Contents
The GeneralEconomic Conditions for the Use of Money. Money and MoneySubstitutes ........................................................ 4 2. The Global MoneyMarkets. US Money Market ........................ 9
3. MoneyManagement. Cash Management for Finance
The purpose of our abstract is studying the global money markets andmoney as versions of the goods. In chapter 1 we cover general economicconditions for the use of money. The intent of this chapter is to introducesome of the functions of money. It is essential to understand these functionssince the money markets carries out similar functions. Everybody use money andit is important to know В«how it worksВ».
Chapter 2 covers short-term debt instruments issued by some of thelargest borrowers in the world-the US Treasury and US federal agencies.US Treasury bills are considered among the safest and most liquid securitiesin the money market. Treasury bill yields serve as benchmark short-terminterest rates for markets around the world. Another large borrower ofshort-term funds is a corporation using instruments such as commercial paper orshort-term medium term notes. These instruments are the subject of this chaptertoo.
Chapter 2 describes short-term floating-rate securities. The term"Floating-rate security" covers several different types of instruments with onecommon feature: the security's coupon rate will vary over the life of theinstrument. Approximately, 10% of publicly traded debt issued worldwidepossesses a floating coupon. Floating-rate securities are the investment ofchoice for financial institutions whose funding costs are based on a short-termfloating rate.
The activity of financial institutions in the money market involves anactivity known as asset and liability management. We introduce the fundamentalprinciples of asset and liability management in chapter 3. An appreciation ofthese concepts and tools is essential to an understanding of the functioning ofthe global money markets.
Chapter 3 describes why LIBOR is the very important interest rate. Thischapter covers agency securities. These securities are not typically backed bythe full faith and credit of the US government, as is the case with Treasurybills. However, short-term agency securities are considered safer than othermoney market instruments except US Treasury bills. We describe the role ofthe Federal National Mortgage Association in US money market. Also we tellabout cash management. So, let's start ...
Chapter1
The General Economic Conditions for the Use of Money. Moneyand Money Substitutes
All of us knowthat a word of "money" means. But not everyone knows why money uses.We shall try to look at money from other point of view in this chapter. Firstwe shall stop on general economic conditions for the use of money, and then weshall tell about functions of money and money substitutes.
Where the freeexchange of goods and services is unknown, money is not wanted. In a state ofsociety in which the division of labor was a purely domestic matter andproduction and consumption were consummated within the single household itwould be just as useless as it would be for an isolated man. But even in aneconomic order based on division of labor, money would still be unnecessary ifthe means of production were socialized, the control of production and thedistribution of the finished product were in the hands of a central body, andindividuals were not allowed to exchange the consumption goods allotted to themfor the consumption goods allotted to others.
The phenomenon of money presupposes an economic order in which productionis based on division of labor and in which private property consists not onlyin goods of the first order (consumptiongoods), but also in goods of higher orders (production goods). In such a society, there is no systematiccentralized control of production, for this is inconceivable withoutcentralized disposal over the means of production. Production is"Anarchistic." What is to be produced, and how it is to be produced, is decided in the first place by theowners of the means of production, whoproduce, however, not only for their own needs, but also for the needs of others, and in their valuations take into account,not only the use-value that they themselves attach to their products,but also the use-value that these possess in the estimation of the other members of the community. The balancing ofproduction and consumption takes place in the market, where thedifferent producers meet to exchange goodsand services by bargaining together. The function of money is to facilitatethe business of the market by acting as a common medium of exchange. [1, p.26]
Indirect exchange becomes more necessary asdivision of labor increases and wants become more refined. In the present stage of economicdevelopment, the occasions when directexchange is both possible and actually effected have already become veryexceptional. Nevertheless, even nowadays, they sometimes arise. Take, forinstance, the payment of wages in kind, which is a case of direct exchange solong on the one hand as the employer uses the labor for the immediatesatisfaction of his own needs and does not have to procure through exchange thegoods in which the wages are paid, and so long on the other hand as theemployee consumes the goods he receives and does not sell them. Such payment ofwages in kind is still widely prevalent inagriculture, although even in this sphere its importance is being continually diminished by the extension ofcapitalistic methods of management and thedevelopment of division of labor.
The simplestatement, that money is a commodity whose economic function is to facilitatethe interchange of goods and services, does not satisfy those writers who are interested rather in the accumulation ofmaterial than in the increase of knowledge. Many investigators imaginethat insufficient attention is devoted to the remarkable part played by moneyin economic life if it is merely credited with the function of being a medium of exchange; they do not think that dueregard has been paid to the significance of money until they have enumeratedhalf a dozen further "functions"-as if, in an economic orderfounded on the exchange of goods, there could be a more important function thanthat of the common medium of exchange. [1, p. 12]
Credittransactions are in fact nothing but the exchange of present goods against future goods. Frequent reference is madein English and American writings to afunction of money as a standard of deferred payments. But the original purpose of this expression was not to contrast aparticular function of money with itsordinary economic function, but merely to simplify discussions about the influence of changes in the value of money uponthe real amount of money debts. It servesthis purpose admirably. But it should be pointed out that its use has led manywriters to deal with the problems connected with the general economic consequences of changes in the value of moneymerely from the point of view of modificationsin existing debt relations and to overlook their significance in all other connections.
Particular attention has been devoted, especiallyin recent times, to the function of money as a generalmedium of payment and the functions of money as a transmitter of value throughtime and space may also be directly traced back to its function as mediumof exchange. [1, p. 15] Indirectexchange divides a single transactioninto two separate parts which are connected merely by the ultimate intentionof the exchangers to acquire consumption goods. Sale and purchase thusapparently become independent of each other.
When an indirect exchange is transacted with the aid of money, it is notnecessary for t...
