Issue of money

The issue of money is one of the main elements of the functioning of the monetary system. Issue cash, as well as non-cash, money is constantly, but at the same time, their number is kept in circulation, as simultaneously the process of handing cash to the banks' cash desks takes place. The issue of money is not the production of new bank notes, but only such a release into circulation, in which there is an increase in the money supply.

It can take the form of cash and non-cash funds. In the first case, it is called money issue. The monopoly right to this belongs to the central issuing bank of the country (in Russia - to the Central Bank).

No other banks and organizations are legally entitled to increase the money supply can not be vested. Only in this case, it is possible to accurately control and manage the formation of the monetary unit M0 - banknotes, which are simultaneously in circulation outside the banking system.

The issue of money is connected with the work of all banks. In our country, a two-tier banking system functions, which means that the emission mechanism operates on the basis of a bank multiplier. That is, the animation (increase) of money in deposit accounts occurs when they move from one to another commercial bank. Multiply the money can not one commercial bank, in this process involved the entire banking system. 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 deposits of banks.

The mechanism of the bank multiplier is connected with a free reserve - these are all the resources of commercial banks that can be used at a certain moment to conduct active banking operations. After all, commercial banks have the right to conduct such operations only within the limits of those resources that are on the accounts. Money on deposits can increase up to fivefold. The mechanism of animation is managed by the Central Bank, regulating the monetary circulation in the country.

The issue of money implies the issuance of all forms of currency in circulation. In circulation not only paper currency notes are issued. Banknotes issued by the Central Bank are its debt obligations and are reflected in the balance sheet. Treasuries issue treasury tickets, as well as a bargaining chip. In addition to this type, there is also a deposit-check issue of money, which increases deposits in the accounts of clients being discussed in banks, which leads to an increase in the number of checks involved in servicing non-cash payments.

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. With the circulation of gold money, their quantity in circulation was regulated by the needs of this circulation, when gold settled in the form of treasure in the treasury or again circulated. Today, with paper-money and credit circulation, the money issue is not capable of self-regulation. The increase in the mass of money is necessary with the growth of production and sales of goods produced by the economy. But in a situation where the supply of money exceeds the demand available for them, the price rise starts, inevitably leading to inflation.

The issue of cash is carried out by issuing them in circulation, accompanied by an increase in the mass of cash in circulation. The Central Bank forecasts the size of future issues and distributes it by regions.

Money continuously moves in cash and non-cash form, moving from business entities to banks and vice versa. Monetary units do not have a value equal to the nominal value. Only cash can be used, because funds spent on a non-cash basis are reflected only in the form of bank account entries.