Many hundreds of years have passed since the inception of the first means of payment, but the main function of issuing money is still not clear to everyone. Today I will try to explain in the most accessible language all the subtleties associated with this rather complex process. The economy of any state, like production, is constantly moving forward, and each new round contributes to the formation of a shortage of money supply. The lost volume can be replenished only with the help of the next issue of the corresponding coins and banknotes.
Basic definition of money emission
Issuing money is a complex economic mechanism that is used to regulate investments. In fact, I'm talking about the release of new means of payment that are relevant on the territory of a particular state. Carrying out this operation even on the scale of one country has a tremendous impact on all spheres of activity.
The emission solves the following number of tasks:
- narrowing the gap between the proportions of different industries and the economy;
- changes in the current market volume and consumer demand;
- elimination of the resulting budget deficit;
- an increase in the number of money in circulation for the opportunity to make new investments and thereby develop the economy.
As a rule, the issue is necessary in case of an increase in the number of consumers of means of payment. In Russia, this process is regulated only by the Central Bank of the Russian Federation. The Ministry of Finance is engaged in the issue of government bonds, but before that the procedure must be approved by the Central Bank.
How is the issue of paper and metallic money carried out
This process is entirely controlled by the Central Bank of the Russian Federation. The release of new cash is carried out with the help of the RCC (cash settlement centers). They are evenly distributed throughout the country. RCCs are present in every region of the Russian Federation and serve commercial banks. To carry out the issue of additional money, revolving cash desks and special reserve funds are preliminarily opened there. This is done in order not to slow down the main work with banks, since the issue is a large-scale and costly process in terms of resources. Centers can issue and accept only money that is already in official circulation. Reserve funds are stored until a certain moment, so they do not participate in the movement between banks for some time.
When in one RCC they begin to give out more money than to receive, then their stock is significantly reduced. In this case, the Central Bank issues a permit to use the same pre-prepared reserve to prevent the formation of a cash deficit in the field of credit institutions. This is the issue of money. It can be carried out both within one region (only a few local RCCs are involved), and at the level of the entire state.
Features of issuing electronic money
In the case of non-cash means of payment, the situation is somewhat different. Such an issue represents the issuance of a large-scale loan from the Central Bank, which is credited to the account of a commercial bank. In this process, cash is not involved. Such emission solves the following tasks:
- attracting new financial investments;
- expansion of the current working capital fund of various enterprises and organizations.
Non-cash money is issued on the basis of a bank multiplier. And again, the Central Bank of the Russian Federation alone is the regulator of all the issues associated with this process. But banks are already launching a non-cash issue. And this is done even without their consent. The process of creating additional electronic means performs the following functions:
- an increase in the number of loans issued due to the release of more money;
- in the process of transferring finance between accounts, their volume increases;
- each bank receives new non-cash funds for distribution in the form of interest-bearing loans.
How securities are issued
Issuance of shares and bonds is an irregular procedure. It is activated exclusively for solving specific problems. Moreover, such an issue can be launched not only by the state, but also by various commercial organizations. The latter should be eligible for relevant activities. The placement of securities and the procedure for their issuance on the territory of the Russian Federation are strictly regulated by current legislation. This type of issue takes place in several stages:
- a decision is made to issue new shares or bonds;
- the proposal is approved;
- the organization is undergoing state registration;
- placed papers;
- the final report on the results of the issue is registered without fail.
Most often, an additional issue of securities is used when there is a need to raise funds. When the issuer just starts its activity, he gets the right to issue the first block of shares to form the authorized capital. Also, this process can be designed to attract debt or other investment... The right to issue securities belongs to joint stock companies whose activities are directly related to the economy, as well as government bodies.
Features of issuing bank cards
If the cash issue of money leads to the replenishment of the mass of bills and coins in the current circulation, then the story with "plastic" is somewhat different. Credit organizations issue payment cards for their clients, maintain cash settlement services and open different accounts. This is, in fact, emission. It is carried out in several stages:
- a bank client submits an application in the form established by the organization for a certain type of plastic card;
- the document is registered, after which it enters the register for subsequent issue;
- the card is produced by the processing center, recording the personal account data on an electronic embedded chip;
- the means of payment arrives at the bank;
- the client receives his card by visiting a branch of a credit institution or receiving it by mail (delivery by courier is possible).
The release of this particular banking product directly depends on the needs and the number of holders. The more people want to acquire plastic cards, the more active the process of manufacturing this means of payment will be.
How money is released into circulation in Russia
First, a few words about cash. Coins in the country are minted in only two cities: Moscow and St. Petersburg. Goznak is in charge of this process. Paper money, stocks, bonds, as well as all documents that require a high degree of protection, are printed exclusively in special printing houses. It is there that watermarks and holographic marks are applied, microprints and practically invisible perforations are created. This is for only one purpose - to protect the data of the paper from counterfeiting. The production and release of cash into circulation are under constant control by the state and the Central Bank.
Here is a list of the features of this process:
- the national currency is not actually tied to gold (the official ratio is not established);
- all coins and banknotes are secured by the assets of the Central Bank of the Russian Federation, which also fully services them, introduces and withdraws them from the general circulation (exclusive right);
- throughout the territory of the Russian Federation, only the national currency is used as an officially authorized means of payment;
- old-style rubles can be exchanged for new bills, since there are no restrictions on this issue;
- the maximum life of banknotes is 60 months, and the minimum is 1 year;
- the issue of money, as well as any legal issues related to it, are regulated by the Board of Directors of the Central Bank of the Russian Federation.
The Central Bank of the Russian Federation is in charge of issuing additional non-cash means of payment. In fact, this is a loan that is distributed to the accounts of commercial banks. A prerequisite in this case is the subsequent issuance of funds to other clients at interest. The securities are sold with an emphasis on the current refinancing rate. The issued funds are credited to the beneficiary's account with the Central Bank of the Russian Federation. As a result, the loan provided is simply repaid when the money is returned.
The country's economy can also be replenished by acquiring a stable hard currency of other states. The US dollar is a great example. This is how the gold and foreign exchange reserve increases, and an additional volume of the national currency is introduced into the internal circulation.
The issue of non-cash money is available not only for the Central Bank. It can be launched by almost any commercial credit organization by providing a loan. But such a complex and important economic process, of course, cannot do without control from above. In any case, such emission of money will be regulated by the rules of the Central Bank of the Russian Federation. This is the banking multiplier.
You can also replenish the money turnover by issuing bills. This is a registered security that has a certain printing form. It guarantees the right of its holder to return the corresponding amount from the debtor.
What is seigniorage
This definition is often confused with an inflation tax. This is damage both for individuals and legal entities, resulting from the rise in prices for various goods and services, as well as a simultaneous decrease in the purchasing power of money.
Seigniorage is the income from the issue, that is, from the increase in the cash turnover in the country. It is recognized as the property of the issuer.
What seigniorage can be when using commodity money
Today this concept is already unfamiliar to us. It goes back to the period when estates took place. In the Middle Ages, the income from the issuance of a means of payment rightfully belonged only to vassals. Hence the name "seigniorage", which means "seigneur's power", came from.
Then the denomination of money was completely dependent on the amount and type of precious metal from which they were minted. There were only coins of different weights and sizes in circulation. Minting was carried out at the court of the king, as well as to order at private enterprises. All raw materials were provided by the client. The higher the denomination of the coin, the more its weight turned out to be and the more expensive the issue was.
The vassal could well make money on such coinage, increasing the cost of making money or reducing its total weight. This privilege was later abolished, since gold and silver coins were replaced by paper equivalents - bills. Since then, the means of payment has ceased to be associated with pieces of precious metals and passed into the category of secured wrappers.
Income from issuing fiduciary money
In the modern world, seigniorage is available to every economically developed state with a hard national currency. For example, the United States. Their dollars are widely quoted and have long been recognized as reserve money. Moreover, about 2/3 of the total mass produced into circulation goes specifically to imports for use by other countries. Each year, the United States receives about $ 500 billion in profit from the issue. And Russia is not in the last place in the list of consumers. The Russian Federation accounts for about $ 15-30 billion of the total income of the United States.
Try to calculate the average seigniorage for yourself using the example of a $ 100 bill. The production costs do not exceed 10 cents. In this case, the state income is equal to $ 99,90. The costs of security, transportation and replacement of worn bills are deducted from this.
If we talk about securities, then in this case seigniorage is made up of the interest profit minus the funds spent on the issue of shares or bonds. Here's a good example. The cost of making a $ 100 bill is 10 cents. The average turnover period for each such "piece of paper" is 5 years. For the start of its operation, the National Bank of the country acquires a bond with a similar par value and an annual profit of 1%. As a result, the income from the issue is approximately 98 cents in 12 months.