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Money and credit - Ivanov V.M.

16.3. Cash replacement function with credit operations

This function of credit is associated with the specifics of the modern organization of money circulation, its functioning mainly in non-cash form. It is known that the bulk of loans are provided through banks. By placing and storing money in the bank, customers thereby enter into credit relations with it, in addition, they create conditions for replacing cash in circulation with credit operations in the form of notes on bank accounts. It becomes possible to provide a loan in non-cash order and the development of non-cash payments. Cashless transactions are credit, as the timing of shipment of products and their payment, as a rule, do not match. Depending on what is ahead of time - the receipt of goods or money - either the supplier credits the recipient, or the recipient - the supplier.

The substitution function is recognized by most economists, but its most common interpretation is the replacement of real money with credit instruments of circulation and credit operations. Thus, along with the development of non-cash turnover, such a functional purpose of the loan is distinguished as substitution of gold in credit money in circulation.

As you know, in the process of credit movement, credit instruments of circulation are created that replace real money in modern monetary systems, that is, gold. These include value signs in the form of banknotes, various bills, checks, stocks, certificates of deposit, bonds. However, the process of demonetization of gold, consisting in the loss of the properties of a monetary commodity, universal equivalent, was completed by the 70s of the XX century. The interconnection of modern credit money with gold as the basis of their value maintenance, even indirectly, is denied by most economists. The functioning of credit instruments of circulation no longer has the nature of a temporary replacement of real money, when the entry into circulation of the former led only to a delay in the movement of the latter. There has been an absolute crowding out of gold from circulation by credit money, which is consistent with the universal law of saving social labor, which, as applied to the sphere of circulation, finds expression in saving the public costs of monetary circulation. In accordance with this law, a new form of money replaces the previous one if it is more economical and can provide a more rational organization of the economy.

Based on the fact that gold has gone out of circulation and only credit money is being circulated, some economists justify the development and development of the substitution function into the function of issuing money in the sphere of non-cash circulation. This point of view is based on the idea that the placement of loans in non-cash form means the simultaneous creation of credit resources, i.e., emission.

The issue of credit functions is the most controversial in credit theory. Disagreements over the number and content of functions are caused not only by the difference in the interpretation of the essence of credit, but also by the lack of unity in determining methodological approaches to their analysis. Many economists substitute the analysis of the functions of credit as an economic category by the analysis of the functions of one of its elements. Moreover, most often, credit functions are identified with the functions of banks. The allocation of functions based on the characteristics of individual forms of credit relations is also widespread. Some authors consider the functions of credit as a specific form of its movement. The result of the lack of a unified methodological basis for the analysis is the emergence of a large number of functions allocated by various economists. The economic literature substantiates the legitimacy of such functions as the accumulation of funds between industries, enterprises, and the population; cash flow regulation by replacing real money with credit operations; cost savings circulation. Often emit monetary (emission) and control (stimulating) functions.

The content of the monetary function, in the opinion of the authors, recognizing it, is to issue money into circulation, based on the nature of credit money, its issue with credit. As a rule, these are supporters of the already mentioned point of view: not value is given in the loan, but banknotes deprived of value. By identifying emission and credit processes, these authors, at the same time, are inclined to distinguish between credit and money as independent economic phenomena.

Economists who distinguish the control function of credit, in fact, confuse the function of credit with the function of one of its subjects - creditors. Of course, the lender exercises control over the activities of borrowers, as he is interested in repaying the borrowed funds. However, the controlling function of the lender is not typical for all forms of credit. In particular, under the state form of credit, the population does not control the activities of the borrower. In the same way, enterprises and organizations that keep funds on its accounts do not control the work of the bank. At the same time, the borrower cannot control the activities of the lender, since he is a dependent party in a credit transaction. Thus, the unlawfully controlling function is attributed to credit as a whole phenomenon.