Read the text quickly for the specific information that will help you to answer the following questions. For better understanding consult the list of terms and expressions below the text.

INDEPENDENT READING

Three parts of the text “Banks and Money” are devoted to the history of European banks. When tested by the teacher on your independent reading you should be prepared to answer what information from TEXT 1 ( parts I, II, III ) is new and interesting to you.

TEXT 1

Read the text quickly for the specific information that will help you to answer the following questions. For better understanding consult the list of terms and expressions below the text.

1. What role did Amsterdam play in the economic life of Europe at the

beginning of the 17th century?

2. Why did people clip and swear coins?

3. How was the problem of quality solved?

4. How were deposits created?

5. What is spendable money?

Banks and Money (I)

For a full view of banks and money the city to visit is Amsterdam. It is associated with one or two of the great developments in their history.

In 1609, money – hard, coined money – was abundant in Amsterdam.

Everywhere in Europe men were taking coins and sweating and clipping them, thereby getting metal to make more of them. It was to the problem of quality that the merchants of Amsterdam now addressed themselves. They created a bank owned by the city; the bank solved the problem of the coins by going back to the system that antedated the invention of coinage. That was weighing. A merchant brought his good and wretched coins to the bank, the bank weighed them, and the weight of the pure metal was then credited to his account. This deposit was a highly reliable form of money. A merchant could transfer it to the account of another merchant. The recipient knew that he was getting honest weight, nothing funny*. Payments through the bank commanded a premium*.

Then came the second Amsterdam discovery. The deposits so created did not need to be left in the bank. They could be lent. The bank then got interest. The borrower then had a deposit that could be spent. But the original deposit still stood to the credit of the original depositor. That too could be spent. Money, spendable money had been created.

The important thing, obviously, is that the original depositor and the borrower must never come at the same time for their deposits – their money. As will now be evident, every monetary innovation or reform carried the seeds of some new abuse. So it was here. One of the important borrowers from the Bank was the Dutch East India Company. The members of the company were often the same men who ran the Bank. In the eighteen century the East India Company fell in hard times;

There was war with England. Ships did not come back. It was slow pay at first, and then its loans went into default*. Early in the last century suspicion spread, the weakness was affirmed, the depositors started coming, and they couldn’t be paid.

Source: adapted from “The Age of Uncertainty”

by Galbright J.K.

Notes:

* nothing funny – зд. никакого обмана

* Payments through the bank commanded a premium. – Платежи через

банк или за дополнительную плату.

*...its loans went into default - ...платежи по ссудам были просрочены

Words and Expressions

1. hard money - наличные деньги

2. coined money – металлические деньги

3. to be abundant – иметься в изобилии

4. to sweat coins – стирать золото с монет

5. to clip coins – обрезать монеты

6. to antedate - предшествовать

7. coinage – металлические деньги; чеканка монет

8. weighing - взвешивание

9. merchant – купец, торговец

10. good coin – полноценная монета

11. wretched coin – зд. неполноценная монета

12. to credit to one’s account – заносить на чей-либо счёт

13. recipient - получатель

14. abuse - злоупотребление

15. to run the bank – управлять банком

Exercises on the Text

1. Complete the following sentences with may, can, could, must, have to, need.

1. The banks … maintain reasonable reserves of cash against their note issue.

2. The commercial banks … replace their depleted reserves by borrowing from the bank of England.

3. The notes were now worthless and the Banque Royal … not pay.

4. The original depositor and the borrower … never come at the same time for their deposits.

5. The deposits so created did not … to be left idle in the bank.

6. You … transfer all or any part of the account balance at any time.

7. My business went bankrupt, so I … sell my home and pay debts.

8. The terms of credit … be agreed with the partners.

9. We … apply for more cash yesterday because we ran out of money

10. How much currency … one take out of the country?

Expressions below the text.

1. What was the essence of John Law's reform?

2. Why did the Banque Royale crash?

3. When did the word "millionaire" come into use and why?

4. What is the difference between "making money" and "creating

money”?

5. Can you explain "getting rich - in or on paper?"

Banks and Money (II)

On the continent John Law was engaged in selling an idea for a new kind of bank, the deposits of which would be secured by land rather than by silver or gold. In Paris in 1716, he got permission from the Regent to set up a bank, the Banque Royale. As part of the bargain the bank took over the deb­its of the Regent and of the realm.

In 1717, Law organized the Company of the West, later the Mississippi Company. It held absolute title to all lands north from the Gulf of Mexico and east from the Rockies. There, it was said, gold and silver were in unlim­ited supply. Maps of the period showed the mines, although no one has seen them since. The nonexistent metal in the imaginary mines was the backing for the notes.

Parisians, hearing of these conceptual riches and that colonization was under way to get them, rushed to buy the stock of the Company of the West. The stock boomed. By 1719, the boom had become wild speculation. The price of the stock went up, sometimes by the hour. Law's notes went out by the hundreds of millions. Government creditors who were paid off in the notes then rushed to buy stock in the Banque Royale or in the Mississippi Company. It was a complete closed-circle system for recycling worthless paper1. In consequence, all involved were getting rich - on or in paper2. It is to that year that we owe the useful French word "millionaire". In 1719, John Law was the most famous man in all France.

There was no way but go down, and presently this became evident. Doubts began to develop about the notes. So people started bringing them to the Banque Royale for the silver and gold that were still in Louisiana, and also not there. The Prince de Conti sent three wagons to carry back the gold to which his notes entitled him. Paying off the notes in gold and silver was suspended; in modern terms, the Banque Royale went off the gold (and sil­ver) standard. And, in a further, rather severe step, ownership of precious metals except in small quantities was made a crime. But nothing could dis­guise the elementary fact that the Banque Royale could not pay, that the notes were now worthless. Like the deposits in Amsterdam, Law's notes were money created by a bank. Issued in excess, the notes clearly were a dis­aster.

Source: adapted from “The Age of Uncertainty”

by Galbright J.K.

Notes:

1. It was a complete closed-circle system for recycling worthless paper. - Это была своеобразная система повторной переработки бумаг, не имеющих никакой цены.

2. ...were getting rich - on or in paper. - ...богатели, либо выпуская бумажные деньги, либо приобретая их.

Words and Expressions

to sell an idea - зд. рекламировать, расхваливать

to secure deposits by - гарантировать надёжность вкладов

land (silver, gold) землёй (серебром, золотом)

to set up - учреждать, основывать

bargain - сделка

nonexistent - несуществующий

note - ценная бумага, вексель, банкнота

unlimited supply - неисчерпаемый запас (резервы)

to hold absolute title (to) - иметь право собственности (на)

backing for the notes - обеспечение ценных бумаг, векселей

conceptual (riches) - зд. воображаемые (богатства)

worthless - не имеющий ценности

to pay off - выплачивать

to suspend - приостанавливать

to go off the gold stan­dard - отказаться от золотого стандарта

severe step - зд. суровая мера

precious - драгоценный

to issue notes - выпускать ценные бумаги, векселя

in excess - в избытке

Exercises on the Text

Banks and Money (III)

In1694, the Bank of England was formed; its founders subscribed the money the King needed. In return, they were given the right to make loans to others with newly issued notes backed by the King's promise to pay. The Bank became an accomplished instrument for regulating the creation of money by lesser banks - in placing limits on lending and consequent deposit expansion and note issue, in doing so, it provided the restraint that, in its ab­sence, had brought misfortune' in Amsterdam, disaster in Paris. Fn London in the eighteenth century the goldsmiths made loans in notes against the hold­ings of gold and silver coin. The Bank of England, when it receivedthese notes, returned them for collection in gold and silver. This required the banks to maintain reasonable reserves of cash against their note issues. They could not be reckless in the issue of notes as was Law. Later the Bank acquired for itself a monopoly of note issue, first in London, then throughout the country.

The subordinate or commercial banks could still lend the funds of the depositors. This would mean deposits - money - for those who borrowed. And this money-creation could be carried to excess. The Bank of England developed a method for preventing this. When the ordinary or common banks seemed too generous with their loans, the Hank allowed some of their loans to run out2 or it sold some of the securities it held. In repaying these loans or paying for their securities, customers of the commercial banks would transfer gold and silver from the vaults of the ordinary banks to the Bank of England. The reserves in gold and silver of the commercial banks, the protection in case depositors came for their money, would thus be de­pleted. Their lending and associated deposit - and money-creation would then have to be curtailed. This is the procedure now celebrated as open mar­ket operations3. The commercial banks could replace their depleted reserves by borrowing from the Bank of England. Bui that could be restrained by rais­ing the rate of interest. This charge by the Bank of England came to be called the Bank Rate, in the last century a mysterious and wonderful thing. In the United Slates the Bank Rate is the rediscount rate or, nowadays, the discount rate. Such were the regulatory functions as developed by the Bank of Eng­land.

 

The Bank of England, we have seen, disciplined its subordinate banks by presenting their notes systematically for collection in silver or gold. Thus it required them to keep their loans and resulting deposits in some reasonable safe relationship to their hard cash. This would be the basic function of an American central, bank.

Source: adapted from “The Age of Uncertainty”

by Galbright J.K.

Notes:

1. ...it provided the restraint that, in its absence, had brought

misfortune... - это обеспечивало ограничение денежной

массы, ибо отсутствие такового привело бы к финансовому

бедствию…

2. ... the Bank allowed some of their loans to run out -

банк допускал сокращение их займов...

3. This is the procedure now celebrated as open market operations. – Эта процедура сейчас называется операциями на открытом рынке.

Words and Expressions

to subscribe money - вносить долю

to make a loan to smb - давать заём, ссуду кому-либо

to place limits on expansion - ограничить расширение

goldsmith - ювелир

holding - запас; пакет акций, владение

(напр., акциями); pl вклады;

авуары

to make loans in notes against - давать взаймы в банкнотах,

holdings of gold coins - обеспеченных золотыми

монетами ­
to return banknotes for collec­tion - обменивать ценные бумаги на

in gold золото

reckless - безответственный, безрассудный

subordinate bank - подчинённый банк

to be too generous - проявлять расточительность в

предоставлении займов

to run out of (money) - кончаться, иссякать (о деньгах)

to pay for securities - оплачивать ценные бумаги

to repay a loan - погашать ссуду

vault - банковское хранилище

to deplete (reserves) - истощать, исчерпывать (запасы)

to curtail smth - сокращать, уменьшать что-либо

 

charge - зд. взимание повышенной процентной

ставки

the Bank Rate - учетная ставка банка

discount rate - банковский процент, учетная ставка

банка
rediscount rate - переучетная славка банка

Exercises on the Text

THE GERUND

Functions of the Gerund.

1. His being sent to London was quite unexpected to us.

2. I like your being attentive in class.

3. I didn’t know of your having been so deeply impressed by my words.

4. Excuse my interruptingyou.

5. Excuse my having interruptedyou.

6. He doesn’t like being interrupted.

7. After coming back to Russia he started his own business.

8. Upon passingall exams he was accepted to Oxford.

9. He left the room without saying good-bye.

10. The work couldn’t be done without necessary research being carried out.

11. We know nothing about his having publishedthis article.

12. We have never heard of his having belongedto the Liberal Party.

13. You mustn’t come to the party without being invited.

14. They were sure of the contract having been canceled.

Exercise 2. The Gerund is used after:

Would you mind…

I don’t mind…

It’s worth…

It’s no use…

to succeed in…

to fall in…

to insist on…

to prevent from…

to be afraid of…

to be sure of…

to be surprised at…

due to…

in spite of…

instead of…

From exercise 2.

Gerund and the Participle.

1. I remember having met him in the south.

2. Having met the dean in the hall we told him the good news.

3. He thanked her for coming.

4. Her coming prevents us from doing our work.

5. Upon coming to the party, he sang mane new songs.

6. When coming into the hall I saw a group of people standing in the

middle.

7. I don’t like writing letters.

8. The experiment being demonstrated, all those present watched it

very attentively.

9. The making of your own style is always a long process.

10. He was against giving an interview.

11. Learning a foreign language helps us to know better our native

one.

12. A building containing a collection of books is called a library.

THE INFINITIVE

COMPLEX OBJECT

He wants me + to read this book. –Он хочет, чтобы я прочел эту

книгу.

He wants his book + to be published. –Он хочет, чтобы его книгу

напечатали.

The Complex Object is used after the following verbs:

To want to expect

To wish to find

to think to consider + to

To know should like

To believe would like

To make

To feel

to see +Infinitivewithout to

To notice

To hear

Russian.

1. I want your company to deliver goods in October.

2. We wish our new model to meet the quality requirements.

3. I’d like you to discuss the details if possible.

4. I expect him to send this letter.

5. I expect him to be sent to the conference.

6. We know him to be an effective manager.

7. We know her to have been an effective stylist.

8. The high price made us cancel out the order.

9. They knew the contract to have consisted of three clauses.

10. We the people run.

COMPLEX SUBJECT

With the Complex Subject.

1. This company is known to produce up-to-date furniture.

2. You are supposed to have already learnt all the irregular verbs.

3. The demand for our new product proves to be higher than expected.

4. Great sums of money are likely to have been spent on this project.

5. Manager is sure to do his best to change personnel now.

6. The letter is unlikely to reach your company on time.

7. This commercial bank appeared to become a bankrupt.

8. Accounting is considered to be a difficult subject.

9. The producers are said to have already reduced prices for computers.

INDEPENDENT READING

Three parts of the text “Banks and Money” are devoted to the history of European banks. When tested by the teacher on your independent reading you should be prepared to answer what information from TEXT 1 ( parts I, II, III ) is new and interesting to you.

TEXT 1

Read the text quickly for the specific information that will help you to answer the following questions. For better understanding consult the list of terms and expressions below the text.

1. What role did Amsterdam play in the economic life of Europe at the

beginning of the 17th century?

2. Why did people clip and swear coins?

3. How was the problem of quality solved?

4. How were deposits created?

5. What is spendable money?

Banks and Money (I)

For a full view of banks and money the city to visit is Amsterdam. It is associated with one or two of the great developments in their history.

In 1609, money – hard, coined money – was abundant in Amsterdam.

Everywhere in Europe men were taking coins and sweating and clipping them, thereby getting metal to make more of them. It was to the problem of quality that the merchants of Amsterdam now addressed themselves. They created a bank owned by the city; the bank solved the problem of the coins by going back to the system that antedated the invention of coinage. That was weighing. A merchant brought his good and wretched coins to the bank, the bank weighed them, and the weight of the pure metal was then credited to his account. This deposit was a highly reliable form of money. A merchant could transfer it to the account of another merchant. The recipient knew that he was getting honest weight, nothing funny*. Payments through the bank commanded a premium*.

Then came the second Amsterdam discovery. The deposits so created did not need to be left in the bank. They could be lent. The bank then got interest. The borrower then had a deposit that could be spent. But the original deposit still stood to the credit of the original depositor. That too could be spent. Money, spendable money had been created.

The important thing, obviously, is that the original depositor and the borrower must never come at the same time for their deposits – their money. As will now be evident, every monetary innovation or reform carried the seeds of some new abuse. So it was here. One of the important borrowers from the Bank was the Dutch East India Company. The members of the company were often the same men who ran the Bank. In the eighteen century the East India Company fell in hard times;

There was war with England. Ships did not come back. It was slow pay at first, and then its loans went into default*. Early in the last century suspicion spread, the weakness was affirmed, the depositors started coming, and they couldn’t be paid.

Source: adapted from “The Age of Uncertainty”

by Galbright J.K.

Notes:

* nothing funny – зд. никакого обмана

* Payments through the bank commanded a premium. – Платежи через

банк или за дополнительную плату.

*...its loans went into default - ...платежи по ссудам были просрочены

Words and Expressions

1. hard money - наличные деньги

2. coined money – металлические деньги

3. to be abundant – иметься в изобилии

4. to sweat coins – стирать золото с монет

5. to clip coins – обрезать монеты

6. to antedate - предшествовать

7. coinage – металлические деньги; чеканка монет

8. weighing - взвешивание

9. merchant – купец, торговец

10. good coin – полноценная монета

11. wretched coin – зд. неполноценная монета

12. to credit to one’s account – заносить на чей-либо счёт

13. recipient - получатель

14. abuse - злоупотребление

15. to run the bank – управлять банком

Exercises on the Text

1. Complete the following sentences with may, can, could, must, have to, need.

1. The banks … maintain reasonable reserves of cash against their note issue.

2. The commercial banks … replace their depleted reserves by borrowing from the bank of England.

3. The notes were now worthless and the Banque Royal … not pay.

4. The original depositor and the borrower … never come at the same time for their deposits.

5. The deposits so created did not … to be left idle in the bank.

6. You … transfer all or any part of the account balance at any time.

7. My business went bankrupt, so I … sell my home and pay debts.

8. The terms of credit … be agreed with the partners.

9. We … apply for more cash yesterday because we ran out of money

10. How much currency … one take out of the country?

Наши рекомендации