The issue of money is one of the main elements of the functioning of the monetary system. The issue of cash, as well as non-cash, money occurs constantly, but at the same time their quantity remains in circulation, since at the same time there is a process of transferring cash to the cash departments of banks. The issue of money is not the production of new bank notes, but only such release of them into circulation, in which there is an increase in the money supply.
It can occur in the form of cash and cashless funds. In the first case, it is called the issue of money into circulation. The monopoly right to this belongs to the central issuing bank of the country (in Russia - the Central Bank).
No other banks and organizations are legally entitled to increase the money supply. Only in this case, precise control and management of the formation of the M0 money aggregate — banknotes that are simultaneously in circulation outside the banking system — is possible.
The issue of money is connected with the work of all banks. Our country has a two-tier banking system, which means that the issue mechanism works on the basis of the banking multiplier. That is, the multiplication (increase) of money in deposit accounts occurs when they move from one to another commercial bank. Money cannot be replicated by one commercial bank; the entire banking system is involved in this process. The credit multiplier is the engine of the whole process, since it is carried out only when lending to the economy; deposit - reflects the increasing amount of money on bank deposits.
The mechanism of the banking multiplier is associated with free reserve - these are all resources of commercial banks that can be used at some point for conducting active banking operations. Indeed, commercial banks have the right to conduct such operations only within the limits of those resources that they have on the accounts. Money on deposits can increase up to five times. The animation mechanism is controlled by the Central Bank, regulating the monetary turnover in the country.
The issue of money involves the issuance of all forms of banknotes. Not only paper banknotes are issued in circulation. Banknotes issued by the Central Bank represent its debt obligations and are reflected in the liability balance sheet. Treasuries issue treasury tickets, as well as small change. In addition to this type, there is also a deposit-check issue of money, in which deposits on the accounts of clients discussed in banks increase, which leads to an increase in the number of checks involved in servicing non-cash payment transactions.
When issuing banknotes in circulation, there is a natural increase in the amount of money in circulation, which is one of the causes of inflation. When circulating gold money, their amount in circulation was regulated by the needs of this circulation, when gold settled in the form of treasures in the treasury or re-entered into circulation. Today, with paper money and credit circulation, money issue is not able to self-regulate. An increase in the mass of money is necessary with an increase in the volume of production and sale of goods produced by the economy. But in a situation where the money supply exceeds the demand available for them, a rise in prices begins, which inevitably leads to inflation.
The issue of cash is carried out through their issuance in circulation, accompanied by an increase in the mass of cash in circulation. The central bank predicts the size of future emissions and distributes it by region.
Money is continuously moving in cash and cashless form, passing from business entities to banks and vice versa. Monetary units do not have a value equal to the face value. Only cash can be circulated, since funds transferred via bank transfer are recorded only in the form of entries in bank accounts.