Finance, Credit, Investments - Economical CategoriesPosted by Byrd Albertsen on May 18th, 2021 Scientific works in the theories of finances and credit, in line with the specification of the study object, are characterized to be many-sided and many-leveled. This is of totality of the economical relations formed along the way of formation, distribution and usage of finances, as money sources is widely spread. For instance, in "the overall theory of finances" you can find two definitions of finances: 1) "...Finances reflect economical relations, formation of the funds of money sources, in the process of distribution and redistribution of national receipts according to the distribution and usage". This definition is given relatively to the conditions of Capitalism, when cash-commodity relations gain universal character; 2) "Finances represent the forming of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of the state functions and obligations and in addition provision of the conditions of the widened further production". This definition is brought without showing the surroundings of its action. We share partly such explanation of finances and think expedient to make some specification. First, finances overcome the bounds of distribution and redistribution service of the national income, though this is a basic foundation of finances. Also, formation and using the depreciation fund that is the section of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year), but to the distribution of already developed value. This latest first appears to be a part of value of main industrial funds, later it is moved to the price price of a ready product (that's to the value too) and after its realization, in fact it is set the depression fund. Its source is considered before hand as a depression kind in the consistence of the ready products cost price. Second, definitive goal of finances is much wider then "fulfillment of hawaii functions and obligations and provision of conditions for the widened further production". Finances exist on hawaii level and in addition on the manufactures and branches' level too, and in such conditions, when the most portion of the manufactures are not state. V. M. Rodionova has a different position concerning this subject: "real formation of the financial resources begins on the stage of distribution, once the value is realized and concrete economical forms of the realized value are separated from the consistence of the profit". V. M. Rodionova makes an accent of finances, as distributing relations, when D. S. Moliakov underlines industrial foundation of finances. Though both of these give quite substantiate discussion of finances, as something of formation, distribution and usage of the funds of money sources, that comes out of the next definition of the finances: "financial cash relations, which forms along the way of distribution and redistribution of the partial value of the national wealth and total social product, is related to the subjects of the economy and formation and using the state cash incomes and savings in the widened further production, in the material stimulation of the workers for satisfaction of the society social and other requests". In the manuals of the political economy we meet with the following definitions of finances: "Finances of the socialistic state represent economical (cash) relations, through the help of which, in the way of planned distribution of the incomes and savings the funds of money sources of hawaii and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural level of individuals and for satisfying other general society requests". "The system of creation and usage of necessary funds of cash resources for guarantying socialistic widened further production represent the finances of the socialistic society. And the totality of economical relations arisen between state, manufactures and organizations, branches, regions and separate citizen according to the movement of cash funds make financial relations". As we've seen, definitions of finances created by financiers and political economists usually do not differ greatly. In every discussed position there are: 1) expression of essence and phenomenon in the definition of finances; 2) the definition of finances, as the system of the creation and using funds of cash sources on the amount of phenomenon. 3) Distribution of finances as social product and the worthiness of national income, definition of the distributions planned character, main goals of the economy and economical relations, for servicing of which it is used. If refuse the preposition "socialistic" in the definition of finances, we may say, that it still keeps actuality. We talk with such traditional definitions of finances, lacking any adjective "socialistic", in the modern economical literature. We may give such an elucidation: "finances represent cash resources of production and usage, also cash relations appeared along the way of distributing values of formed economical product and national wealth for formation and additional production of the cash incomes and savings of the economical subjects and state, rewarding of the workers and satisfaction of the social requests". in this elucidation of finances like D. S. Moliakov and V. M. Rodionov's definitions, following the traditional inheritance, we meet with the widening of the financial foundation. They concern "distribution and redistribution of the value of created economical product, also the partial distribution of the value of national wealth". This latest is quite actual, relatively to the process of privatization and the transition to privacy and is periodically used in practice in different countries, for example, Great Britain and France. "Finances - are cash sources, money, their creation and movement, distribution and redistribution, usage, also economical relations, which are conditioned by intercalculations between your economical subjects, movement of cash sources, money circulation and usage". "Finances are the system of economical relations, which are linked to firm creation, distribution and usage of financial resources". We meet with absolutely innovational definitions of finances in Z. Body and R. Merton's basis manuals. "Finance - it is the science about how the people lead spending `the deficit cash resources and incomes in the definite time period. The financial decisions are characterized by the expenses and incomes which are 1) separated with time, and 2) generally, it really is impossible to take them into consideration beforehand neither by those who get decisions nor any other person" . "Financial theory consists of amounts of the conceptions... which learns systematically the subjects of distribution of the cash resources relatively to enough time factor; it also considers quantitative models, through that your estimation, putting into practice and realization of the alternative variants of every financial decisions take place" . These basic conceptions and quantitative models are employed at every level of getting financial decisions, but in the most recent definition of finances, we meet the following doctrine of the financial foundation: main function of the finances is in the satisfaction of the people's requests; the subjects of economical activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function. For the goals of our monograph, it is important to compare well-known definitions about finances, credit and investment, to choose how and how much you'll be able to integrate the finances, investments and credit in to the one total part. Some researcher thing that credit may be the consisting part of finances, if it's discussed from the position of essence and category. The other, more numerous group proves, an economical category of credit exists parallel to the economical group of finances, by which it underlines impossibility of the credit's existence in the consistence of finances. N. K. Kuchukova underlined the independence of the category of credit and notes that it's only its "characteristic feature the turned movement of the worthiness, which is not related to transmission of the loan opportunities alongside the owners' rights". N. D. Barkovski replies that functioning of money created an economical basis for apportioning finances and credit as an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, because the science about finances has business with the research of such economical relations, which lean upon cashflow and credit. Let's discuss the most spread definitions of credit. in the present day publications credit appeared to be "luckier", then finances. For instance, we meet the following definition of credit in the finance-economical dictionary: "credit may be the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a kind of movement of the loan capital and expresses economical relations between the creditor and borrower". This can be a traditional definition of credit. In the earlier dictionary of the economy we read: "credit is the system of economical relations, which is formed while the transmission of cash and material means in to the temporal usage, as a rule beneath the conditions of returning and paying percent". In the manual of the political economy published under reduced amount of V. A. Medvedev the following definition is given: "credit, being an economical category, expresses the created relations between your society, labour collective and workers during formation and usage of the loan funds, beneath the terms of paying present and returning, during transmission of sources for the temporal usage and accumulation". Credit is discussed in the next way in the last education-methodological manuals of political economy: "credit may be the system of money relations, that is created along the way of using and mobilization of temporarily free cash method of the state budget, unions, manufactures, organizations and population. Credit comes with an objective character. It is useful for providing widened further production of hawaii and other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by hawaii is fulfilled without this problem". We meet the following definition if "the course of economy": "credit is an economical category, which represents relations, as the separate industrial organizations or persons transmit money methods to each-other for temporal usage under the conditions of returning. Creation of credit is conditioned by way of a historical procedure for fulfilling the economical and money relations, the form of which is the money relation". Following scientists give slightly different definitions of credit: "Credit - is a loan in the form of money or commodity, that is given to the borrower by way of a creditor beneath the conditions of returning and paying the percentage rate by the borrower". Credit is giving the temporally free money sources or commodity as a debt for the defined terms by the price tag on fixed percentage. Thus, a credit may be the loan by means of money or commodity. In the process of this loan's movement, a definite relations are formed between a creditor (the loan is distributed by a juridical of physical person, who gives certain cash as a debt) and the debtor. Combining every definition named above, we arrived at a concept, that credit is giving money capital of commodity as a debt, for several terms and material provision beneath the price of firm percentage rate. It expresses definite economical relations between the participants of the procedure of capital formation. Necessity of the credit relations is conditioned, in one side, by gathering solid level of temporarily free money sources, and from the next side, existence of requests of these. Though, simultaneously we must distinguish two resembling concepts: loan and credit. Loan is characterized by: o Here, the discussion may touch upon transmission of money and also things form one side (loaner) to another (borrower): a)under the owning of the borrower and, at the same time, b) under the conditions of returning same amount or same quantity and quality of the items; o The loaning of money may bear no interest; o Any person may take part in it. With the difference with loan, credit, that is somehow an exclusive occasion of the loan, represents: o One side (loaner) gives to the second one (borrower) only money, and _ for temporal usage; o It may not bear no interest (if the assignment doesn't foresee something); o In it creditor isn't any person, but a credit organization (at the initial place, banks). So, a credit may be the bank credit. To your mind, it is not correct to use "credit" and "loan" as the synonyms. Banking crediting is the union of relations between bank (as a creditor) and its borrower. These relations touch upon: a) Giving some money to the borrower for definite purpose (though, we meet the so-called free credits, aims and objects of crediting are not appointed in the assignment); b) Its opportune returning; c) Getting percentage rate from the borrower for using the sources under his/her disposal. The fundamental foundation of the credit essence and its own important element is existence of trust between your two sides (in Latin "credo", from which comes the term "credit", means "trust"). From the positioning of circulation of money forms (in the abstraction, historical process of formation economical relations and social budget and banking systems expressed by them) comparing different definitions of finances and credit, the paradox conclusion appears: credit is the private occasion of finances. And truly, from the positioning of movement of the money forms, finances represent the procedure of formation and using the funds of cash means. Frequently such movements are fulfilled without returning, but sometimes, it is possible to give loans from the budget for the investment projects of other needs. Also, when a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage could be realized as inside the manufacture or corporation (there is no subject about returning or not returning of the usage), so gratis under conditions of returning. This latest is called commercial form because of transmitting the sources to others, but even yet in this occasion, it is the element of economic climate of the manufacture and corporation. From the idea of cash means movement, main character of credit is the process of formation and using the funds of cash means under the conditions of returning and, generally, taking the value-percentage. If gating the credit value doesn't take place (even yet in the exceptional occasions), in line with the movement form, credit becomes an exclusive occasion of finances, as from the web financial funds (consequently from the state budget) the loans which bear no interests can be utilized. If gating credit value occurs, by the appearance form, credit is discussed to be financial modification. From the historical point of view, finances (especially in the sort of the state budget) and credit (beginning with usury, later commercial and banking) were developing differently for considering credit to be the section of finances. Though, from the genetic-historical perspective, previous loaners, before giving loan, needed gathering the permanent capital not returning, that is the net financial foundation. The banks analogously needed concentration of the important own capital for influxing the consumers' means and for getting higher percentage rate under the conditions of returning. Herewith, exactly on the financial basis, in the type of financial fund (which later partially becomes loan fund) the main bank capital appears to be the reservation (insurance) area of the fund, which naturally is financial and not loan. So notwithstanding the fundamental distinctions between finances and credit form the genetic-historical viewpoint, credit is apparently formed from finances and represent their modification. From the essential position of expressing economical relations of finances and credit, we talk with cardinal distinctions between these two categories. Which mostly expressed by the distinction of the movement forms notwithstanding they're returnable or not. Finances express relations in the aspects of distribution and redistribution of social product and section of the national wealth. Credit expresses distribution of the appropriate value only in the section of percentage given for loan, while according to the loan itself, a just a temporal distribution of money sources takes place. Herewith, there is a large amount of common between your finances and credit as from the essential point of view, so in line with the form of movement. Simultaneously, there is a significant distinction between finances and credit as in the essence, so in the proper execution too. According to this, there has to be a kind of generally economical category, that may consider finances and credit as a complete unity, and in the bounds of the category itself, the separation of the specific essence of the finances and credit would take place. Funding of the cash means is common to the researched economical categories. It takes place in any separate system of finances and credit, which have been touched upon during the analyses of defining finances and credit. Word combination "funding of the money sources (fund formation)" reflects and defines exactly essence and form of economical category of more general character, those of finances and credit categories. Though in Finance Hub SW London 2021 in economical texts and practice, it is very uncomfortable to employ a termini, which includes three words. Also, "unloading" with an information hardens greatly its influxing in to the circulation even in the conditions of its strict substantiation and thoroughness. In the discussing context we consider: 1) wide and narrow understanding of economical group of the finances; 2) discussing finances in narrow understanding under general traditional meaning; 3) discussing finances, as funding of the cash means, in wide understanding, which concerns finances - in narrow meaning and credit - in complete meaning. Termini "funding" and its own equivalent "fund formation" are used by us because the purposeful structuring of cash means, which is predicated on two poles - accumulation of money sources (gathering) and its usage for definite purpose in the form of financing and crediting. We have established a new termini - "finance-investment sphere" (FIS). Analyses about interrelation of finances and credit made by us give us an opportunity of proving, that in the given termini, the word "financial" is used with this is of funding cash sources, its purposeful structuring. In this process we consider at the same time financial, credit and investments' economical categories. Let's sum up middle results of discussing new concept - "finance-investment sphere" and discuss its investment consisting parts. The idea "investments" was brought in to the native economical science from the West. In the Soviet economical science they for years used in the area "investments" the termini "capital placement", which expressed the usage of the industrial factors in the sphere of real industrial activities during realization of capital projects. In one glance, this termini in its concept is identical to the "investments", consequently it is possible to use them as synonyms. Although termini "investments" and "investing" have the advantage towards the termini "capital placement" from linguistic and philological points of view, because they're expressed with one word. This is simply not only economical and comfortable along the way of dealing with the termini "investment" itself, but additionally it gives an opportunity of termini formation. More concretely: "investment process", "investment domain", "finance-investment sphere" - all these termini are much more acceptable. Changing native economical termini with foreign ones is purposeful, if it really matters (by keeping parallel usage of the native termini for the inheritance). Though we should not change native economical termini into foreign ones altogether, when by ordinal traditional language easy to explain private and narrow concrete processes and elements get their own termini. The "movement" of the termini is approved in the narrow professional bounds, but their "spitting out" into the economical science may turn economical language in to the tangled slang. Let's discuss termini - "investment" and "capital placement's" usage in the economical literature. Investments are placement of funds in to the main and circulation capital for the purpose of getting profit. "Investments in material assets - are the placements of funds into the mobile and real estate (land, buildings, furniture and so forth). Investments in financial assets will be the placements of funds in to the securities bank accounts along with other financial instruments". We don't meet with the termini "investments" in the earlier economical dictionary, but we meet the combined termini "investment policy" - the union of the industrial decisions, which guarantee main directions of the capital investments, the activities of their concentration in the determinant suburbs, which the reaching of planned rates of development of the society production is depended, balancing and effectiveness, getting ultimately more and more production and profit of the national income for each and every lost Ruble". For today, in probably the most actual definitions, the capital investments are bounded only by financial means, you should definitely only financial, but additionally the investment of natural, material-technical and informational resources occurs. Labour resources take a genuine place in the investment process. They themselves fulfill this or that investment process. A positive side of the discussed definitions is that they connect investment policy and capital placements (investments): - economical development in line with the key directions to the concentration; - providing high rates of economical growth; - raising an economical effectiveness, that is expressed: a) by growing the throw from the production and national income for every lost Ruble; b) by fulfilling the branch structure of the investments; c) by improving their technological structure; d) by optimization of these further production structure. Compared with such definition of the investments (capital placement) this is of investments in the dictionary attaching the "Economics" is apparently unimproved: "investments - the expenses of gathering production and industrial means and increasing material reserve". In this definition current expenses (production expenses) are blended with the investment (capital) expense. Also, not the investment expenses but (though the investments are followed by the correct expenses) exactly advancing. It differs from the expenses by that the means (means) are put by returning the advanced values, also, under the conditions of growth, to that your concept-advanced capital is corresponding. the advancing could be realized in the money, natural-material and informational forms. Except the termini "investments", there are two more termini related to the investment. They're shown below. "Human capital investment" - any activity provided for rising the workers labour productivity (in the way of growing their qualification and developing their abilities); at the expenses of improving the workers' education, health insurance and raising the mobility of the working forces". It is extremely useful to utilize the mentioned termini, though it requires one correction: the human capital investments do not concern only workers, but also the servants, representatives of every kind of labour. "Investment commodity, capital goods - a capital." In the state manuals of political economy of the reformation time the capital investments are discussed as "expenses for creating new main funds and widening, reconstruction and renewing the active ones". In this definition the investments (capital placements) during separation of the forms (types) of further production of the main funds are bounded only by main funds (without increases of the circulation funds and insurance reserves): a) creating new ones; b) widening; c) reconstruction; d) renewing. Also, the concept of the industrial gathering appears, at the expenses of widening of basic, circulation funds and also insurance reserves takes place". You'll meet below the definitions of investments from "the course of economy": the investments are called "placements of fund into the basic capital (basic method of production), reserves, also other economical objects and processes, which request long-termed influxing of material and cash means. "In line with the division of capital into physical and money forms, the investments too should be split into material and cash investments". They apportion investment commodity, to which belong industrial and nonindustrial building objects, vehicles purposed for changing or widened technical park and the furniture, increasing reserves among others. "They call the full total investments of production an investment product, that is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of them is named the depreciation; it represents important investment resources for compensation of renewal till the level of before industrial usage, deteriorating and repairing of the basic means. Second consisting the main total investments is represented by net investments - capital investments for the intended purpose of increasing basic means". Depreciation is not a compensation resource of wearing the basic funds out, but it may be the purposeful financial way to obtain such resources. Human capital investment is "a particular kind of investments, mostly in education and health protection". "Real investments will be the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that is increasing material values of the industrial means". We are able to agree with such definition with one specification that material and nonmaterial values too belong to the real capital (wealth), consequently science-researching experimental-construction results, various information, education of he workers and others. Such service as organization of the excitable games, also the service of redistribution social wealth from one private person to some other (except charity). "Financial investments represent placement of funds into the shares, obligations, promissory notes, other securities and instruments. Such investments, of course, usually do not give increases of the real material capital, but they help getting profit, consequently at the expenses of changing the course of the securities in enough time of speculation, or distinguishing the course in various places of sell and purchasing". We share wholly such definition, hence it follows that financial investments (if it's not accompanied by real investments consequently) usually do not increase real material wealth and real nonmaterial wealth. According to this context, the expression below is essential: "we should distinguish financial investments, which represent placement of the funds in the ways of selling and purchasing the securities for the intended purpose of getting profit and financial investments, which become cash and real, moved to real physical capital." In the "economical course" quoted before long and short-termed investments are separated. Recognizing the existence of the bounds between them, the authors ascribe short-termed investments to "a month or more" investments. If we get such conditioned criteria, that people can call the investments which overcome the terms of some months, long-termed ones, which is very doubtful and we don't trust it. A long-termed character of the fund placement is a significant feature of the investments (short-term doesn't combine with the concept of investments). Principally, it will be better to point out quick compensative, middle termed compensative and long-termed compensative investments: - less then 6 months - quick compensative; - from 6 months up to the year . 5 - middle termed compensative; - more then the year . 5 - long termed compensative. We stopped at the definition of the investments in the capital work "economical course" for the special purpose, as, inside it the author tried to go over the idea of investments systemically and quite completely, herewith the book is published at the moment. We'll return to the discussion the definition economical category of "investments" in different publications in the following chapter. The definitions given here are quite enough for having a notion of the level of smoking cigarettes the given category in the economical literature. What conclusions could be made according this is of the mentioned economical category in the published works, except the made notions and specifications? There is quite deeply, concretely and thoroughly defined the idea of "investments", different definitions in the economical literature; but mostly in every works about the investments discussed by us as yet, there is not opened the essence of investments as an economical category. In every monograph , even if it has a title investment, being an economical category , there is given only the definition, idea of investments. But, because the Academician Vasil Chantladze explains, "a thought is really a discussion, which proves something concerning the distinguishing feature of the researched object. A concept out of much essential characteristic features represents only one, and essential in it is only - definition". However the categories are much wider; it really is "a key, probably the most fundamental idea of every science". Economical categories theoretically represent real, objectively existed productive relations. A category is the defining of occasions of existed characters, connections, relations of the target world. Generally, any educational process is fulfilled by the categories, which give opportunities for dividing the processes and occasions semantically, for expressing the definitions of a topic and realize their specific peculiarities and economical relations of a material world. Our goal is strictly to substantiate investments - as an economical category and also, as a financial category in the narrow understanding. Here we make an application for another manual thesis created by the academician Vasil Chantladze: "every financial relation is an economical one and every financial category is and economical one, however, not every economical relation and economical category is financial relation and financial category". In the process of defining the investments, it is very important take in mind the sides of resources, expenses and incomes, because investment, from one side, is the result of the manufacture's activity, and, from a different one, - part of income, which, in this case, is not used for usage. Another occasion: it is advisable to discuss investments in two aspects: as a category of reserve and flow, that may reflect the connection between "keeping funds" and "investments".Like it? Share it! More by this author |