Finance, Credit, Investments - Economical CategoriesPosted by Byrd Albertsen on May 18th, 2021 Scientific works in the theories of finances and credit, based on the specification of the research 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 example, in "the general theory of finances" there are 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 in line with 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 formation of centralized ad decentralized money sources, economical relations relatively with the distribution and usage, which serve for fulfillment of hawaii functions and obligations and also 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 create 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 usage of the depreciation fund that is the part of financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value throughout a year), but to the distribution of already developed value. This latest first is apparently part of value of main industrial funds, later it is moved to the cost price of a ready product (that is to the value too) and following its realization, and it is set the depression fund. Its source is taken into account in advance as a depression kind in the consistence of the ready products cost price. Second, main goal of finances is a lot wider then "fulfillment of hawaii functions and obligations and provision of conditions for the widened further production". Finances exist on the state level and in addition on the manufactures and branches' level too, and such conditions, when the most section of the manufactures are not state. V. M. Rodionova includes a different position relating to this subject: "real formation of the financial resources begins on the stage of distribution, when 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 a system of formation, distribution and using the funds of money sources, that happens of the following 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 usage of 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, by making use of which, in the form of planned distribution of the incomes and savings the funds of money sources of the state and socialistic manufactures are formed for guaranteeing the growth of the production, rising the material and cultural degree of the people and for satisfying other general society requests". "The system of creation and using 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 based on the movement of cash funds make financial relations". As we've seen, definitions of finances created by financiers and political economists do not differ greatly. In every discussed position there are: 1) expression of essence and phenomenon in this is of finances; 2) the definition of finances, because 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 this is of finances, we may say, that it still keeps actuality. We talk with such traditional definitions of finances, without an adjective "socialistic", in the modern economical literature. We might give such an elucidation: "finances represent cash sources 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 worthiness of national wealth". This latest is quite actual, relatively to the process of privatization and the transition to privacy and is periodically found in practice in different countries, for instance, Great Britain and France. "Finances - are cash sources, financial resources, 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 connected with firm creation, distribution and using 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 individuals lead spending `the deficit cash resources and incomes in the definite period of time. The financial decisions are characterized by the expenses and incomes which are 1) separated with time, and 2) as a rule, it really is impossible to take them into consideration beforehand neither by those that get decisions nor any other person" . "Financial theory includes amounts of the conceptions... which learns systematically the subjects of distribution of the cash resources relatively to enough time factor; in addition, it considers quantitative models, by making use of which the estimation, putting into practice and realization of the choice variants of each financial decisions happen" . These basic conceptions and quantitative models are employed at every degree of getting financial decisions, but in the latest definition of finances, we meet with 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 each level) are directed towards fulfilling this basic function. For the goals of our monograph, it is very important compare well-known definitions about finances, credit and investment, to decide how and how much it is possible to integrate the finances, investments and credit into the one total part. Some researcher thing that credit may be the consisting part of finances, if it is discussed from the position of essence and category. The other, more numerous group proves, that an economical group 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 group of credit and notes that it is only its "characteristic feature the turned movement of the worthiness, which is not related to transmission of the loan opportunities together with the owners' rights". N. D. Barkovski replies that functioning of money created a cost-effective basis for apportioning finances and credit being an independent category and gave rise to the credit and financial relations. He noticed the Gnoseological roots of science in money and credit, as 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 modern publications credit were "luckier", then finances. For instance, we meet the following definition of credit in the finance-economical dictionary: "credit may be the loan by means 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 your creditor and borrower". This can be the traditional definition of credit. In the earlier dictionary of the economy we read: "credit is the system of economical relations, that is formed while the transmission of cash and material means into the temporal usage, generally beneath the conditions of returning and paying percent". In the manual of the political economy published under reduction of V. A. Medvedev the next definition is given: "credit, as an economical category, expresses the created relations between the 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 following way in the earlier education-methodological manuals of political economy: "credit may be the system of money relations, which is created along the way of using and mobilization of temporarily free cash means of the state budget, unions, manufactures, organizations and population. Credit has an objective character. It is used for providing widened further production of hawaii along with other needs. Credit differs from finances by the returning character, while financing of manufactures and organizations by the state is fulfilled without this problem". We meet the following definition if "the span 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 process of fulfilling the economical and money relations, the proper execution 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, which is given to the borrower by 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 of fixed percentage. Thus, a credit is the loan by means of money or commodity. Along the way of this loan's movement, a definite relations are formed between a creditor (the loan is given by a juridical of physical person, who gives certain cash as a debt) and the debtor. Combining every definition named above, we come to a concept, that credit is giving money capital of commodity as a debt, for certain terms and material provision under the price of firm percentage rate. It expresses definite economical relations between the participants of the process of capital formation. Necessity of the credit relations is conditioned, from one side, by gathering solid level of temporarily free money sources, and from the second side, existence of requests of these. Though, simultaneously we must distinguish two resembling concepts: loan and credit. Loan is seen as a: o Here, the discussion may touch upon transmission of money and also things form one side (loaner) to some other (borrower): a)beneath the owning of the borrower and, concurrently, b) beneath the conditions of returning same amount or same quantity and quality of the things; o The loaning of money may bear no interest; o Any person might take part in it. With Finance Hub SW London 2021 with loan, credit, which 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 is not any person, but a credit organization (at the initial place, banks). So, a credit is 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 own borrower. These relations touch upon: a) Giving some money to the borrower for definite purpose (though, we meet with the so-called free credits, aims and objects of crediting aren't appointed in the assignment); b) Its opportune returning; c) Getting percentage rate from the borrower for using the sources under his/her disposal. The essential foundation of the credit essence and its important element is existence of trust between your two sides (in Latin "credo", that comes the word "credit", means "trust"). From the position 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 may be the private occasion of finances. And truly, from the position of movement of the money forms, finances represent the procedure of formation and using the funds of cash means. Very often 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, whenever a manufacture or corporations use their cash funds and we mean the finances of industrial subject, such usage may 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 named commercial form because of transmitting the sources to others, but even in this occasion, it's the element of financial system of the manufacture and corporation. From the idea of cash means movement, main character of credit is the process of formation and usage of the funds of cash means beneath the conditions of returning and, generally, taking the value-percentage. If gating the credit value doesn't happen (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 hawaii budget) the loans which bear no interests may be used. If gating credit value takes place, by the appearance form, credit is discussed to be financial modification. From the historical viewpoint, finances (especially in the sort of hawaii 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 viewpoint, 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 so you can get 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) section of the bank capital is apparently the reservation (insurance) section of the fund, which by nature is financial and not loan. So notwithstanding the essential distinctions between finances and credit form the genetic-historical viewpoint, credit is apparently formed from finances and represent their modification. From the fundamental position of expressing economical relations of finances and credit, we talk with cardinal distinctions between both of these 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 portion of the national wealth. Credit expresses distribution of the appropriate value only in the portion of percentage given for loan, while based on the loan itself, a just a temporal distribution of money sources takes place. Herewith, there is a large amount of common between the finances and credit as from the fundamental point of view, so in line with the form of movement. Concurrently, there is a significant distinction between finances and credit as in the essence, so in the form too. According to this, there has to be some sort of generally economical category, which will consider finances and credit as a complete unity, and in the bounds of this category itself, the separation of the precise essence of the finances and credit would take place. Funding of the money means is common to the researched economical categories. It requires invest any separate system of finances and credit, which have been touched upon through the analyses of defining finances and credit. Word combination "funding of the cash sources (fund formation)" reflects and defines exactly essence and type of economical category of more general character, those of finances and credit categories. Though in the 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 category of the finances; 2) discussing finances in narrow understanding under general traditional meaning; 3) discussing finances, as funding of the money means, in wide understanding, which concerns finances - in narrow meaning and credit - in complete meaning. Termini "funding" and its own equivalent "fund formation" are employed by us as the purposeful structuring of cash means, which is based 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 fresh termini - "finance-investment sphere" (FIS). Analyses about interrelation of finances and credit made by us give us a chance of proving, that in the given termini, the term "financial" is used with this is of funding cash sources, its purposeful structuring. In this technique we consider as well 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 a long time used in the area "investments" the termini "capital placement", which expressed using 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. Though the termini "investments" and "investing" have the benefit towards the termini "capital placement" from linguistic and philological points of view, because they're expressed with one word. This is not only economical and comfortable in the process of working with the termini "investment" itself, but also it gives a chance of termini formation. More concretely: "investment process", "investment domain", "finance-investment sphere" - all these termini are a lot more acceptable. Changing native economical termini with foreign ones is purposeful, if it certainly 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 an easy task to explain private and narrow concrete processes and elements get their own termini. The "movement" of these termini is approved in the narrow professional bounds, but their "spitting out" into the economical science risk turning economical language into the tangled slang. Let's discuss termini - "investment" and "capital placement's" usage in the economical literature. Investments are keeping funds in to the main and circulation capital for the purpose of getting profit. "Investments in material assets - are the placements of funds in to the mobile and real estate (land, buildings, furniture etc). Investments in financial assets will be the placements of funds into the securities bank accounts and other financial instruments". We don't meet the termini "investments" in the last economical dictionary, but we meet the combined termini "investment policy" - the union of the industrial decisions, which guarantee main directions of the administrative centre 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 much more production and profit of the national income for every lost Ruble". For today, in probably the most actual definitions, the administrative centre investments are bounded only by financial means, when not only financial, but additionally the investment of natural, material-technical and informational resources takes place. Labour resources take a genuine invest the investment process. They themselves fulfill this or that investment process. A positive side of the discussed definitions is 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, which is expressed: a) by growing the throw off of 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 their further production structure. Compared with such definition of the investments (capital placement) the definition of investments in the dictionary attaching the "Economics" appears to be unimproved: "investments - the expenses of gathering production and industrial means and increasing material reserve". In this definition current expenses (production expenses) are mixed with the investment (capital) expense. Also, not the investment expenses but (although investments are followed by the appropriate expenses) exactly advancing. It differs from the expenses by that the means (means) are placed by returning the advanced values, also, beneath the conditions of growth, to which the concept-advanced capital is corresponding. the advancing could be realized in the amount of 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 form of growing their qualification and developing their abilities); at the expenses of improving the workers' education, health and raising the mobility of the working forces". It is extremely useful to utilize the mentioned termini, though it needs one correction: the human capital investments do not concern only workers, but also the servants, representatives of each 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 occurs". You'll meet below the definitions of investments from "the course of economy": the investments are called "placements of fund in to 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 divided 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, which is directed towards keeping and increasing the basic capital (basic means) and reserve. Total investments consist of two parts. One of these is named the depreciation; it represents important investment resources for compensation of renewal till the amount of before industrial usage, deteriorating and repairing of the basic means. Second consisting area of the total investments is represented by net investments - capital investments for the purpose of increasing basic means". Depreciation isn't a compensation resource of wearing the basic funds out, but it is the purposeful financial source of such resources. Human capital investment is "a particular kind of investments, mostly in education and health protection". "Real investments are the investments in the economical branches and also, they are kinds of economical activities, which provide influxing the increases of real capital, that's increasing material values of the industrial means". We can agree with such definition with one specification that material and nonmaterial values too participate in 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, needless to say, usually do not give increases of the true material capital, however they help getting profit, consequently at the expenses of changing the span of the securities in the 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 is not followed by real investments subsequently) usually do not increase real material wealth and real nonmaterial wealth. In accordance with this context, the expression below is essential: "we must distinguish financial investments, which represent keeping 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 "one month or even 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 idea of investments). Principally, it could be better to explain quick compensative, middle termed compensative and long-termed compensative investments: - less then six months - quick compensative; - from 6 months up to the year . 5 - middle termed compensative; - more then the year and a half - long termed compensative. We stopped at the definition of the investments in the capital work "economical course" for the special purpose, as, in it the author tried to discuss the concept of investments systemically and quite completely, herewith the book is published just now. 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 concept of the level of smoking cigarettes the given category in the economical literature. What conclusions could be made according the definition of the mentioned economical category in the published works, except the made notions and specifications? There's quite deeply, concretely and thoroughly defined the idea of "investments", different definitions in the economical literature; but mostly atlanta divorce attorneys 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's given only the definition, concept of investments. But, as the Academician Vasil Chantladze explains, "a concept is a discussion, which proves something about the distinguishing feature of the researched object. A thought out of much essential characteristic features represents only 1, and essential in it is - definition". But the categories are much wider; it really is "a key, probably the most fundamental concept of every science". Economical categories theoretically represent real, objectively existed productive relations. A category may be 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 subject and realize their specific peculiarities and economical relations of a material world. Our goal is strictly to substantiate investments - being 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 ingest 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, - a part of income, which, in this instance, is not useful for usage. Another occasion: it is advisable to discuss investments in two aspects: as a group of reserve and flow, which will reflect the connection between "placement of funds" and "investments".Like it? Share it! More by this author |