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Money and credit - Ivanov V.М.

16.3. Function of substitution of cash by credit operations

This function of credit is connected with the specifics of the modern organization of monetary circulation, its functioning primarily in non-cash form. It is known that most of the loans are provided through banks. By placing and keeping money in the bank, customers thereby enter into credit relations with him, in addition, create conditions for the replacement of cash in circulation by credit operations in the form of entries in bank accounts. Become possible to provide loans in a non-cash order and the development of non-cash settlements. Non-cash transactions are credit, as the terms of shipment of goods and their payment, as a rule, do not coincide. Depending on what is ahead of time - the receipt of goods or money - or 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 by credit instruments of circulation and credit operations. Thus, along with the development of non-cash turnover, this functional purpose of the loan is allocated, such as the replacement of gold in circulation with credit money.

As you know, during the movement of credit, credit instruments of circulation are created, replacing in real money systems real money, i.e. gold. These include signs of value in the form of banknotes, various bills of exchange, checks, shares, certificates of deposit, bonds. However, the process of demonetization of gold, consisting in the loss of the properties of a monetary commodity, the universal equivalent, was completed by the 70s of the XX century. The relationship of modern credit money to gold as the basis of their value, even indirect, is denied by most economists. The functioning of credit instruments of circulation no longer has the character of a temporary substitution of real money, when the entry into circulation of the former led only to a delay in the movement of the second. There was an absolute ousting of gold from circulation by credit money, which is consistent with the general law of the economy of social labor, which, as applied to the sphere of circulation, is expressed in the economy of the social costs of money circulation. In accordance with this law, a new form of money displaces the previous one, if it is more economical and can provide a more rational organization of the economy.

Proceeding from the fact that gold is withdrawn from circulation and only credit money is being used, some economists justify the development and growth of the substitution function in the function of money issuance in the sphere of non-cash turnover. This view is based on the notion that the placement of loans in a non-cash form means the simultaneous creation of credit resources, i.e., emissions.

The question of the functions of credit is the most controversial in the theory of credit. Disagreements about the number and content of functions are due not only to the difference in the interpretation of the essence of the loan, but also to the lack of unity in the definition of methodological approaches to their analysis. Many economists study the functions of credit as an economic category substitute for the analysis of the functions of one of its elements. At the same time, credit functions are most often identified with the functions of banks. Distribution of functions is also common, proceeding from the peculiarities of certain forms of credit relations. Some authors consider the functions of credit as a concrete form of its movement. The result of the absence of a single methodological basis for analysis is the emergence of a large number of functions that are distinguished by various economists. The economic literature justifies the legitimacy of such functions as the accumulation of funds between industries, enterprises, the population; Regulation of money turnover by replacing real money with credit operations; Saving of distribution costs. Often allocate monetary (emission) and control (stimulating) functions.

The content of the monetary function, in the opinion of the authors who recognize it, consists in issuing money for circulation, based on the nature of credit money, their issue with a loan. As a rule, they are supporters of the point of view already mentioned: not a value is given to a loan, but money, deprived of value. Identifying the emission and credit processes, these authors at the same time tend to distinguish between credit and money as independent economic phenomena.

Economists who allocate a credit control function, in fact, confuse the function of a loan with the function of one of its subjects - creditors. Of course, the lender controls the activities of borrowers, since he is interested in repaying the loaned 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 borrower's activities. In the same way, enterprises and organizations that keep their funds on their accounts do not control the work of the bank. At the same time, the borrower can not control the activities of the creditor, since in a credit transaction it is an dependent party. Thus, it is wrong to control the function as a whole phenomenon.