The economic essence of finance and inflation.

The concept of 'funds' covers a vast area of economic relations connected with the reproduction of the social product in cash.

The external manifestation of finance in the economy is in the form of movement of funds from various participants in social production. On the surface of things this movement is the transfer of cash from one owner to another in the form of non-cash or cash payments. This was especially true during the origin of the term "finance", from the Latin «finish» - end, finish, ending the payment settlement between the subjects of economic relations. Later the term was transformed into «financia», used in a wide sense, as a cash payment, and then - as a set of of income and expenditure and any business units or complexes.

Not every monetary transaction, the transaction is a financial, as money mediate movement of the entire value of the social product, which is carried out by means of different economic categories - prices, wages, finance, credit and others.

Monetary nature of Finance emphasizes the form of their implementation and their accessories to the value of economic categories.

To allocate finances of a number of economic categories, it is necessary to move from consideration of the phenomenon of Finance to investigate their nature - the inner content of the subject, which is expressed in the unity of all the different forms of its existence. Therefore may represent the image of the subject of research to link its external and internal characteristics.

To understand the essence of finance can be taken as a starting point in the production process (as a whole or individual circuit production assets separate entity - the manufacturer) the time of separation costs and is relatively independent of the cash in the implementation of its form of manufactured products. At a pre-determined by the nature of production structures formed proportions products sold on the elements corresponding to "C», «V», «m», and the formation of the corresponding funds of funds or the accumulation of these funds.

Enlarging the movement of value in the economy can be traced to these basic elements that characterize the main components of the cost of the process of reproduction:

P = C + V + m,

Where P - the total social product;

C - production material costs;

V - value of the desired product;

m - value of the surplus product.

Finally, after going through all stages of the reproductive process, the social product is converted and translated into three separate funds: the fund reimbursement consumption fund and the accumulation fund.

As a result of the cost of the product is entering a new cycle, and the part is consumed and falls out of further movement. The above processes are responsible for a complex web of financial relationships and requires a scientific approach to the study of their effect on the efficiency of the economy and its ongoing development, social processes in society.

Finally, after going through all stages of the reproductive process, the social product is converted and translated into three separate funds: the fund reimbursement consumption fund and the accumulation fund.

As a result of the cost of the product is entering a new cycle, and the part is consumed and falls out of further movement. The above processes are responsible for a complex web of financial relationships and requires a scientific approach to the study of their effect on the efficiency of the economy and its ongoing development, social processes in society.

The subject of the science of finance is a specific system of economic relations, related to the formation, distribution and use of centralized and decentralized funds of funds (government, businesses, organizations and other entities) in order to perform the functions and tasks of the state and to ensure the expanded reproduction.

Finance - an integral part of the monetary relations, but not all monetary relations are financial.

Finances are different from money in content and the functions they perform. Money - it is a universal equivalent, with which primarily measured labor costs associated producers, and finance - is an economic tool distribution and redistribution of the gross domestic product and national income, a tool of control over the formation and use of funds of funds.

The process of reproduction is a whole continuously repeating cycle.

Production →Distribution→ Exchange →Consumption → Production

Each subsequent cycle of reproduction is possible only after the newly created value will undergo distribution, in which will be set up target monetary funds that are the foundation to meet the diverse needs. The actual cash flows are the second and third stages of the reproductive process. But only in the second stage is the movement of value apart from the movement of goods, and is characterized by its alienation (by hand) or the isolation of each of the target value (within the same owner). At this stage, the stage of financial relations, there is a distribution value of the social product for the intended purpose and economic entities.

A homogeneous economic relations, being represented in the generalized abstract form, form an economic category - finance.

Thus the criterion for inclusion of any relationship to the financial are:

1. The actual cash flows, i.e., transition from one owner to another.

2. Distributive nature of these relationships.

3. Place of origin - the second stage of the reproductive process.

The term inflation (from the Latin. Inflation - «bulge") was first used in relation to the circulation of money in the period of the Civil War in the United States in 1861-1865. Financing of public spending by issue of paper money with the termination exchange led to "bulge" of money and the depreciation of paper money.

Inflation - a violation of the law of monetary circulation, distorting the process of social reproduction and economic policies and which manifests itself in an excess of money in comparison to the real needs in their turnover, depreciation of money.

The causes of inflation are associated with disparities between the different spheres of the economy: accumulation and consumption, supply and demand, revenue and expenditure, sources of loan capital and their use; supply of money in circulation and needs to use and needs of the economy in the money.

The underlying processes of inflation are both in the sphere of circulation, and in the sphere of production, and often driven by economic and political factors. All factors affecting to the inflation, can be divided into two large groups.

Internal factors: militarism, the cyclical development of the economy, unbalanced investment, state-monopoly pricing, regulation of the economy, the crisis of public finance, credit expansion, an excess of money in circulation and increase their velocity.

External factors: the impact of global structural crisis, the monetary policy of the leading capitalist countries, aiming to export inflation to other mills. Mechanism exported inflation is low tide currency abroad in connection with the balance of payments of the country. Such as the U.S., using the status of the dollar as a reserve currency, the U.S. cover a chronic deficit in its balance of payments outflow of dollars abroad - in other countries, that is, Exports of U.S. inflation. Export inflation contribute governments providing dollar loans, grants, and private corporations, buying up companies abroad, banks participating in operations Eurocurrency market.

Inflation can develop in a stable money supply. For example, the decline in the goods and services at a fixed quantity of money causes inflation. Acceleration of circulation of money, all other conditions remaining unchanged equivalent release additional quantity of money in circulation.

Sometimes inflation especially encouraged by the State, when the use of all other forms of redistribution of the social product and national income.

No matter in what link incipient inflation, eventually a chain reaction, because all elements of reproduction related.

Function in relation to finances means the range of activities inherent in the economic category, display of nature in action, specific ways of expression inherent property categories. The function reflects social purpose categories, revealed its economic nature.

Due to the fact that finances are complex, specific economic category, a derivative of the other, more general category - the money, and for the failure to clearly define the boundaries of the given economic category, its deep penetration into all spheres of social, political and economic life.

Now the greatest recognition to two basic concepts of finance: distribution and reproduction.

Some proponents believe that any finance the second stage of social production - in the process of allocating the cost of the social product in its cash, that the distribution reflects the specific nature of the finance their operations.

According to this concept finance two functions: distribution and control.

With the help of the distribution functions are distributed and redistributed gross social product and the most important part - the national income, as well as part of the national wealth.

Distinguish primary distribution of the social product, and the subsequent, or redistributed.

In the primary distribution of the total aggregate public of the product from the Fund compensation (material costs and depreciation charges ization) and the newly created value - the national income, the primary income generated production sector (businesses and their employees).

Redistribution covers various processes of dividing society-governmental product by business entities in the industry and in the territorial context, resulting in satisfying various needs of members of reproduction in cash to ensure of the final consumption of product in physical form. The income of some participants are formed by other costs, and national national income takes the form of the accumulation fund and the consumption fund. In the first case the funds are used for expansion or growth productive assets, capital of the material sphere, and non material sphere. Twain funds for social infrastructure, the creation of reserves and insurance funds. Consumption fund components of the final income of the population, used for its reproduction, the resources for the maintenance of social institutions, science, culture, management, defense. [1; p 78 ]

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