Classification of money

Money may also be classified according to its inherent value. In full-bodied money, the intrinsic value of the money's material con­tent has a value, equal to its monetary value (face value). For example, the inherent value of a $10 gold piece was originally equal to its monetary value of $10. Not only could you use the $10 gold Eagle to buy $10 worth of groceries, you could sell its gold content (melted down) for $10 in cash on the gold market. Today, however, since the price of gold has increased, the gold in a $10 gold piece is worth much more than $10. In credit money, the intrinsic value of the money's material content is less than its monetary value.

Representative money is money (usually paper) that serves in place of commodity money. It may represent either full-bodied or credit money. The gold certificates that circulated in the United States before 1933 are a good example of full-bodied money. But the certificates are no longer used. An advantage of representative money is that it is more portable than commodity money.

The government sometimes issues fiat money, which is backed only by the promise of the government to redeem it or to exchange it for other types of money. To help finance the Civil War, Congress authorized the issue of paper money officially known as United States notes and popularly called greenbacks. This was fiat money; the notes were legal tender but were not redeemable for gold or silver.

Today most of American currency is in the form of Federal Reserve notes, which are issued by the Federal Reserve Banks with the approval of the U.S. Treasury. At one time the gold re­serve required for these notes was 25 percent. The other 75 per­cent of the backing was in the form of additional gold certificates, government securities, or note assets of the bank. Today there is no gold reserve behind these notes, so they are also fiat money.

(Hailstones T.J. Op.cit, p.p. 151-153)

full-bodied money полноценные деньги; intrinsic value of the money's material content реальная, действительная стоимость материального содержания денег; monetary value денежная стоимость (золота или серебра); face value номинальная стоимость; gold Eagle aм. «орел», старинная золотая монета в 10 долларов; credit money кредитные деньги; representative money представители полноценных денег; fiat ['faiaet] money бумажные деньги, не обеспеченные золотом; not redeemable for gold не обеспеченные золотом; note assets денежные активы.

Read the following text and exchange opinions on the European biggest financial centres and their competition for supremacy.

It was in Europe that financial centres started, and it is there that the battle for supremacy is fiercest. Europe has far too many of them: London, Frankfurt, Paris, Zurich, Amsterdam, Milan, Madrid, Luxembourg. Nomura Securities has six offices in North America, ten in Asia — and no fewer than 17 in Europe. No wonder out­siders want closer European integration in financial services. There is little sign of it yet, however: most EC countries are setting up their own futures exchanges, ignoring the lesson from Chicago that trading is best concentrated in one place.

London

For now, London stands head and shoulders above other European centres. It has the biggest foreign-exchange and equity markets, the greatest concentration of insurers and pension funds and the largest number of foreign banks. Yet it knows that it is more vulnerable than the other big two centres, New York and Tokyo. Much of its banking, foreign-exchange, insurance and securities business is internation­al — and thus mobile. The Corporation of London, the archaic local government that rules the City's square mile, is spending $2,5m. on a research project to assess London's competitiveness.

In some ways London looks more secure now than it did. In the 1960s and 1970s sterling was under constant attack; exchange controls hedged London's markets in; top personal-tax rates were ludicrously high; and the stockmarket was losing market share. The euromarkets that had come to London by chance were dominated by foreign intermediaries. There were doubts about the British tra­dition of nod-and-wink regulation.

Things improved in the 1980s. Exchange controls went, tax rates were cut, sterling stabilized. More significant for the rest of Europe was the London stockmarket's Big Bang in 1986. Big Bang scrapped fixed commissions, allowed unrestricted entry to the exchange and set up an electronic market-making system in place of the old floor-trading jobbers.

London has built on this success in the 1990s. Sterling joined Europe's exchange-rate mechanism in 1990, reassuring sceptics about the British commitment to fight inflation. The regulatory sys­tem strikes a better balance between light self-regulation and effec­tive statutory rules than those applied in several other financial centres.

futures фьючерс(ы), срочные контракты, срочные сделки; exchange биржа; futures exchange фьючерсная (срочная) биржа; foreign exchange market валютный рынок; equity обыкновенная акция; equity market рынок акций; insurer страховщик, страховое общество; to hedge the market хеджи­ровать, страховать (ограждать) от потерь рынок; personal (property) tax налог на личное (движимое) имущество; ludicrous [‘l(j)u:dikr3s] нелепый; stock market фондовая бир­жа, рынок акций; Big Bang «Большой шок» (толчок), резкое изменение в финансовой практике; jobber англ, джоббер, спекулянт на фондовой бирже, профессиональный биржевик (заключающий сделки за собственный счет); to build on осно­вываться на; exchange rate mechanism механизм валютных курсов; statutory ['stastjutari] установленный законом.

Paris

That is not true of the continent's two biggest centres, Paris and Frankfurt, both of which harbour dreams of supplanting London. For the past five years Paris has been erecting the infrastructure to support its claims. In the early Victorian era Paris was as big a money-raising centre as London; it was the 1848 revolution and the Franco-Prussian war of 1870 that deflated it. And in the early 1960s it might have been Paris not London that became the centre of the eurodollar market.

Paris looks impressive enough. French banks are Europe's big­gest. The bourse, which has an automated trading system is open to banks and foreigners and boasts paperless settlement. But looks may not be enough. France's domestic financial base, with few private pension funds and lots of companies still in state hands, is weak. This prevents Paris, unlike London, from attracting much international business. Financial markets evolve through the leadership of practi­tioners, not governments. France has mountains to climb before it gets a risk-taking, market-making culture like London's.

to supplant вытеснять, выживать; bourse [buss] фр. фондо­вая биржа; to evolve развиваться.

Frankfurt

Across the Rhine, in contrast, there is a new mood of confi­dence. The Germans note the eastward shift in the EC's centre of gravity. The financial needs of reconstructing Eastern Europe are bound to involve German institutions more than others.

Everyone — the chancellor, the Bundesbank, the Frankfurter Borse and Germany's biggest commercial bank, Deutsche Bank — is now talking about Finanzplatz Deutschland. Though Berlin has long-term aspirations, in the near future that means Frankfurt. The German government has thrown its weight behind plans to set up a Deutsche Borse, a holding company that would embrace under Frankfurt's leadership all the regional stock exchanges.

The country's big three banks, which still run most international capital-markets operations from London, are slowly moving busi­ness such as trading in government-bond futures home — if only because they will be the main owners of the Deutsche Borse.

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