English for the students of economic faculties

4. Падение спроса на товары первой необходимости в связи с их ухудшившимся качеством привело к относительно мягкой инфляции в несколько процентов.

5. Низкий процент инфляции не считается слишком большой проблемой для государства и даже может способствовать увеличению капиталовложений.

MONEY AND BANKING (ДЕНЬГИ И БАНКОВСКОЕ ДЕЛО)

Money and its Functions. Деньги, их функции

Although the crucial feature of money is its acceptance as the means of payment or medium of exchange, money has other functions. It serves as a standard of value, a unit of account, a store of value and as a standard of deferred payment. We discuss each of the functions of money in turn.

The Medium of Exchange. Средство обращения

Money, the medium of exchange, is used in one-half of almost all exchange. Workers exchange labour services for money. People buy and sell goods in exchange for money. We accept money not to consume it directly but because it can subsequently be used to buy things we do wish to consume. Money is the medium through, which people exchange goods and services.

To see that society benefits from a medium of exchange, imagine a barter economy.

A barter economy has no medium of exchange. Goods are traded directly or swapped/or other goods.

In a barter economy, the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

Trading is very expensive in a barter economy. People must spend a lot of time and effort finding others with whom they can make mutually satisfactory swaps. Since time and effort are scarce resources, a barter economy is wasteful. The use of money - any commodity generally accepted in payment for goods, services, and debts - makes the trading process simpler and more efficient.

Other Functions of Money. Другие функции денег

Money can also serve as a standard of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods and services. In this function money appears as the unit of account, is the unit in which prices are quoted and accounts arc kept.

In Russia prices are quoted in roubles; in Britain, in pounds sterling; in the USA, in US dollars; in France, in French francs. It is usually convenient to use the units in which the medium of exchange is measured as the unit of account as well. However there are exceptions. During the rapid German inflation of 1922 - 1923 when prices in marks were changing very quickly, German shopkeepers found it more convenient to use dollars as the unit of account. Prices were quoted in dollars even though payment was made in marks, the German medium of exchange.

The situation in Russia nowadays reminds of that of in Germany.

Money is a store of value because it can be used to make purchases in the future.

To be accepted in exchange, money has to be a store of value. Nobody would accept money as payment for goods supplied today if the money was going to be worthless when they tried to buy goods with it tomorrow. But money is neither the only nor necessarily the best store of value. Houses, stamp collections, and interest-bearing bank accounts all serve as stores of value. Since money pays no interest and its real purchasing power is eroded by inflation, there are almost certainly better ways to store value.

Finally, money serves as a standard of deferred payment or a unit of account over time. When you borrow, the amount to be repaid next year is measured in pounds sterling or in some other hard currency. Although convenient, this is not an essential function of money. UK citizens can get bank loans specifying in dollars the amount that must be repaid next year. Thus the key feature of money is its use as a medium of exchange. For this, it must act as a store of value as well. And it is usually, though not invariably, convenient to make money the unit of account and standard of deferred payment as well.

Different Kinds of Money. Различные виды денег

In prisoner-of-war camps, cigarettes served as money. In the 19th century money was mainly gold and silver coins. These are examples of commodity money, ordinary goods with industrial uses (gold) and consumption uses (cigarettes), which also serve as a medium of exchange. To use a commodity money, society must either cut back on other uses of that commodity or devote scarce resources to producing additional quantities of the commodity. But there are less expensive ways for society to produce money.

A token money is a means of payment whose value or purchasing power as money greatly exceeds its cost of production or value in uses other than as money.

A $10 note is worth far more as money than as a 3x6 inch piece of high-quality paper. Similarly, the monetary value of most coins exceeds the amount you would get by melting them down and selling off the metals they contain. By collectively agreeing to use token money, society economizes on the scarce resources required to produce money as a medium of exchange. Since the manufacturing costs are tiny, why doesn't everyone make $10 notes?

The essential condition for the survival of token money is the restriction of the right to supply it. Private production is illegal.

Society enforces the use of token money by making it legal tender. The law says it must be accepted as a means of payment.

In modem economies, token money is supplemented by 10 U money.

An IOU money is a medium of exchange based on the debt of a private firm or individual.

A bank deposit is IOU money because it is a debt of the bank. When you have a bank deposit the bank owes you money. You can write a cheque to yourself or a third party and the bank is obliged to pay whenever the cheque is presented. Bank deposits are a medium of exchange because they arc generally accepted as payment.

VOCABULARY NOTES

the means of payment - средство платежа

medium of exchange - средство обращения

a standard of value - мера стоимости

a unit of account - единица учета

a store of value - средство сбережения (сохранения стоимости)

a standard of deferred payment - средство погашения долга

subsequently - впоследствии a barter economy - бартерная экономика

o swap (a/so swop; syn. to exchange, to barter) - обменивать, менять

to hand over in exchange - передать, вручить в обмен

a double coincidence of wants - двойное совпадение потребностей

a monetary unit - денежная единица

to remind of - напоминать

to be worthless - обесцениваться

an interest-bearing bank account - счет в банке с выплатой процентов

to pay interest - приносить процентный доход

to erode - зд. фактически уменьшать

hard currency - твердая (конвертируемая) валюта

soft currency - неконвертируемая валюта

invariably - неизменно, постоянно

prisoner-of-war camp - лагерь военнопленных

commodity money -- деньги - товар

token money - символические деньги (дензнаки)

inch - дюйм (равен 2,5 см)

to melt down - расплавить tiny costs - мизерные затраты

legal tender - законное платежное средство

to supplement - дополнять

IOU money - I owe you - я вам должен; деньги - долговое обязательство a bank deposit - вклад в банке

Assignments

I. Suggest the Russian equivalents

exchange labour services for money; you must hand over in exchange a good or service; a double coincidence of wants; spend a lot of time and effort;

make mutually satisfactory swaps; a barter economy is wasteful; commodity generally accepted in payment for goods; prices arc quoted and accounts are kept; the rapid German inflation; its purchasing power is eroded by inflation;

it's usually but not invariably convenient; cut back on other uses; exceeds its cost of production; by collectively agreeing; the survival of token money; society enforces the use of token money; token money is supplemented by IOU money; interest-bearing bank accounts

II. Replace the parts in italics by synonyms

sometimes payment can be put off till later, the vital feature of money; its purchasing power is worn away; the money is without value, it is not always convenient; time and effort are rare resources; private production of money is against the law

III. Find in the text opposites to the following words and expressions

take away; reject; planned event; in a minor way; increase; is less than;

separately; very large; be under no compulsion to; public

IV. Fill in the gaps with the words and expressions from the text

1. The crucial feature of money is its acceptance as __ or __.

2. People buy and sell goods __ for money.

3. In a barter economy goods are traded directly or __ other goods.

4. People must spend a lot of __ finding others with whom they can make

mutually __.

5. Society considers it convenient to use __ to determine __ of different

goods and services.

6. The unit of account is the unit in which prices are __ and __ are kept.

7. During the rapid German inflation German shopkeepers found it __ to use dollars as __.

8. Money is a store of value because it can be used __.

9. Nobody would accept money as payment for goods supplied today if the money was going __.

10. Since money __ and its real __ power __ by inflation, there are almost certainly better ways to store value.

11. UK citizens can get bank loans __ the amount that __ next year.

12. When you borrow, the amount to be repaid next year is measured in __.

13. __ are ordinary goods with __ (gold) and __ (cigarettes), which also serve as a medium of exchange.

14. To use a commodity money, society must either __ other uses of that commodity or devote __ to producing __ of the commodity.

15. A token money is a means of payment whose __ as money greatly __ its cost of production or value in uses other __.

16. By __, society economizes on the scarce resources required to produce money as __.

17. The essential condition for the survival of token money is __ to supply it.

18. Society enforces the use of token money by making it __.

19. In modem economies, token money __ by __.

20. An IOU money is a medium of exchange based on __ 1.

21. __ is IOU money because it is a debt of the bank.

V. Find in the text English equivalents for the following основная (ключевая) черта (2 варианта); средство платежа; средство обращения; мера стоимости; средство сбережения (средство сохранения стоимости); единица учета; средство погашения долга; в обмен на; может быть впоследствии использовано; обмениваться товарами и услугами;

бартерная экономика; измерять(ся); обесцененный; платить проценты;

покупательная способность; промышленное использование; потребительское использование; деньги - товар; денежные знаки (символические деньги); денежная стоимость; ограничение права; вклад в банке; банковская ссуда; законное платежное средство; долговое обязательство

VI. Explain in English

double coincidence of wants; deferred payment; medium of exchange;

purchasing power; monetary value; legal tender; IOU

VII. Answer the questions

1. Why do people accept money?

2. Dwell on the functions of money.

3. Dwell on different kinds of money.

4. What's a barter economy? Why is trading expensive in a barter economy?

5. What currency can be used as the unit of account? Speak on the current situation in Russia.

6. What does IOU stand for?

VIII. Translate into English using all the active possible

1. Существует несколько функций денег. Во-первых и прежде всего, деньги являются средством платежа, или обращения; деньги можно использовать при покупке и продаже товаров и услуг. Деньги выступают также мерой стоимости. Общество считает удобным использовать денежную единицу в качестве масштаба для соизмерения относительных стоимостей различных благ и ресурсов.

Деньги служат средством сбережения. Поскольку деньги являются наиболее ликвидным товаром, то есть таким, который можно без проблем продать (обменять), то они являются очень удобной формой хранения богатства. Это, однако, не единственная форма хранения богатства. Во время упадка в экономике, при высокой инфляции и обесценении денег, население, скорее всего, будет хранить богатство в виде недвижимости или других дорогостоящих товаров - предметах искусства, драгоценностях.

2. Деньги, которые, в сущности, являются долговыми обязательствами государства, коммерческих банков и сберегательных учреждений, имеют стоимость благодаря товарам и услугам, которые приобретаются за них на рынке.

THE ROLE OF BANKS (РОЛЬ БАНКОВ)

The following story is going to explain the role of banks. In the past most societies used different objects as money. Some of these were valuable because they were rare and beautiful, others- because they could be eaten or used. Early forms of money like these were used to buy goods. They were also used to pay for marriages, fines and debts. But although everyday objects were extremely practical kinds of cash in many ways, they had some disadvantages, too. For example, it was difficult to measure their value accurately, divide some of them into a wide range of amounts, keep some of them for a long time, use them to make financial plans for the future. For reasons such as these, some societies began to use another kind of money, that is, precious metals.

People used gold, gold bullion, as money. Those were dangerous times, and people wanted a safe place to keep their gold. So they deposited it with goldsmiths, people who worked with gold for jewellery and so on and also had a guarded vault to keep it safe in. And when people wanted some of their gold to pay for things with, they went and fetched it from the goldsmith.

Two developments turned these goldsmiths into bankers. The first was that people found it a lot easier to give the seller a letter than it was to fetch some gold and then physically hand it over to him. This letter transferred some of the gold they had at the goldsmith's to the seller. This letter we would nowadays call a cheque. And, of course, once these letters or cheques, became acceptable as a way of paying for goods, people felt that the gold they had deposited with the goldsmith, was just as good as gold in their own pockets. And as letters or cheques, were easier to carry around than gold, and a lot less dangerous, people started to say that their money holdings were what they had with them plus their deposits. So a system of deposits was started. The second development was that goldsmiths realized they had a great deal of unused gold lying in their vaults doing nothing. This development was actually of greater importance than the first.

Now let's turn to the first bank loan ever and see what happened. A firm asked a goldsmith for a loan. The goldsmith realized that some of the gold in his vault could be lent to the firm, and of course he asked the firm to pay it back later with a little interest. Of course, at that moment the goldsmith was short of gold, it wasn't actually his gold, but he reckoned it was unlikely that everyone who had deposited gold with him would want it back at the same time, at any rate - not before the firm had repaid him his gold with a little interest. He thought it safe enough.

To understand what actually happened in. this simple transaction let's consider the following table.

Tabl. 6. Goldsmiths as bankers

	Assets	Liabilities
1. Old-fashioned goldsmith 2. Gold lender 3. Deposit lender: Step 1 4. Deposit lender: Step 2	Gold $100 Gold $90+loan $10 Gold $100+loan $10 Gold $90+loan $10	Deposits $100 Deposits $100 Deposits $110 Deposits $100

The first row shows what the goldsmith did before he made this loan. He had a hundred dollars of gold, which he owed to the people who had deposited it with him, so his assets and liabilities were the same. But when he lent, say, $10 of gold to the firm, he actually had only $90 of gold in his vault plus the value of his loan. His assets still equalled his liabilities, but he was going to get some interest.

It so happened that the firm, that took out the loan, didn't really want to carry that $10 of gold around, so it asked the goldsmith if, instead of actually taking the gold, it could be given a deposit. The third row of Tabl. 6 shows what happened then. Although the goldsmith's assets and liabilities were the same, but were then worth $110, not $100. When the firm wrote a cheque for $10, and that person came in to collect his $10 worth of gold, the goldsmith's assets failed, but so did his liabilities (the fourth row of the table). The important point to notice here is that it made no difference to the goldsmith whether his initial loan was in actual gold or in a form of a deposit.

Now let's turn to the question of reserves. Reserves are the amount of gold that is immediately available in the vault to meet depositors' demands. People originally deposited $100 of gold with the goldsmith. The goldsmith lent $10, leaving himself with $90. As a banker he was relying on the fact that not everyone would want their gold back at the same time. If they had done, he couldn't have paid out. His reserves of $90 were not enough.

The goldsmith in the table has a 100% reserve ratio. The reserve ratio is the ratio of reserves to deposits. Once he has made his loan, he has a 90% deposit ratio. This is a small risk with a small profit. How much dare he lend out in order to make a profit through his interest charges? What are the risks involved^ Suppose the goldsmith took too much of a risk. He lent 80% of the gold he had. This panicked people. They doubted he could pay them all back, he was bound to lose some of the gold he had lent, so they rushed to get their gold back before it was too late. That was what we would now call a run on the bank, a financial panic. And the financial panic leads to exactly what people fear. the bank cannot pay them, goes bankrupt, and they go bankrupt as well.

VOCABULARY NOTES

rare - редкий

fines - штрафы

to measure their value accurately - точно измерить их стоимость (ценность)

to divide into a wide range of amounts - разделить на много частей (маленьких или больших)

precious metals - драгоценные металлы

gold bullion - золотой слиток

to deposit with - хранить, вкладывать

'a goldsmith - золотых дел мастер

worked with gold for jewellery - делал золотые украшения

a guarded vault - охраняемый подвал, хранилище

to fetch - приносить, доставать

to transfer - переводить, передавать

once these letters or cheques, became acceptable as a way of paying for goods - как только (когда) эти письма, или чеки, стали приниматься при оплате товаров

their money holdings - деньги, которые им принадлежали, которыми они владели

a bank loan - банковская ссуда, заем

a little interest - небольшой процент

the goldsmith was short of gold - у мастера не было достаточно золота

to reckon - полагать, считать

at any rate - во всяком случае

a transaction - сделка

to owe - быть должным

assets and liabilities - активы и пассивы

the value of his loan - стоимость ссуды, которую он дал

to equal - равняться, быть равным

the firm didn't really want to carry that gold around, so it asked the goldsmith

if, instead of actually taking the gold, it could be given a deposit - фирма не хотела держать золото при себе (носить золото с собой) и вместо того, чтобы на самом деле его забрать, попросила мастера принять это золото на хранение в виде вклада

(they) were worth $110 - их стоимость составляла, они оценивались (имели ценность) в 110 долларов

to write (syn. to draw, to issue, to make out) a cheque - выписать чек

his assets failed - зд. его активы снизились

to fail - (о банках) обанкротиться

initial loan - первоначальная ссуда

reserves - резервы

the amount of gold that is immediately available in the vault - запасы (количество) золота, которое всегда находится (и может быть немедленно получено) в хранилище банка

depositors' demands - требования вкладчиков

leaving himself with $90 - оставив себе только 90 долларов

to rely on - рассчитывать, надеяться на что-либо

the reserve ratio - резервная норма

dare - осмеливаться

to make a profit through his interest charges - получить прибыль за счет платежа процентов

What are the risks involved? - Чем он рискует?

to panic (panicked) - пугать, приводить в панику to doubt - сомневаться

he was bound to lose some of the gold - он непременно должен был потерять часть золота

a run on the bank - натиск вкладчиков на банк

the financial panic - финансовая паника

to fear - опасаться, страшиться

to go bankrupt - обанкротиться

Assignments

I. Suggest the Russian equivalents

they wanted their gold to pay for some things with; two developments turned these goldsmiths into bankers; it transferred some of the gold they had...to the seller; the goldsmith was short of gold; the risks involved; to make a profit through his interest charges; a goldsmith took too much of a risk; he was bound to lose some of the gold

II. Fill in the gaps with the words and expressions from the text

1. In the past most societies used different objects as __ to buy __, to pay for __.

2. Some of these were valuable because they were __, others- because they __.

3. People used gold, __, as money.

4. People __ their gold with __, people who __ also had __ to keep gold safe in.

5. When people wanted some of their gold to __, they went and __ it from the goldsmith.

6. People found it a lot easier __ the seller __, that we would nowadays call __, than it was __ some gold and then __ to him.

7. Once these letters or cheques, became __ as a way of __ for goods, people felt that the gold they __ with the goldsmith, was just __ as gold in their own __.

8. People started to say that their __ were what they __ plus their __.

9. Goldsmiths realized they had a great deal of__ lying in their vaults __.

10. This development was actually of__ than the first.

11. At the moment of his first loan the goldsmith __, it wasn't actually __ gold, but he __ it was __ that everyone who __ gold with him would want it back __.

12. The third row shows that although the goldsmith's __ were the same, but__ $110, not $100.

13. When the firm __ for $10, and that person came in __ his $10 worth of gold, the goldsmith's __.

14. It made __ to the goldsmith whether his __ was in __ or in a form of__.

15. Reserves arc the amount of gold that is __ to meet __.

16. As a banker he __ the fact that __ would want their gold __ at the same time.

17. The reserve ratio is the ratio of __ to __.

18. How much __ he lend out in order to __ through __?

19. People __ he could pay them all back, he __ to lose some of the gold he had lent, so they __ to get their gold back before __.

20. The __ or __, leads to exactly what people __: the bank cannot __ them, __, and they __ as well.

III. Find in the text English equivalents for the following

использовать золото (слитки) в качестве денег; отдавать на хранение;

золотых дел мастер; (банковское) хранилище (охраняемый подвал); забирать у мастера; стали приниматься в качестве платежа за товары; неиспользуемое золото; оставив себе только 90 долларов; простая сделка; небольшой риск с небольшой прибылью; расплатиться; обанкротиться (2 вар.); финансовая паника; натиск вкладчиков на банк

IV. Answer the questions

1. What did people use as money? Give some examples.

2. What were the reasons that made some societies start using precious metals as money?

3. Who were the original bankers? Where did they keep gold?

4. What are the 2 developments that turned the goldsmiths into bankers? Which of them is of greater importance?

5. What kind of letter did people give to the seller as a payment? What's it called nowadays?

6. Why did people start to say that their money holdings were what they had with them plus their money deposits?

7. How was the system of deposits started?

8. What did a firm ask a goldsmith for? Did he agree to it? On what terms?

9. Explain the information in the first and in the second rows of the table.

10. What did the firm want to do with the gold it had borrowed from the goldsmith? What would we call a deposit today?

11. Explain the information in the third and the fourth rows of the table.

12. What was the goldsmith relying on as a banker?

13. What is reserves and a reserve ratio? What is the goldsmith's reserve ratio after making the loan?

14. Why is it said that the goldsmith took too much of a risk? How much did he lend? What did people do? What is it called nowadays?

V. Translate into English using all the active possible

1. Когда царствует процветание, можно ожидать, что банки расширят кредит до максимума своих возможностей. Наоборот, когда на экономическом горизонте появляются тучи депрессии, банкиры поспешно берут назад свои предложения о займах, стремясь к безопасной ликвидности, даже если для этого потребуется пожертвовать потенциальным доходом от процента. Банкиры могут опасаться крупномасштабных изъятий вкладов паникующим населением и сомневаться в способности заемщиков выплатить ссуду.

MODERN BANKING (СОВРЕМЕННАЯ БАНКОВСКАЯ СИСТЕМА)

The goldsmith bankers were an early example of a financial intermediary.

A financial intermediary is an institution that specializes in bringing lenders and borrowers together.

A commercial bank borrows money from the public, crediting them with a deposit. The deposit is a liability of the bank. It is money owed to depositors. In turn the bank lends money to firms, households or governments wishing to borrow.

Banks are not the only financial intennediaries. Insurance companies, pension funds, and building societies also take in money in order to relend it. The crucial feature of banks is that some of their liabilities are used as a means of payment, and are therefore part of the money stock.

Commercial banks are financial intermediaries with a government licence to make loans and issue deposits, including deposits against, which cheques can be written.

Let's start by looking at the present-day UK banking system. Although the details vary from country to country, the general principle is much the same everywhere.

In the UK, the commercial banking system comprises about 600 registered banks, the National Girobank operating through post offices, and a dozen trustee saving banks. Much the most important single group is the London clearing banks. The clearing banks are so named because they have a central clearing house for handling payments by cheque.

A clearing system is a set of arrangements in which debts between banks are settled by adding up all the transactions in a given period and paying only the net amounts needed to balance inter-bank accounts.

Suppose you bank with Barclays but visit a supermarket that banks with Lloyds. To pay for your shopping you write a cheque against your deposit at Barclays. The supermarket pays this cheque into its account at Lloyds. In turn, Lloyds presents the cheque to Barclays, which will credit Lloyds' account at Barclays and debit your account at Barclays by an equivalent amount. Because you purchased goods from a supermarket using a different bank, a transfer of funds between the two banks is required. Crediting or debiting one bank's account at another bank is the simplest way to achieve this.

However on the same day someone else is probably writing a cheque on a Lloyds' deposit account to pay for some stereo equipment from a shop banking with Barclays. The stereo shop pays the cheque into its Barclays' account, increasing its deposit. Barclays then pays the cheque into its account at Lloyds where this person's account is simultaneously debited. Now the transfer flows from Lloyds to Barclays.

Although in both cases the cheque writer's account is debited and the cheque recipient's account is credited, it does not make sense for the two banks to make two separate inter-bank transactions between themselves. The clearing system calculates the net flows between the member clearing banks and these are the settlements that they make between themselves. Thus the system of clearing cheques represents another way society reduces the costs of making transactions.

The Balance Sheet of the London Clearing Banks. Балансовый отчет лондонских клиринговых банков

Tabl. 7 shows the balance sheet of the London clearing banks. Although more complex, it is not fundamentally different from the balance sheet of the goldsmith-banker shown in Таbl 6. We'll begin by discussing the asset side of the balance sheet.

Таbl. 7. Balance Sheet of London Clearing banks

Assets	?b	Liabilities	?b
Sterling: Cash Bills & market loans Advances Securities Lending in other currencies Miscellaneous assets TOTAL ASSETS	2,9 34,7 83,0 9,4 54,6 15,5 200,1	Sterling: Sight deposits Time deposits CDs Deposits in other currencies Miscellaneous liabilities TOTAL LIABILITIES	54,1 59,9 8,1 46,2 31,8 200,1

Cash assets are notes and coin in the banks' vaults. However, modem banks' cash assets also include their cash reserves deposited with the Bank of England. The Bank of England (usually known as the Bank) is the central bank or banker to the commercial banks.

Apart from cash, the other entries on the asset side of the balance sheet show money that has been lent out or used to purchase interest-earning assets. The second item, bills and market loans, shows short-term lending in liquid assets.

Liquidity refers to the speed and the certainty with which an asset can be converted back into money, whenever the asset-holders desire. Money itself is thus the most liquid asset of all.

The third item, advances, shows lending to households and firms. A firm that has borrowed to see it through a sticky period may not be able to repay whenever the bank demands. Thus, although advances represent the major share of clearing bank lending, they are not very liquid forms of bank lending. The fourth item, securities, shows bank purchases of interest-bearing long-term financial assets. These can be government bonds or industrial shares. Although these assets are traded daily on the stock exchange, so in principle these securities can be cashed in any time the bank wishes, their price fluctuates from day to day. Banks cannot be certain how much they will get when they sell out. Hence financial investment in securities is also illiquid.

The final two items on the asset side of the balance sheet show lending in foreign currencies and miscellaneous bank assets. Total assets of the London clearing banks were ?200,1 billion. We now shall examine how the equivalent liabilities were made up.

Deposits are chiefly of two kinds: sight deposits and time deposits. Whereas sight deposits can be -withdrawn on sight whenever the depositor wishes, a minimum period of notification must be given before time deposits can be withdrawn. Sight deposits are the bank accounts against, which we write cheques, thereby running down our deposits without giving the bank any prior warning. Whereas most banks do not pay interest on sight deposits or cheque (checking) accounts, they can afford to pay interest on time deposits. Since they have notification of any withdrawals, they have plenty of time to sell off some of their high- interest investments or call in some of their high-interest loans in order to have the money to pay out deposits.

Certificates of deposit (CDs) are an extreme form of time deposit where the bank borrows from the public for a specified period of time and knows exactly when the loan must be repaid. The final liability items in Таbl 7 show deposits in foreign currencies, miscellaneous liabilities, such as cheques, in the process of clearing.

VOCABULARY NOTES

a financial intermediary - финансовый посредник

to bring together - соединять, сводить вместе

insurance companies - страховые компании

pension funds - пенсионные фонды

the money stock - денежная масса, деньги в обращении

to issue deposits - открывать вклады

the National Girobank - англ. Национальный жиробанк

trustee saving banks - доверительные сберегательные банки

London clearing banks - лондонские клиринговые банки (банки - члены расчетной палаты)

a central clearing house - центральная расчетная палата

inter-bank accounts - межбанковские счета

Barclays - Барклайз банк (Великобритания)

Lloyds - Ллойдз банк (Великобритания)

to credit - кредитовать

to debit - дебетовать

cheque recipient - получатель чека

cash assets - денежные активы

the Bank of England - Банк Англии, Английский банк

interest-earning (syn. interest-bearing) assets - активы, приносящие процентный доход

bills and market loans - векселя и рыночные займы

short-term lending - краткосрочное кредитование

liquid (ant. illiquid) assets - ликвидные активы

liquidity - ликвидность

advances - ссуда в виде аванса

a sticky period - трудный период

securities - ценные бумаги

interest-bearing long-term financial assets - долгосрочные финансовые активы, приносящие процентный доход

government bonds - государственные облигации

industrial shares - промышленные акции

the stock exchange - фондовая биржа

miscellaneous bank assets - прочее имущество банка

sight deposit - депозит до востребования; бессрочный вклад

time deposit - срочный вклад

to withdraw - отзывать (вклад)

to run down a deposit - уменьшать вклад

cheque (checking) accounts - текущий (чековый) счет

to sell off - распродавать

call in high-interest loans - требовать возврата займов (требовать уплаты процентов)

certificates of deposit - депозитные сертификаты

miscellaneous liabilities - прочие (другие) пассивы

Assignments

I. Suggest the Russian equivalents

institution that brings lenders and borrowers together; crediting them with a deposit; with a government licence; as a means of payment; handling payments by cheque; a set of arrangements; adding up all the transactions; to balance inter-bank accounts; the net amount; to calculate the net flows between banks;

costs of making transactions; cash assets are notes and coin; to purchase interest-earning assets; bills and market loans; asset-holders; lending to households and firms; the major share of clearing bank lending; interest-bearing long-term financial assets; price fluctuates; a period of notification;

high-interest investments

II. Replace the parts in italics by synonyms

debited at the same time; interest-bearing assets; current assets; to support the firm fог a difficult period of time; firms may not be able to repay when the bank demands; demand deposit; to draw money from a bank account

III. Fill in the gaps with the words and expressions from the text

1. A financial intermediary is an institution that specializes in __.

2. A commercial bank __ money from the public, __ them with a deposit, which is __ of the bank.

3. As liabilities are used as __, and are part of __.

4. Commercial banks are __ with a government licence to __ and__.

5. The clearing banks are so named because they have __ for __.

6. A clearing system is a set of __ in which __ between banks are __.

7. Lloyds presents the cheque to Barclays, which will __ Lloyds' account at Barclays and __ your account at Barclays by __ amount.

8. Because you purchased goods from a supermarket using __, __ between the two banks is required.

9. Barclays then __ into its account at Lloyds where this person's account is __.

10. The clearing system calculates __ between the member clearing banks, thus representing another way society __ of making transactions.

11. Modem banks' __ include notes and coin in the banks' vaults and their __ deposited with __.

12. The other entries on the asset side of __ show money that has been __ or used to purchase __.

13. The second item, __, shows __.

14. Money itself is thus __ asset of all.

15. The third item, __, shows lending to ___.

16. Although advances represent __ of clearing bank lending, they are not __ of bank lending.

17. The fourth item, __, shows bank purchases of __, which can be __ or__.

18. Although these assets are traded daily on __, their price __ from day to day, hence financial investment in securities is also __.

19. Deposits are chiefly of two kinds: __ and __.

20. Whereas __ can be withdrawn __ whenever the depositor wishes, without giving the bank __, a minimum __ must be given before __ can be __.

21. Whereas most banks do not pay interest on __ or __, they can afford to pay interest on __.

22. Since they have notification of any withdrawals, they have plenty of time to sell of ___ or call in ___ in order to have the money to pay out deposits.

23. CDs are an __ form of __ where the bank borrows from the public for __ and knows exactly when ___.

IV. Increase your vocabulary

Prepositions

to borrow from, to purchase from

to bank with; to deposit with

to credit with; to lend to

to take in; to call in loans

to write a cheque against a deposit

to pay the cheque into account

an account at a bank

Make sentences of your own using these phrases.

V. Find in the text English equivalents/or the following

финансовый посредник; банковские пассивы; страховая компания;

пенсионный фонд; строительное общество; предоставлять ссуды; открыть депозит; доверительный сберегательный банк; клиринговый банк; центральная расчетная палата; кредитовать счет; дебетовать счет; перевод суммы денег (фондов); получатель чека; банк - член расчетной палаты;

балансовый отчет; активы; денежные активы; кассовый резерв; краткосрочные ссуды; переводить в деньги; авансовая ссуда; ценные бумаги;

правительственные облигации; акции какой-либо промышленной компании; фондовая биржа; неликвидный; прочее имущество; бессрочный вклад (депозит до востребования); отзывать вклад по предъявлении;

срочный вклад; не предупреждая заранее; текущий (чековый) счет; выплачивать проценты; депозитный сертификат

VI. Explain in English

the National Girobank; cash assets; cash reserves; interest-earning assets;

asset-holders; liquid assets; illiquid assets; sight deposits; time deposits

VII. Answer the questions

1. What's a financial intermediary? Name different financial intermediaries.

2. What's a deposit?

3. What's a bank liability? In what way are the bank liabilities part of the money stock?

4. What's a commercial bank?

5. What's a clearing bank?

6. What's a clearing system? How does it work? Draw a scheme showing how the system works.

7. What's the role of the Bank of England?

8. What do assets include? Dwell on each item.

9. What's liquidity? Why is money itself the most liquid asset? Why aren't advances very liquid forms of bank lending?

10. What do liabilities include? Dwell on each item.

VIII. Translate into English using all the active possible

1. О деятельности коммерческого банка можно судить (понять) с помощью балансового отчета, в котором активы равняются пассивам.

2. У коммерческого банка две основные функции -- прием денежных вкладов и выдача ссуд.

3. Банкир преследует две противоречащие друг другу цели. Одна цель -- прибыль. Коммерческие банки, как и другие предприятия, стремятся к прибыли. Поэтому они предоставляют кредиты и покупают ценные бумаги, правительственные облигации и акции компаний. Эти операции в балансе показаны как основные активы, приносящие доход коммерческим банкам. С другой стороны, коммерческий банк должен стремиться к безопасности. Для банков безопасность обеспечивается ликвидностью, в частности такими ликвидными активами, как наличность. Поэтому банкиры стремятся к балансу между осторожностью и прибылями.

4. Финансовые посредники - это институты, которые собирают сбережения населения и предоставляют их заемщикам. Финансовые посредники в общем виде могут быть разбиты на три группы - банковские, страховые и инвестиционные институты. Банковские институты состоят из коммерческих банков, сберегательных банков и др. Для них характерно принятие вкладов населения и организаций. Страховые институты представлены страховыми компаниями и пенсионными фондами. Инвестиционные институты представлены финансовыми компаниями. Они привлекают деньги, выпуская собственные акции и инвестируя фонды в акции и облигации.

MONEY AND THE RETURN IT EARNS (ДЕНЬГИ И ДОХОД, КОТОРЫЙ ОНИ ПРИНОСЯТ)

Fundamental to all financial markets is the idea of earning a return on money. Money has to work for its owner. Here are some of the ways it can do so:

1. You deposit $1,000 with a bank, which pays you, say, 10 per cent a year interest. In other words, your $1,000 of capital earns you $100 a year, which is the return on your money. When you want your $1,000 back you get $1,000, plus any accumulated interest, not more or less. Provided your bank does not go bust, your $1,000 of capital is not at risk, except from inflation, which may reduce its purchasing power each year.

2. You buy gold bullion to a value of $1,000 because you think the price of gold will rise. If the price of gold has risen by 20% after a year, you can sell your gold for $1,200. You have made a profit or a capital gain, of $200 on your capital outlay of $1,000. In other words you have a return of 20% on your money. If the price of gold fails to move, you've earned nothing because commodities like gold do not pay interest.

3. You use your $1,000 to buy securities that are traded on a stockmarket. Usually these will be government bonds (known as gilt-edged securities or gilts in the UK) or ordinary shares in a company. The former always provide an income; the latter normally do. Traditional gilt-edged securities pay a fixed rate of interest. Ordinary shares in companies normally pay a dividend from the profits the company earns. If the company's profits rise, the dividend is likely to be increased; but there is no guarantee that there will be a dividend at all. If the company makes losses, it may have to cease paying a dividend.

But when you buy securities that are traded on a stockmarket, the return on your $1,000 is not limited to the interest or dividends you receive. The prices of these securities will also rise and fall, and your original $1,000 investment accordingly becomes worth more or less. So you are taking the risk of capital gains or capital losses.

Suppose you buy $1,000 worth of ordinary shares, which pay you a dividend of $40 a year. You are getting a return or dividend yield of 4% a year on your investment ($40 as a percentage of $1,000). If after a year the market value of your $1,000 of shares has risen to $1,100, you can sell them for a capital gain of $100 (or a 10% profit on your original outlay). Thus your overall return over a year consists of the $40 income and the $100 capital gain: a total of $140 or a 14% overall return on your original $1,000 investment.

Investors are generally prepared to accept much lower initial yields on shares than on fixed-interest stocks because they expect the income to rise in the future. Most investors in ordinary shares are seeking capital gains at least as much as income. Note that if you are buying a security, you are taking the risk that the price may fall whether it is a government bond or a share. But with the government bond the income is at least guaranteed by the government. With the share there is a second layer of risk. the company may not earn sufficient profits to pay a dividend.

To summarize: money can be deposited to produce an income; it can be used to buy commodities or goods, which arc expected to rise in value; or it can be invested in stockmarket securities, which normally produce an income but show capital gains or losses as well. Of course, there are many variations on each of these items.

VOCABULARY NOTES

an accumulated interest - накопленный процент

provided (syn. providing) - при условии

to go bust (syn. to go bankrupt) - обанкротиться

a capital gain - доход от прироста капитала (как результат роста рыночной стоимости активов; может быть получен при продаже активов)

capital outlay - капиталовложения

gilt-edged securities (gilts) - первоклассные (особо надежные) ценные бумаги (доcл. с золотым обрезом)

ordinary shares - обыкновенные акции

a fixed rate of interest - фиксированная процентная ставка

pay a dividend - приносить дивиденд

to cease - прекращать

a capital loss - капитальный убыток (потери от понижения рыночной стоимости активов)

a yield - доход по ценным бумагам (особенно облигациям)

a dividend yield - доход на акцию

overall return - общий, суммарный доход

a second layer of risk - дополнительный риск

a layer - слой

Assignments

I. Suggest the Russian equivalents

the idea of earning a return on money; your $1,000 of capital earns you $100 a year; a profit or a capital gain of $200 on your capital outlay of $1,000;

commodities like gold do not pay interest; securities that are traded on a stockmarket; your overall return over a year; most investors in ordinary shares are seeking capital gains at least as much as income; there is a second layer of risk; the company may not earn sufficient profits to pay a dividend; so you are taking the risk of capital gains and capital losses

II. Replace the parts in italics by synonyms

in case your bank does not go bankrupt; securities that are bought and sold on a stockmarket; to earn profits enough to pay a dividend.

III. Fill in the gaps with the words and expressions from the text

1. Fundamental to all financial markets is the idea of.__.

2. Your $1,000 of__ earns you $100 a year, which is __ on your money.

3. When you want your $1,000 back you get __.

4. Provided your bank does not __, your $1,000 of capital is __.

5. You may buy __, but if the price of gold fails to move, you've earned __ because commodities like gold __.

6. Of all __ traded on a stockmarket __ always provide an income, __ normally do, and traditional __ pay __.

7. Ordinary shares in companies normally pay __ the company __.

8. When you buy securities that are traded on __, the return is not limited to __ or __ you receive.

9. If the market value of your shares has risen, your __ over a year consists of __ and __.

10. Investors are generally prepared to accept __ on shares than on __ stocks because they expect the income __.

11. Most investors in ordinary shares are seeking __ at least as much as __.

12. With the government bond the income is at least __.

13. If the company does not __, it may __ to pay __.

IV. Find in the text English equivalents for the following

процент годовых; накопленные проценты; при условии, что...; обанкротиться; сокращать покупательную способность денег; рисковать; золотой слиток; ценные бумаги; государственные облигации; акции; фиксированная процентная ставка; прекратить выплату дивидендов; начальный доход по акциям; приносить доход (проценты) (2 варианта); доходы на капитал (доходы от прироста капитала); потеря капитала

V. Explain in English

a capital gain; a capital loss; a return; an overall return; a dividend yield; a fixed rate of interest.

VI. Answer the questions

1. What are the ways of earning a return on money?

2. What are gilt-edged securities? Who issues them? Why are they considered to be of the highest class?

3. In what cases does the investor take the risk of capital gains? Capital losses? .

4. Which way of earning a return do you consider the safest and most profitable other things being equal?

VII. Translate into English using all the active possible

1. В условиях рыночной экономики всякая денежная сумма способна приносить доход.

2. Если вы владеете акциями какой-либо компании и цены на эти акции поднялись, то вы можете получить доход, продав эти акции.

3. Продать или купить акции можно на особом рынке - фондовом.

4. Цена акции колеблется, ее курс может падать и повышаться. Это зависит от размеров прибыли, которую получает компания, и, следовательно, от дивиденда, который выплачивается по акциям, а также от банковской процентной ставки.

5. Предположим, цена на акции составляет $100. Если дивиденд по акциям равен $10, а рыночная ставка процента равна 10%, то 100-долларовая акция приносит доход в 10 долларов. Сумма наличными в 100 долларов, помещенная (вложенная) в банк, тоже приносит доход в 10 долларов. Следовательно, цена на акции не изменится.

6. Если дивиденд повысится до 20 долларов, а процентная ставка останется неизменной (10%), то доход по акциям в этих новых условиях удвоится по сравнению с доходом от такой же суммы, помещенной в банк. Вполне естественно, что курс акции (цена на акции) удвоится.

INTEREST RATES AND BOND PRICES (СТАВКА ПРОЦЕНТА И ЦЕНЫ НА ОБЛИГАЦИИ)

The change in interest rates has important implications for the stockmarket prices of bonds, which pay a fixed rate of interest: fixed-interest securities, of which the traditional gilt-edged securities issued by the government arc the most familiar though companies also issue fixed-interest bonds. It works like this.

Gilt-edged securities are a form of IOU (I owe you) or promissory note issued by the government when it needs to borrow money. The government undertakes to pay so much a year in interest to the people who put up the money and who get the IOU in exchange. Normally the government agrees to redeem the stock at some date in the future, but to illustrate the interest rate mechanism it is easiest initially to take an irredeemable or undated stock, which does not have to be repaid.

The original investors who lend the money to the government do not have to hold on to the lOUs. They can sell them to other investors, who then become entitled to receive the interest from the government. Suppose the government needs to borrow money at a time when investors would expect an 11% yield on a gilt-edged security. It oners $11 a year interest for every $100 it borrows. The investor is prepared to pay $100 for the right to receive $11 a year interest, because this represents an 11% return on his outlay.

Then suppose that interest rates rise to a point where an investor would expect a 12,5% return if he bought a gilt-edged security. He will no longer pay $100 for the right to $11 a year in income. He will only be prepared to pay a price that gives him a 12,5% return on his outlay. The "right" price in this case is $88, because if he pays only $88 to receive $11 a year in income, he is getting a 12,5% return on his investment. So in the stockmarket the price of the gilt-edged security that pays $11 a year interest will have to fall to $88 before investors are prepared to buy it. The original investor who paid $100 thus sees the value of his investment fall because of the rise in interest rates. Conversely, the value of his investment would have risen if interest rates had fallen.

To summarize: If interest rates on securities go down, bond prices or prices for securities go up, and vise versa.

VOCABULARY NOTES

a promissory note - долговое обязательство

to put up the money - вкладывать деньги

to redeem - погашать (ценные бумаги)