The first stage actually began in July, 1990 simultaniously with the total currency restrictions abolition regarding the capital flow to EU. The second started in January, 1994 with the beginning of the European Monetary Institute in Frankfurt on the Main consisting of the Central banks managing member countries. The purpose of the European Monetary Institute creation was the preparation for the European System of Central Banks organization and ECU banknote issue. The European Council laid on December, 1995 in Madrid confirmed the decision of the Common European Currency introduction from January, 1999 what became the third concluding stage.
The Council participants decided to refuse the name of «ECU» admitting EURO instead. As envisioned by the Council euro shouldn’t be a parallel national currency like it was ECU but it should become a single and common currency precisely for all the EU members which finally will replace marks, pounds and francs.
The technical transfer stipulated four stages. Till May, 1998 the European Union should decide what countries will constitute the monetary union. Australia, Belgium, Finland, France, Germany, Ireland, Luxembourg, Netherlands, Italy, Portugal and Spain were included into the first list. The Great Britain and the rest Scandinavian countries joint at the later stage. This group of the 11 above mentioned countries forms the market with the GDP of 6.5 billion USD and with the population more than 280 million people. For comparison: The US GDP is 6.955 billion USD with the population of 263 million people.
On the second stage which began on January 1st, 1999 the fixed exchange rates were identified. The European Monetary Institute transformed into the European Central Bank. Beginning from the above date the monetary markets quote in euro which became the basic currency in the interbank payments. The correspondent banks chose their euro-clearing bank and set up the euro-accounts. The private individuals could hold euro for their bank accounts and make bank payments by means of this currency but still the banknotes and coins haven’t been issued for circulation.
On the third stage beginning from January 1st, 2002 the euronotes and coins were put in circulation. Euro became the second lawful currency after the national as on streets as in shopping centers.
On the last stage six months ago the national currencies lost their lawfulness as a mean of payment but for some time banks exchanged them on euro. To July, 2002 euro become the only currency unit in the European Union. The emission and control of cash euro circulation were entrusted on the European Central Bank.
The function of world money is performed by the modern money but at limits. First of all nowadays it is not performed by all the money. For the second even those currencies (for example US dollars, euro, yens) which are actively used today in the international relations are not universal either and they don’t cover all the system of the World money circulation.
All the listed functions were fully performed by money in the condition of the gold standard, i.e. when the role of the total equivalent was played by gold. The suspension of gold standard led to the fact that money stopped to perform their two traditional functions (treasures and world money) which couldn’t be performed without gold in the quality of money. That’s why in the modem conditions the economic literature often indicates only three functions of money: standard of value, instrument of circulation and mean of payment though this is a debatable opinion.
A consideration must be given to that actually in performing by the modern money its functions the fundamental changes took place but it doesn’t mean that two of five functions do not exist at all.
The function of treasures forming actually transforms into the function of value store when money is considered as a special liquid asset which saves after the good sale and provides its owner with a purchasing power in future.
Reviewing the initial analysis results of the money functions we can determine their interaction and also pay attention that the function of instrument of circulation and payment should determine the level of the total monetary stock in the country and the function of saving is directly linked with the State monetary policy.
The basic requirement of the money functions performing is the stability of the money circulation whole system.
The comprehension questions
1. Name two basic theories of money origin in the World Economy.
2. What are the basic history stages of money development according to the evolutional theory?
3. List the money functions and elaborate the concepts.
4. The essence of money consists of three features, name them.
Section 2. MONEY TURNOVER, MONEY CIRCULATION AND MONEY SYSTEM
1.2.1. Metal full-bodied money
In the course of historical development initially the system of metal money circulation formed which was based on the metal money usage.
The money qualification which is based on the materially substantial features of the total equivalent allows classifying conventionally the metal money on full-bodied and token money.
The full-bodied (real) money is money the nominal (designated on it) value of which corresponds to its real value, i.e. to the value of metal of which it is produced (an obverse of a coin – adverse, a reverse of a coin – reverse, a ridge – edge).
The first coins appeared in about the XIIth century B.C.E. in China and in the VIIth century B.C.E. in the ancient Lydian State (the Asia Minor). The oldest money which were discovered on the territory of Kazakhstan are the ancient coins found during the diggings of such towns as Otrar, Taraz, Turkestan, Balasagun, Suyab. The earliest are dated from the VIth century. Before the XXIInd century they were produced manually from copper, bronze, gold. As a rule the coins had the images of a family coat of arms – tamga and indicated the title of the main sovereign ruler – kagan. At that times each of them issued their own coins with their title that’s why they greatly differed from each other not only by the images but also by their thickness and form.
Later in the middle centuries in Kypchakiya the territory of which marched with the territory of modern Kazakhstan a silver tanga and a copper poul circulated. The copper coins usually were used for everyday buyings and silver for the foreign trade operations.
After Kazakhstan joint to Russia in the beginning of the XVIIIth century little by little the Russian coins and monetary units began to circulate in our country. In the pre-revolution Kazakhstan during the monetary reform of 1895-1897 the system of gold monometallism was established with the gold-coin circulation.
The gold, silver and copper coins were used in circulation. The basic type of the monetary units was the State Bank credit notes which on 92 % were ensured by gold. The basic part of the monetary stock consisted of the nominal instruments of circulation which could be freely exchanged on the full-bodied money – gold coins and thus they had the population’s credibility.
Having an inmost value the full-bodied money depends on neither the other types of wealths nor the market conditions in which it circulates. All the types of commodity money belong to the full-bodied money – gold and silver coins.
The token money (the substitute of real money) is money the nominal value of which is higher than real, i.e. its purchasing power exceeds the intrinsic value of the commodity which plays role of the monetary relations bearer. The purchasing power of this money is determined by the market conditions exceptionally whereby the inmost value of token money doesn’t influence on it. The token money includes all the types of paper money, credit notes and metal symbols of value (billion coins – small coins