Money surrogates: concept, types, role in the economy

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

Money surrogates - what is it? What is their role in modern economic systems? How do they affect business life? This is an incomplete list of issues that we will discuss with you in this article.

Concept

Money surrogates are special substitutes for official forms of money that have been put into circulation by business entities to make payments. According to a number of experts, they are an important criterion for judging the development of money circulation in any country due to their presence or absence. It should be noted that money surrogates, although they perform the functions of means of payment, cannot act as an object of savings, and also determine the proportions in the exchange of goods. Their special property (against the background of money) is that they do not have absolute liquidity due to the limited circulation. It is problematic to ensure their purchasing power due to the fact that they are accepted only in a discounted form. In other words, their real price is always slightly below par. This is not least due to certain features. So,money of non-cash payments is "subjected" to a commission from the systems. And if a thing costs 100 virtual rubles, then you will have to pay 101 for it, at least.

Why did money substitutes appear?

The main reason for their appearance is the lack of banknotes, which are officially recognized. This may be the result of a too tight credit policy by the state (which is aimed at combating negative inflationary processes). In order to find out how the economy is provided, the monetization coefficient is calculated. It is defined as a percentage of the money supply and the country's gross domestic product. As an example, we can cite 1990, when the coefficient in Russia, according to various estimates, fluctuated in the range of 12-20%. Although for normal functioning it should be at least 60%. As an additional reason for the appearance of money surrogates, breaks in economic ties are called, which were especially active in the 90s of the last century.

Classification

What kind of money surrogates can there be? Depending on the specifics of their organization, the nature of the participants and a number of additional features, the following substitutes are distinguished:

State. These include a treasury note, regional money, tax incentives and a number of other substitutes, the issue and distribution of which is carried out under state control.
Commercial. These include payments by bills of exchange, drawing up receipts with subsequentmutual settlements and other similar forms of organization, which for the most part depend on the interaction of private structures.
Other. This includes substitutes such as gas vouchers, food, clothing, shipping documents, and many other similar interactions.

Why are money substitutes used?

This issue was especially relevant in the initial period of transition to a market economy. Answers include the following:

Replacement of money as a means of payment due to the fact that there was an acute shortage of cash. Problems in this case were also thrown by the underdevelopment of cashless payments due to problems with the banking system. In general, the negative effect could be reduced if electronic money were introduced, but there were none at that time.
The presence of hidden losses of enterprises, which became especially important during the transition to market methods of farming.
Attempts to evade numerous taxes, which reduced the receipt of funds in the budget, and increased its deficit.
Difficulty in using a commercial bill as a commercial lending tool in Russia.
Inflationary processes, which, first of all, were associated with the release of prices and the transition to economic management on market conditions.

All of the above reasons contributed to the fact that money surrogates were able to develop very strongly as financial instruments for unsecured barter andcommercial loan. So, for example, in order to pay off non-payments to the budget for 1991-1996, the amount of which amounted to billions of rubles, the Ministry of Finance of the Russian Federation issued treasury bills. Such means of payment allowed us to avoid a more unfortunate situation.

Modernity

On the one hand, they could potentially be the weak point of our economy. But, at the same time, their structural importance should not be underestimated, since their presence is dictated by economic reasons. Thus, the liquidation of money surrogates can lead to the loss of part of the savings, and will also have a negative impact on economic processes. We now actively use electronic money, there are a large number of payment systems. On the one hand, due to limited circulation, they do not have absolute liquidity, and in which case there may be problems with obtaining them. Also, do not forget that their real price is always below par. But, along with this, it should be noted that the simultaneous elimination of the order that has already taken shape is not possible.

Influence of surrogates

If we consider the 90s of the last century, there was a significant difference in purchasing power due to the use of money surrogates. So, if expressed in rubles, then prices could easily differ by 1.5-2 times. Of course, you can see that this is also observed now, when bread costs differently in Tver and on Sakhalin. But onethe case when we are dealing with traffic overlays, and quite another when food is sold in neighboring malls. By the way, this influence led to the formation of a unique, relatively autonomous payment system on the territory of the Russian Federation, in which money surrogates still operate. So, we can recall that our civil servants, who are on the road for a long time in cars, are given coupons for gasoline. On the one hand, this is not money, a person will not be able to spend it uncontrollably. On the other hand, there are some nuances of spending control. But be that as it may, the ambulance is on the move, the police and firefighters, too, so this system quite justifiably serves its purpose.

Treasury surrogates

They are used for settlements or to attract additional funds to the state treasury. As an example, let's take this: a hypothetical country has a budget deficit of 2%. There are two options for action: either we take loans, or we cut costs. Theoretically, the second option is more correct. But who told you that humanity acts rationally? Politicians are people who do not want to lose their ratings. Therefore, a special treasury note is being developed, its issue is negotiated (in what quantity, what denomination, interest, and so on). All this is guaranteed by the state. On the one hand, these are reliable investments, but on the other hand, they are not profitable. For example, let's say that the hypothetical state under consideration has inflation of 12%, and issued securities will give only 7%arrived.

Dangers and risks

Even at first glance, it is clear that those who invest in them will only lose their savings. And if we take into account a number of other factors that relate to the objectivity of the assessment of information, then the situation will be sad in general (I mean that many economic experts consider inflation calculations using modern methods to be underestimated). Money and money circulation in this case is used as the basis of the financial life of the state, and surrogates allow you to avoid the negative consequences of their shortage.

Using electronic money

If we talk about the market of the Russian Federation, the main players here are Webmoney and Yandex. Money. Of course, there are also banking systems for making electronic payments, but due to a number of features, we will not consider them. Last but not least, this is due to the fact that they are created as additional services of banking institutions. Whereas we are interested in electronic payment systems that were created specifically for such purposes. In the world market, PayPal is considered the leading player, but due to the fact that it is not represented in the Russian Federation, it will not be considered. But, in general, the principle of operation is the same, so that what works in our country can be successfully transferred to foreign analogues. So what does a typical buying process look like? A person comes to the seller, asks about the price of the goods, and then decides whether he needs it. If the answer is yes, then it provides him with a certain amountmonetary units and receives a product or service.

How do electronic surrogates work?

In this case, everything is somewhat more complicated. Initially, it is necessary to provide funds for the use of an intermediary (electronic payment system). Then the seller will make a request to her in order to find out if you have enough money. If the information is confirmed, the necessary goods will be sent, and a certain amount will be debited from the account. That is, the money is not directly used in the process itself, although at the beginning of the action and at the end (when the seller cashes out the earnings), they are necessary. But in a number of actions, electronic substitutes are used instead. If we consider Webmoney, then it can be WMZ, WMR, WMU, WME, WMB and so on. As you can see, there are many options.

Barter and coupons

Let's at the end of the article consider another type of surrogates, as well as their role in the economy. Barter refers to the direct exchange of goods. As an example, ten boxes of matches can be changed for one loaf. This is the real barter. In cases where the country's economy ceases to function, and all ties collapse, then this form of exchange allows you to maintain the livelihoods of people, at least by exchanging the goods that they produce. That is, the role of barter is great in cases of uncontrolled chaos, because thanks to it, at least some interaction appears. And in the future, it may already develop into more stable ties, only already dressed in monetary and commodity relations. Coupons, on the other hand, are used in cases where the state is going through difficult times, and resources are very limited - so much so that their incorrect distribution can lead to certain human losses. Therefore, they are used to regulate the distribution of available resources. Then you can choose more or less suitable sizes of supplies. An example is the situation of a hypothetical state, when its agriculture has suffered greatly, but there is no money or opportunities to buy them abroad. Also coupons can be used to support the poor. But such a practice is not found in our country now. Thus, surrogates such as coupons and barter are indicators of the stability and sustainability of society. Moreover, the fact of their absence or being at such a level that they cannot be registered indicates the presence of positive development trends.