Money surrogates - what is it? What is their role in modern economies? How do they affect business life? This is an incomplete list of issues that we will discuss in the framework of this article.
The concept
Money surrogates are special substitutes for official forms of money that were put into circulation by business entities in order to make payments. According to a number of experts, they are an important criterion in order to be able to judge the development of money circulation in any country due to their presence or absence. It should be noted that monetary substitutes, 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 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 face value. This is not least due to certain features. So, cashless payments are “taxed” by the commission on the part of the systems. And if a thing costs 100 virtual rubles, then for it you have to pay 101, at least.
Why did money surrogates appear?
The main reason for their appearance is called 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 well the economy is supported, the coefficient of monetization is calculated. It is defined as the percentage of the mass of money and the gross domestic product of the country. An example is 1990, when in Russia the coefficient, 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 monetary surrogates, the breaks in economic ties, which were especially actively manifested in the 90s of the last century, are called.
Classification
What kind of money substitutes can 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 bill, regional money, tax benefits and a number of other substitutes, the issue and distribution of which is carried out under state control.
- Commercial. These include payments by bills, drawing up receipts, followed by mutual settlements and other similar forms of organization, which for the most part depend on the interaction of private entities.
- Other. This includes substitutes such as coupons for gasoline, food, clothing, trade documents and many other similar elements of interaction.
Why are money substitutes used?
This issue was especially relevant in the initial period of transition to a market economy. The answers include the following:
- Substitution of money as a means of payment due to the fact that there was an acute shortage of cash. The problems in this case were also prompted 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 was especially actualized during the transition to market methods of farming.
- Attempts to evade numerous taxes, due to which cash flow to the budget decreased, and its deficit increased.
- The complexity of using a commodity bill as an instrument of commercial lending in the vastness of Russia.
- Inflationary processes, which, in the first place, were associated with the release of prices and the transition to management on market conditions.
All of the reasons listed above contributed to the fact that money substitutes were very able to develop as financial instruments for unsecured barter and commercial credit. So, for example, to pay off defaults 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 sad situation.
Modernity
On the one hand, they can potentially turn out to be a weak spot in our economy. But, along with this, one should not underestimate their structural importance, since their presence is dictated by economic reasons. So, the liquidation of cash substitutes can lead to the loss of part of the savings, and also have a negative impact on economic processes. Now we are actively using 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 problems may arise with their receipt. Also do not forget that their real price is always below face value. But, along with this, it should be noted that the simultaneous elimination of the order that has already taken shape is not possible.
The influence of surrogates
If we consider the 90s of the last century, then due to the use of money substitutes, there was a significant difference in purchasing power. So, if expressed in rubles, then prices could easily vary by 1.5-2 times. Of course, one can notice that this is observed even now, when bread costs differently in Tver and on Sakhalin. But it is one thing when we are dealing with transport overlays, and quite another when food is sold in neighboring shopping arcades. By the way, this influence has led to the formation of a unique, relatively autonomous payment system in the Russian Federation, in which money surrogates still operate. So, we can recall the fact that our civil servants, who have been traveling on cars for a long time, are issued petrol coupons. On the one hand, this is not money; a person cannot spend it uncontrollably. On the other hand, there are separate nuances of spending control. But be that as it may, the ambulance travels, the police and firemen, too, so this system justifiably serves its purposes.
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: 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 ticket is developed, its release is specified (in what quantity, what denomination, interest, and so on). All this has state guarantees. On the one hand, these are reliable investments, but on the other hand, they are not profitable. Let’s say, for the hypothetical state under consideration, inflation is 12%, and the issued securities will yield only 7% of the profit.
Hazards 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 factors that relate to the objectivity of evaluating information, the situation will be generally sad (I mean that many economic experts consider inflation estimates to be underestimated by modern methods). Money and money circulation in this case is used as the basis of the financial life of the state, and surrogates allow avoiding the negative consequences of their shortage.
Using electronic money
If we talk about the market of the Russian Federation, here the main players are Webmoney and Yandex.Money. Of course, there are also banking systems for electronic payments, but because of a number of features we will not consider them. Last but not least this is due to the fact that they were 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 action is the same, so that what is in our place can be successfully transferred to foreign analogues. So, what does a normal 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 he provides him with a certain amount of monetary 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 use by 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, then the necessary goods will be sent, and a certain amount will be debited from the account. That is, money is not directly used in the process itself, although at the beginning of actions and at the end (when the seller will cash out earnings) they are needed. 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 us at the end of the article consider another type of surrogate, as well as their role in the economy. By barter is meant the direct
exchange of goods. As an example, ten boxes of matches are changed for one loaf. This is the real barter. In cases where the country's economy ceases to function, and all ties collapse, this form of exchange allows you to support the livelihoods of people, at least by exchanging the goods they make. That is, the role of barter is great in cases of uncontrolled chaos, because thanks to it there is at least some interaction. And in the future it may already develop into more stable ties, only already clothed in monetary-commodity relations. Coupons are used in cases when 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 pick up more or less suitable supply sizes. An example is the situation of a hypothetical state when its agriculture was badly damaged, and there is no money or opportunity to buy them abroad. Also, coupons can be used to support the poor. But such practice in our country is now not meet. Thus, surrogates such as coupons and barter are indicators of the stability and sustainability of society. Moreover, the fact of their absence or stay at such a level that they cannot be registered, indicates the presence of positive development trends.