Nothing in the world causes such fierce disputes between people as the value of money in the world. Some argue that this is the most important thing in the world, since only money gives us a pass into the world of great opportunities and the realization of the most cherished desires. Others, on the contrary, blame money for all failures and claim that they are the greatest evil on earth. What is the essence and function of money really? Today we will try to move away from superficial and emotional views on this issue and analyze it from an unbiased point of view.
Money is the most important financial instrument with the help of which all economic activity in the world is carried out, starting from the usual trade between people, and ending with the conclusion of state contracts between countries. It is important to realize that money is a certain measure of the value of certain goods and services, as a result of which we are able to actually assess the value of certain things in the world. Despite the fact that as far back as the 70s of the XX century, the binding of the American dollar to gold (gold and currency parity) was canceled, today, in fact, gold plays a rather significant role in the stability of the global financial system. As a result, the essence and functions of money play a decisive role in the system of state economic development.
The main body that monitors the number of banknotes in the country is the Central Bank, which, if necessary, can withdraw part of the money from circulation, as well as issue (issue) additional cash banknotes. In general, the Central Bank is engaged in the regulation of monetary circulation in accordance with the specific needs of the economy at a particular point in time.
The essence of money and their functions are determined by the following tasks:
- Provide the opportunity to carry out a wide selection of goods and services for various transactions
- They are a means of circulation, as a result of which it is possible to evaluate not only purchasing power, but also a comparison of goods among themselves
- Eliminates the shortcomings of barter exchange of goods, which greatly facilitates the purchase of those goods that are necessary.
It is noteworthy that the essence and functions of money can not always be directly compared with banknotes that are familiar to each of us. In some emergency situations, as well as in martial law, the function of money can be performed by coupons that the state issues for essential goods (water, sugar, bread, matches, salt, etc.). Thus, we see that, in general, any thing can fulfill the function of money, if they are endowed with a certain measure of value. With the help of coupons, the state can reduce the risk of speculative operations and reduce the shadow economy segment in the unstable economic situation of the country.
It is important to remember that money alone costs very little, since only a measure fills them with significance in relation to other currencies. In addition, the entire credit and financial system of the world is tightly interconnected, as a result of which the essence and functions of money can be performed by securities. Having a certain significance, securities can act as a financial instrument in the performance of large trade transactions or the merger of several companies. Shares and bonds of companies are the benchmark of its capital, according to which the company is evaluated in the market, and since pricing is ongoing, the value of the shares can either increase or decrease.
In conclusion, it should be noted that the essence, functions and types of money represent such a voluminous sphere of economic doctrine that it is simply impossible to fully describe all its elements within the framework of the article. Here we talked about the basics of the monetary system, knowing that everyone will already be able to better navigate the complex flow of economic information.