much more convenient in the modern world. Cheques, bankers’ cards, and credit cards are being used increasingly and it is possible to imagine a world where ‘money’ in the form of coins and paper currency will no longer be used.
T E X T 2
THE FUNCTIONS OF MONEY
Money serves as (l) a medium of exchange, (2) a unit of account, and (3) a store of value. We examine each of these functions, beginning with medium of exchange.
Amedium of exchange, or a transactions medium, is anything generally acceptable as a means of payment in the exchange of goods and services, in repaying debts, and in the exchange of assets, such as shares of common stock.
The second function of money is to serve as a unit of account. Aunit of account is a yardstick for measuring prices and values and a benchmark for comparing them. In principle, any commodity can serve as a unit of account. Having chosen the good, we can express the price of each of the rest of the goods in units of that good. Historically, societies designated a single item to serve as the unit of account, say, a kilogram of wheat. In this way, each good could be priced at so many kilograms of wheat per unit. In modern times, paper money is the unit of account. For example, the dollar is the unit of account in the United States. Knowing that a pound of peaches costs two dollars and a pound of apples costs one dollar enables us to compare their value. Thus, money becomes a standard of value.
Normally, the same item serves as the unit of account and the medium of exchange: the dollar in the United States; the yen in Japan; the mark in Germany. In abnormal times, however, societies divorce the two functions of money, often unofficially. For example, although the ruble is the unit of account in Russia, some Russians use foreign currencies, such as the dollar and the mark, as the unofficial medium of exchange. Many Russians, without access to foreign currencies, resort to barter. Invariably, the reason for the divorce of the medium of exchange from the unit of account is a deterioration of the currency as a store of value, which takes us to the third function of money.
A store of value is a reservoir of future purchasing power. Money is both a temporary and a permanent store of purchasing power. The function of money as a temporary store of purchasing power is an outgrowth of its function as a medium of exchange. If an item is to serve as a medium of exchange, people must hold that item to carry out their transactions. For example, consider an individual who earns $700 a week but plans to spend $560 on goods and services and save $140 every week. Usually this individual will not spend the entire $560 on payday. Instead, he may spend $90 on payday and hold $470 in the form of money to be spent over the course of the week. This $470 held in money is a temporary store of purchasing power.
People, however, hold more money than they need to carry out their transactions. Why? The answer is that money can also serve as a permanent store of purchasing power. Individuals who save forgo present consumption to have higher future consumption. The wealth of individuals is their accumulated savings. Money is one form in which individuals may keep their wealth; stocks, bonds, and real estate are other forms. Of course, when wealth is held in money, in the future it will not need to be exchanged to buy goods and services. The ability of money to serve as a store of value depends on its capacity to retain its purchasing power.
1. Illustrate your understanding of three functions of money with your own examples.
T E X T 3
CURRENT MEASURES OF MONEY
Today the standard measures of money in all developed countries include the volume of currency and the volume of deposits at a point in time. Usually there are narrow and broad measures, distinguished by the type of deposits included in the definition of money. In the United States, the central bank tracks and reports on three measures of money, Ml, M2, and M3.
The narrowest measure of money,Ml, consists of currency, traveler's checks, non-interest-bearing checking accounts (called demand deposits), and interest-bearing checking accounts (called other checkable deposits). All the components of Ml are funds that are generally acceptable immediately for transactions and are naturally referred to by the Fed astransactions balances. They are pure media of exchange; in other words. Ml consists of perfectly liquid assets. The termliquidity refers to the ease and convenience with which an asset can be converted to a medium of exchange. Currency and checking accounts do not need to be converted to anything else to be used as a medium of exchange. They are already the medium of exchange.
A broader measure of money is M2, which consists of Ml plus savings deposits, small-denomination time deposits, (private) money market mutual funds (MMMFs), money market deposit accounts, and two smaller items used primarily by businesses: overnight repurchase agreements and overnight Eurodollars. All the non-M1 components of M2, callednontransactions balances, can be used for payments but usually with some delay. Certainly that is the case with savings and time deposits. Funds in other accounts, such as the money market deposit accounts and money market mutual funds, can be transferred by check, but there are limits on either the number or the size of checks that can be written against these accounts. Typically very few checks are written on these accounts, and the checks that are written are for major payments. Thus, the broader measure emphasizes the store-of-wealth (value) function more than the medium-of-exchange function.
Finally,M3 equals M2 plus balances of less-liquid accounts that are even less likely to be used for payments. These balances are large-denomination time deposits and institutional money market mutual funds as well as term Eurodollars and term repurchase agreements.
- Explain what M1, M2 and M3 mean.
T E X T 4
THE WORLD’S MAJOR CURRENCIES
The currencies of the world’s major economies have names and backgrounds that are as diverse as the countries themselves.
The dollar, used in many countries including the USA, Canada, Australia, gets its name from a silver coin minted during the Middle Ages in a small valley, or “Thal”, in Bohemia called Joachimsthal. Just as a sausage from Frankfurt came to be called a frankfurter, the coins from Joachimsthal were called "Joachimsthaler" or simply "Thaler," and came to be called "dollar" in English.
The pound, used in Britain, Egypt, and Lebanon among others, refers to the weight used in determining the value of coins, based on precious metals such as gold or sterling. The penny has the same origin as the word pawn, found in terms such as pawn shop, and originally meant "to pledge." A penny, like any currency, is a "pledge" of value. In Italy and Turkey, the currency is called lira. The word is based on the Latin libra, meaning "pound," and once again refers to the weight of the original coins.
In Spanish, the word meaning "weight," peso, is used to describe the coins that were based on a certain weight of gold or silver. Originally, there were gold coins called peso de ото and silver ones called peso de plata. In Spain, the currency is called peseta, meaning "small peso." The word peso is used to describe the currency in many Spanish-speaking countries in Latin America.
In Denmark, Norway, and Sweden, the word for crown—krone in Denmark and Norway, krona in Sweden—is used to describe the currency that was originally minted by the king and queen, with royal crowns stamped on the earlier coins. Today, the crown has been replaced by other symbols, but the name remains.
The franc, used in France, Switzerland, Belgium, and other countries and territories, is based on the early coins used in France that bore the Latin inscription franconium rex, meaning "king of the Franks." The coin, as well as the country, took its name from one of the original tribes that settled in the area, the Franks.
The German mark and Finnish markka derive their names from the small marks that were cut into coins to indicate their precious metal content. The German mark, deutsche mark in German, is often called by its shortened name, D-mark.
The riyal, in Saudi Arabia and Qatar, and the rial in Iran, are based on the Spanish word real—which, in turn, was derived from the Latin regal(is)—referring to earlier "royal" coins. The dinar, used in Iraq and Kuwait among others, derives its name from "denarius," a Roman coin that was worth "ten bronze asses," an item of considerable value in days of old. In India, Pakistan, and other countries of the subcontinent, the currency is called rupee (in Indonesia, rupiah), based on the Sanskrit word rupya, meaning "coined silver."
The ancient Chinese wordyiam meant "round," or "small round thing." The name of the Japanese currency, the yen, and the name of the Chinese currency, the yuan, both derived from the old Chinese word, refer to the round shape of the original coins.
1.What other names and backgrounds of the national currencies do you know?
2.What are the backgrounds of the national currency in your country?
Ex. 5. What is the English for?
a) деньги – мера стоимости; деньги – наиболее ликвидный из всех активов; наличные денежные средства; чековые депозиты; сберегательные счета; мелкие срочные депозиты; взаимные фонды денежного рынка; обратить в наличность; индивидуальные счета взаимных фондов денежного рынка; крупные срочные депозиты; чековый депозит; бессрочный вклад; средство сбережения.
b)1.Деньги служат средством обращения. 2.Деньги используются для купли-продажи товаров и услуг. 3.Деньги помогают избежать неудобств бартерного обмена. 4. Мы оцениваем стоимость товара в денежном выражении. 5. Деньги используются для выполнения любого финансового обязательства. 6. Деньги – это все, что выполняет функцию денег. 7. Это позволяет покупателям и продавцам сравнивать стоимость различных товаров и ресурсов. 8. Долговые обязательства также измеряются в денежном выражении. 9. Деньги являются удобной формой хранения богатства. 10. Текущие счета (чековые депозиты) представляют собой обязательства коммерческих банков и сберегательных учреждений. 11. При необходимости люди могут обратить свои чековые вклады в бумажные и металлические деньги.
Ex. 6. Join the parts to make up a sentence.
A) A medium of exchange
B) we can express the price of each of
C) in the future it will not to be
D) distinguished by the type of deposits
E) can be converted to a medium of exchange
F) The reason for the divorce of
G) the store-of-wealth function more than
1. There are narrow and broad measures
2. to buy goods and services
3. the medium of exchange from the unit of account is a deterioration of
4. Having chosen the good
5. is anything generally acceptable as a
6. The term liquidity
7. the medium-of-exchange function.
a) the currency as a store of value.
b) included in the definition of money.
c) means of payment in the exchange of good and services.
d) When wealth is held in money,
e) refers to the ease and convenience with which an asset
f) The broader measure emphasizes
g) the rest of the goods in units of that good.
BANKING
A banker is a man who lends you umbrella when the weather is fair, and takes it away
from you when it rains.
Banks
-financial institutions that offer the widest range of financial services – especially credit, savings, and payment services – and perform the widest range of financial functions of any business firm in the economy.
Affiliated bank
- bank whose stock has been acquainted by a bank holding company.
Bankers’ banks
- groups of banks that are given a legal permit to create regional service firms in order to facilitate the delivery of certain customer services, such as rapid transfer and investment of customer funds and the execution of orders to buy or sell securities.
Bank holding company
- a corporation charted for the purpose of holding the stock (equity shares) of one or more banks.
Correspondent banking
- a system of formal and informal relationships among large and small banks established to facilitate the exchange of certain services, such as clearing checks.
Nonbank banks
- financial service firms that either offer checking account services or grant commercial loans but not both of these services.
Unit banks
- banks that offer the full range of their services from one office, though a small number of services (such as taking deposits or cashing checks) may be offered from limited –service facilities (such as drive-in windows and automated teller machines).
Ex.1. Translate the following sentences. Pay attention to the italicized words.
1. Don’t bank on going abroad this summer, we may not have enough money.
2. The morning began fine, but now clouds are banking up.
3. I have always bank with the Royal Bank.
4. They have an access to huge banks of public data or library information.
5. The only way out is to ask your bank for a loan.
6. I am not sure if I should buy this suit. – Come on! It won’t break the bank.
7. Mr. Smith had bankrolled them when they had nothing.
Ex. 2. Match the term with its definition.