Money capital. Physical and monetary capital

The demand and supply of financial capital is reduced to the supply and demand of assets in the form of money (primarily on bank deposits) and. These assets bring their owners (savers) income in the form (on bank deposits, debt securities) or profit (from shares and other non-debt securities). Consumers (borrowers) of financial assets need them primarily for investments in real capital, as well as for other operations.

Financial capital and its formation. Equilibrium interest rate

Financial (monetary) capital - is the money invested by entrepreneurs in . Firms demand not only for physical capital, but primarily for temporarily free cash that can be spent on the acquisition of capital goods.

Financial capital arises because households do not spend all their income on current consumption, but save some of it. These savings go to firms through financial markets and are used by them to acquire capital goods, i.e. for investment. Using capital sourced from household savings, firms pay savers loan interest representing price of financial capital.

It is assumed that they are perfectly competitive. In other words, none of the individual savers or firms is able to influence the interest rate by changing the supply of their savings or their demand for them. The equilibrium market interest rate arises in the process of competition between all savers and investors.

The demand of firms for financial capital for investment depends on the interest rate: the lower it is, the greater the investment. The supply of savings usually depends positively on the interest rate: the higher the interest rate, the greater the savings.

Let's put it in Fig. 15.5 on the horizontal axis, the size of investments of firms () and savings of households (), and on the vertical axis - the interest rate () and combine together the functions of the demand of firms for money for investment () and the supply of savings by households ().

Rice. 15.5. Equilibrium in the financial market

The intersection point of these two functions gives us the equilibrium interest rate (). At this rate, financial markets are in equilibrium, because investment equals savings ().

An individual investor firm cannot influence the market interest rate, but accepts it as given. Therefore, to determine the investment made by a given firm, one should substitute the market interest rate into the firm's investment demand function.

Please note that the rental price of capital depends on the interest rate. Suppose the price of equipment is 100 rubles, its service life is 5 years, and the interest rate is 10% per annum. In this case, the owner of the equipment will rent it out for at least 30 rubles. per year, of which 20 rubles. will compensate for the annual wear and tear of equipment (100 rubles / 5 years), and 10 rubles. will constitute a percentage of the money capital (100 rubles x 0.1) invested by the owner in the purchase of equipment. We have, therefore, the formula

Minimum rental price of capital = Depreciation + Interest on capital.

Thus, the interest rate affects the minimum supply price of capital in the capital services market.

Real capital retains its importance in the modern economy, but financial capital plays an increasingly important role in it.

Essence and forms of financial capital

Financial capital refers to capital in the form of money and securities. However, if all securities can be attributed to financial capital, then by no means all money is financial capital. The main part of cash in the hands of the population and in the cash desks of enterprises and organizations, as well as the main part of the funds in bank accounts (settlement, current, check), which are intended primarily for servicing transactions for the purchase and sale of goods and services, and not to be used as capital. Only a part of them is used for these purposes, for example, when a company provides installments to its customers or an advance to suppliers. Part of the insurance and pension savings (they are usually kept in banks) is also used as financial capital.

The structure of financial capital is as follows (see Fig. 18.1).

Financial capital is generated by the needs of economic turnover. The economic circulation model (see Section 3.4) shows that firms spend part of their assets in the form of payment for economic resources, and for this they need to keep part of the assets in cash and in bank accounts for current expenses, and part in bank deposits and in securities for future expenses. Households spend money, pay taxes and save, for which they also need cash, funds in bank accounts and deposits, and in securities. The state as an economic agent pays for goods, services and subsidies from its accounts and carries out various state cash transfers, as well as issues government securities. Insurance and pension funds and companies in the course of the economic cycle mitigate the risks of economic and social life and at the same time constantly have part of their assets temporarily free.

Rice. 18.1. Structure of financial capital

The changing ratio between financial and real capital

In the course of the economic cycle, financial capital is transformed into real capital. Money and securities are circulating in fixed assets and material working capital.

But by no means all financial capital is converted into real capital (for example, Russian households constantly keep part of their financial assets, especially in foreign currency, at home). Moreover, in the course of the economic cycle, part of the real capital is converted back into financial capital (for example, fixed capital is reduced in the course of depreciation deductions, turning into depreciation savings stored in banks). Finally, financial capital is fed by more and more financial investments (for example, in securities). As a result, financial capital constantly exists in parallel with real capital.

Unity and separation of financial and real capital

The parallel existence of two types of capital leads to the fact that there are two sectors in the economy.

First, it is based on financial capital and produces financial services. financial sector(banks and other credit institutions, insurance companies, pension and other funds, stock exchanges and other securities market organizations). This sector consists of various financial firms and organizations, mainly in the credit sector, which is why they are often referred to as financial and credit institutions.

Secondly, it is based on real capital and produces goods and non-financial services. real sector. It covers agriculture and forestry, industry and construction, transport and communications, trade and public catering, housing and communal services, household and social services, science, culture, education, healthcare, etc.

Both of these sectors are closely related, which again proves the patterns of economic circulation. However, in a developed economy, this relationship becomes more complex, and as a result, the autonomy of the financial sector increases. Therefore, we can talk not only about unity, but also about the separation of the two sectors. Thus, in the short term, the main indicators of the financial sector (indicators of the state of the monetary system and the stock market) may change in a generally different direction than the main indicators of the real sector (economic growth, unemployment, production of basic products). An example of such a situation is the autumn of 1998 in Russia, when, after the August default, the indicators of the financial sector (inflation, the volume of bank deposits and loans issued, the stock index, the exchange rate) continued to deteriorate, although the real sector already in October 1998 began to continue to still economic growth.

Correlation between financial and real sector

One of the reasons for the growing autonomy of the financial sector is its increasing dominance over the real sector, especially in developed countries.

According to one estimate, the national wealth of the world in 2000 was estimated at $130 trillion, including the value not only of real and financial capital, but also of mineral resources, land and forests. Nevertheless, two-thirds (87 trillion dollars) of this national wealth, even in such an extended interpretation, was accounted for by financial assets (financial capital).

As a result of the growing influence of the financial sector, financial indicators — the stock index, inflation, the state of the budget, and the exchange rate — are of increasing macroeconomic importance. Unlike the economic reports of past decades, modern economic news begins primarily with financial indicators.

Reasons for the changing ratio between financial and real capital

The underlying reason for this changing ratio is the growing division of labor (especially in developed countries), which increases and complicates the economic cycle, which requires an increasing amount of money and an increasing amount of securities to serve.

Other reasons include the following:

democratization of the financial sector. The main part of the financial capital of the world is concentrated in developed countries, and not only in the hands of their banks, firms and states. In these countries, the high income level of the powerful middle class has allowed it in recent decades to set aside large savings and turn them, with the help of financial institutions or independently, into bank deposits and securities, including foreign ones. Such broad participation (indirect or direct) of the middle class of developed countries in banking and securities trading can be called the democratization of the financial sector. It gives the financial sector a powerful boost;

securitization(from English securities - securities), i.e. the process of expanding the types and scope of issuance of securities. Of the relatively new types of securities, it should be noted derivatives, i.e. secondary securities derived from primary financial instruments (stocks, bonds and other debt obligations, bank accounts and deposits, commodity contracts). Derivatives in the form of futures, options, swaps are becoming more and more common in the issuance of securities, as they help reduce the risks arising from transactions with primary financial instruments, and in comparison with them are less risky sources of profit. With regard to the growth in the scale of issued securities, this issue is driven not only by the emergence of new types of securities, but also by the democratization of the financial sector (see above);

globalization of capital, i.e. ever freer movement of huge masses of capital, mainly from developed countries, over most of the globe (see Chapter 38). Financial capital is the most mobile, and therefore often the globalization of capital is called financial globalization. Thus, in Russia, about half of transactions with securities on the stock exchange account for foreign buyers. The purchase of Russian securities and the provision of various loans to Russian firms and banks accounts for the vast majority of foreign capital flowing into Russia. Thus, the import of foreign financial capital provides a significant stimulus for the growth of the financial sector in Russia.

Demand and supply of financial capital

Demand for financial capital is presented by:

• firms that need to finance their production costs and investments in real capital, but which do not have enough own funds for this, and therefore they turn to banks for loans and / and issue shares and debt securities for this. Great demand for financial capital in the form of foreign currency is presented by firms - importers of goods and services and firms - exporters of capital. To reduce the risks of transactions with securities and foreign currency, they also use derivatives. Finally, some firms make a speculative demand for financial capital, playing on the changing rates of securities and the national currency, as well as on the prices of goods listed on the stock exchanges;
• show primarily demand for mortgage loans (i.e. for housing construction) and other types of consumer credit (for example, for the purchase of durable goods), and in Russia - also for foreign currency;
• non-profit organizations need financial capital to invest in real capital;
• the state makes a significant demand for financial capital by issuing debt securities, especially in the event of a state budget deficit.

Supply of financial capital formed due to the fact that:

• firms in the process of economic circulation have temporarily free funds that they hold in banks and / or in securities;
• households save part of their income by opening bank deposits and/or buying securities;
• non-profit organizations rarely hold their assets in the form of financial capital. More often, the state does this by placing temporarily free budget money in banks, supporting its gold and foreign exchange reserves (usually consisting of foreign currency, gold, but primarily foreign securities) and other financial reserves (for example, the Russian government due to high world oil prices). formed a stabilization fund, which should consist of foreign securities - see paragraph 29.3).

Equilibrium of demand and supply of financial capital

Thus, the supply and demand of financial capital is reduced to the supply and demand of assets in the form of money (primarily in bank deposits) and securities. These assets bring income to their owners in the form of loan interest (on bank deposits, debt securities) or profits (from shares and other non-debt securities). Consumers (borrowers) of financial assets need them primarily for investments in real capital, as well as for other operations.

Financial and credit institutions mediate between the owners of financial assets and borrowers, providing services to both - opening and maintaining bank accounts and deposits, providing loans, issuing, distributing and acquiring securities, buying and selling foreign currency to their clients. The importance of this mediation lies primarily in the fact that in this way: (a) the economic circuit is maintained; (b) there is a spontaneous market allocation (placement) of capital between different branches of the real sector. Therefore, if the banking system is developed and has large assets in the country, if the stock market (securities market) is developed and has a large turnover, then the economic circulation is carried out well, and the real capital is optimally distributed between the branches of the real sector, i.e. in line with product demand and industry profit margins.

The balance between the supply and demand of finance capital is established through the level of profit, or, as is often said, the rate of profit. The equilibrium rate of return is established at the point where an acceptable level of return is provided both for the owners of financial capital and for the borrowers of this capital. Moreover, borrowers take a loan (or issue securities) in the expectation that the profit from using the loan (securities) will be greater than the payment for this loan (securities). In other words, borrowers demand financial capital until the marginal return on the use of this capital is equal to the payment for the use of this capital.

In addition to supply and demand, the following points affect the size of the rate of profit:

• the amount of assets available in the country. The larger a country's financial assets relative to its demand for real capital, the cheaper they are. Thus, in Russia, with its low banking assets and the small size of the stock market, financial capital is relatively expensive, while in the capital-abundant developed countries it is cheap;
• the size of the rate of return that the owners of bank deposits can receive as a means of placing financial assets. If reliable banks increase the interest on deposits, then this increases the craving for them on the part of the owners of financial assets and thereby increases the supply of financial assets on the part of banks. This leads to cheaper credit;
• the rate of return that can be obtained from securities that actually compete with bank deposits as a means of placing financial assets. If the yield of reliable securities begins to noticeably exceed the interest on deposits, then an increasing part of the owners of financial assets will keep their assets in securities, and not on bank deposits.

In economic life, greater risk requires a premium to the rate of profit in the form of a risk premium. Therefore, shares (a riskier financial instrument) often bring more profit to their owners than to owners of government securities or bank deposits (less risky financial instruments). The difference in risks explains the different profitability of financial instruments.

However, if we make the assumption that there are no risks in the economy, then the profitability of all financial instruments will be the same and approximately equal to the interest rate on loans (but lower than the rate on deposits, since financial and credit institutions must have their own commission for intermediation). On this assumption the classical theory of interest is built.

Interest theory

Briefly, it can be reduced to the proposition that the demand for finance capital increases as the interest rate falls, and vice versa.

The supply and demand of financial capital can be regulated by the state. For this it uses financial instruments- instruments of state influence on the demand and supply of financial capital in the form of limits, standards for banks (for example, refinancing rates, required reserves for commercial banks), as well as securities and other liquid assets of firms that can be used for operations in the capital markets.

In both figures, the demand curve for financial capital DD decreases from left to right, i.e. the demand for finance capital grows as the interest rate falls. In the left figure (short run), the supply of capital is represented by a vertical curve SS, because in the short run it is almost unchanged. In the right figure (long run), the supply of capital is shown as a flat curve because in the long run the country accumulates financial capital, which leads to lower interest rates. And as a result, the balance of supply and demand is established in our example at different points - in the short term at the level of 15% per annum, in the long term - at the level of 10% per annum.

Rice. 18.2. Demand and supply of financial capital in the short-term (a) and long-term (b) periods

In 2003, Russian borrowing firms considered it profitable for themselves to receive short-term loans (that is, for a period of up to 1 year inclusive) at a rate of 10 to a maximum of 15% per annum (after all, the profitability of products in Russia as a whole in the same year was approximately 12%), and financial and credit institutions considered it beneficial for themselves to provide such loans at a rate of at least 15-20%. As a result, the equilibrium point was set in the range of approximately 15% per annum. At such an equilibrium point, it was predominantly the companies exporting raw materials with their high rate of return that could freely take short-term bank loans, and even then many of them, dressing themselves with markets abroad in developed countries, preferred to take loans there at a lower interest rate.

The high interest rate hinders the growth of investment in our country. However, the development of the credit sector in Russia leads to a decrease in the equilibrium interest rate.

Risks and timing

Riskier business projects require higher returns to cover the risk premium for entrepreneurs undertaking these projects. But it is important that such projects can result in a loss of funds for the lender. So he also provides himself with a risk premium by raising the interest rate on the assets he lends to risky projects.

Uncertainty inherent in all business activities means that the provision of assets for long periods is more risky than for short ones. In conditions of high uncertainty, economic agents prefer not to take or provide assets for several years in advance, unless there is a high probability of receiving a very large income. A similar situation was typical for Russia in the 1990s, where the high uncertainty of economic prospects (highly dependent on fluctuations in world prices for exported energy carriers, on a possible change in economic policy within the country) discouraged both owners of financial assets and borrowers from providing and using financial assets for a long period. So, in the total volume of loans issued in Russia by credit institutions, long-term loans were in the late 90s. only a few percent (while in the 80s - 20-30%). In modern Russia, the share of long-term loans is increasing, but it is still below the Soviet level.

Nominal and real interest rate

Inflation also affects the interest rate. Above was an example with a nominal interest rate, i.e. in terms of inflation. If the nominal interest rate is reduced by the amount of inflation, then we get the real interest rate. In 2003, the inflation rate in Russia was 12% (according to the consumer price index). As a result, the real interest rate on short-term loans was 15% - 12% = 3%.

The distinction between nominal and real interest rates must be made in order to get a correct idea of ​​the true, real rate of credit and not to assume that a rate of 100% is very high if inflation is 105%.

There are several general definitions of the concept that are most common and used to reveal its essence.

Capital is the resources created by human labor. They are used to produce goods and provide services, bringing material income.

Capital is a cost that is a means of obtaining additional profit. But on the condition that hired labor of workers is used.

Capital is the personal savings of an individual in the form of securities, money, movable and immovable property. They are used for further enrichment.

Capital is a social force represented by people who own the means of production on the rights of privatized property.

Types of capital

Distinguish material-material (physical) and human form. The essence of capital is that it is absolutely any resource created with the aim of issuing an increasing volume of economic goods. Intangible capital - property that is used by the company for a long time in its activities. It may include office and industrial buildings, furniture in them, vehicles. It is divided into two types: circulating and fixed physical capital.

What is the difference between capitals?

The difference between fixed capital and it lies in the fact that the financial value of the asset is redistributed to the product during production periods in installments. And human capital is called those physical and mental skills of the individual, which were obtained through experience and mental activity. This is a special kind of labor force.

money capital

This type of capital is the constant to which the monetary value of capital in the form of an asset is reduced. Therefore, both physical and human capital can be measured in terms of money. The real is embodied in the means of production, the money - in investments. The latter is not, as such, an economic resource, since it is used only to purchase certain factors of production.

Excursion into history

The first types of capital were merchant and usurer, which originated long before the economy of capitalism. The merchant was in the middle position at the stage of production in the exchange of goods. Usury, by analogy with the concept of "usurer", brought income from the narrowing of loans in the form of a percentage of the amount of goods. These forms of capital contributed to the concentration of money in one entrepreneur.

The transition to the capitalist form of ownership contributed to the formation of a fundamentally new type of socio-economic relations. There is such a thing as industrial capital. It contains a certain amount of money that circulates in any sphere of production and goes through a complete cycle as it moves, taking a special form at each stage. This kind of capital is inherent not only in industry, but also in the service sector, transport, agriculture, and so on.

Circulation of capital

This term refers to the three stages of the movement of capital and their progressive transition from each other. The beginning occurs in the form of an investment of the nth sum of money. It is used to buy equipment, production shops, warehouses, special vehicles, as well as labor.

Stage 1: money capital is transformed into productive capital. In the production process of purchasing, entrepreneurs go to create a new proposal.

2nd stage: productive capital passes into commodity. The sale of manufactured goods and the provision of services bring the owner of the enterprise a certain amount of money.

3rd stage: commodity capital becomes money capital. This is the end point and the achieved goal of production.

The impact of capitalism on the economy

The development of capitalism provoked the emergence of a special specialization and the concept of "division of labor". Industrial capital was divided in two. The trading part is its isolated part, which functions during the circulation of the product, passing through two stages of the above-mentioned circle. It is aimed solely at obtaining financial profit, acting as a free mass between the real price and the price of the product on the market.

Loan capital is a separate part of industrial capital given on loan, bringing income to its owner in the form of a percentage of use. In this form, temporarily free cash resources are accumulated. Nowadays, most of this type of capital is distributed among financial and credit organizations.

Monopoly associations in the banking and industrial sectors led to the formation of finance capital, which can be defined as "big banking capital merged with industrial capital." Banks provide large loans to enterprises (as an option, by purchasing shares of one or another industrial concern), but industrial capital also influences this area, creating its own financial structures, buying bank shares and bonds.

Financial capital keeps financial and industrial groups, which include trading companies, banks, large enterprises. It is generated by a small number of so-called oligarchs, whose assets have a significant impact on the state of the country's economy.

Payments to mothers

The Russian Federation has been providing financial assistance to families with two or more children for 8 years now (whether a natural or adopted child does not play a role). The amount of capital depends on the number of children in the family. The mother (citizen of the Russian Federation) of children born or adopted after 01/01/2007, the father of the child (citizenship of the Russian Federation is optional) if his wife died untimely, or older children in the family in case of non-proliferation of state measures to support parents have the right to receive maternity capital.

One feature has maternity capital. Changes in amounts do not affect the replacement of a previously issued certificate. From 2007 to 2015, there was an increase from 250,000 rubles to 477,942 rubles.

Maternity capital can be spent on improving housing conditions (including reducing the amount of a mortgage loan previously taken by the family), on receiving educational services (student accommodation in a hostel, paying a monthly payment in a kindergarten, etc.) and on the mother’s pension savings ( through a non-state pension fund). The change in capital is determined at the state level.

Essence, types and forms of capital

Definition 1

Capital- this is the sum of goods in the form of material, intellectual and financial resources used as a resource in order to produce more goods.

Narrower definitions are also common. According to the accounting definition capital refers to all the assets of the firm. By economic definition capital is divided into two types - real, i.e. in material and intellectual form, and financial, i.e. in the form of money and securities. Increasingly, a third type is also distinguished - human capital resulting from investment in education and the health of the workforce.

Real capital(real assets, non-financial assets) is divided by basic and working capital(Fig. 1). Fixed assets usually include property that has been in use for more than one year. In Russia, fixed capital is called fixed assets.

Real working capital should include only material working capital, i.e. inventories, work in progress, stocks of finished goods and goods for resale. This is the economic definition of working capital.

Figure 1. Structure of real capital

If we add to the material working capital funds in settlements with suppliers and buyers (accounts receivable, i.e. loans and installment payments to buyers, and deferred expenses, i.e. advances to suppliers), cash on hand of the enterprise and wage costs , then we get working capital (working capital, or current assets) according to the accounting definition.

Real capital brings income in the form of profit. It can be in different versions: profit of the company, royalties of the owner of intellectual capital (for example, the owner of a patent), etc.

financial capital(financial assets, less often - capital assets) consists of money and securities. It is generated by the needs of the economic circulation. Financial capital generates income in the form of profit (from stocks) and interest (from bonds, bank accounts and deposits, loans). The financial capital provided on loan is called loan capital.

Types of capital

1. Main capital
2. Working capital
3. Permanent Capital
4. variable capital
5. working capital

The goal of the capitalist is the receipt of surplus value (the excess value of the goods produced over the value of the capital expended on such production). According to Marxist theory, variable capital creates surplus value. Constant capital creates conditions that extend the capitalist's ownership of surplus value.

physical capital

Definition 2

Physical (real) capital- invested in business, working source of income in the form of means of production: machinery, equipment, buildings, structures, land, stocks of raw materials, semi-finished products and finished products used for the production of goods and services.

money capital

Money capital (monetary form of capital)- money intended for the acquisition of physical capital.

Remark 1

It should be noted that the direct possession of this money does not generate income, that is, they do not automatically become capital. In this they differ from financial capital in the form of money on deposit.

financial capital

financial capital- money placed in financial instruments (stocks, bonds, deposits) to receive passive (interest, dividends) or speculative income.

Theories of capital

Theories of capital have a long history.

A. Smith characterized capital only as an accumulated stock of things or money. D. Ricardo interpreted it already - as a material stock - means of production. The stick and stone in the hands of primitive man seemed to him the same element of capital as machines and factories.

Remark 2

The Ricardian approach to capital as a stock of means of production is reflected in the statistics of the national wealth of a number of countries, including Russia. Thus, domestic statistics include fixed assets, tangible circulating assets, household property (consumer durables) in the national wealth. In $2003, the Federal State Statistics Service of Russia estimated the country's national wealth at $35 trillion rubles. At $82\%$ it consisted of fixed assets, at $7\%$ - from material working capital, at $11\%$ - from household property.

Unlike their predecessors, K. Marx approached capital as a category of social character. He argued that capital is a self-increasing value, giving rise to the so-called surplus value. Moreover, he considered only the labor of hired workers to be the creator of the increase in value (surplus value). Therefore, Marx believed that capital is, first of all, a certain relationship between different strata of society, in particular between wage workers and capitalists.

Among the interpretations of capital, one should mention the so-called temperance theory. One of its founders was an English economist Nassau William Senior($1790-1864$). Labor was considered by him as the "victim" of the worker, who loses his leisure and rest, and capital - as the "victim" of the capitalist, who refrains from using all his property for personal consumption, and does not turn a significant part into capital.

Remark 3

On this basis, the postulate was put forward that the benefits of the present are of greater value than the benefits of the future. And consequently, the one who invests in economic activity, deprives himself of the opportunity to realize part of his wealth today, sacrifices his current interests for the sake of the future. Such sacrifice deserves to be rewarded in the form of profit and interest.

According to the American economist Irving Fisher($1867-1947), capital is what generates a stream of services that turn into an influx of income. The more the services of this or that capital are valued, the higher the income. Therefore, the amount of capital must be estimated on the basis of the amount of income received from it. So, if renting an apartment annually brings its owner $5,000 dollars, and in a reliable bank he can receive $10 \% $ per annum on the money deposited in the urgent account, then the real price of the apartment is $50 \ 000 $ dollars. After all, this is the amount you need put in the bank at $10%$ per annum to receive $5,000$ annually.

Capital is a durable resource created with the aim of producing more goods. Distinguish between physical capital - the material form of the instruments of production and objects of labor and human capital - the skills, knowledge, skills of a person used in production.

As a rule, any entrepreneur, when organizing his business, must have a certain amount of money, i.e. capital in cash, on which he acquires material capital (in the form of raw materials, means of production) and human capital (labor). Since the acquisition of these elements takes place on the market and takes the form of a sale, we can talk about the existence commodity form of capital. The combination of material and human capital occurs in the process of production and means that capital takes production uniform. The result of production is economic goods, that is, new goods and services. This means that capital is returned to commodity form and the sale of these goods on the market allows the entrepreneur to receive money that will allow him to resume the production process, i.e. capital returns to monetary form. The continuous movement of capital is called circulation . The movement of capital from the form of money through all stages back to the form of money is called capital turnover .

The commodity form of capital leads to the appearance trading capital , that is, trade stands out as a special form of activity. The production form of capital leads to the emergence entrepreneurial capital which specializes in manufacturing products.

Physical (real or production) capital is a source of income invested in a business in the form of means of production: machinery, equipment, buildings, structures, land, stocks of raw materials, semi-finished products and finished products used for the production of goods and services.

Money capital (monetary form of capital) - money intended for the acquisition of physical capital. It should be noted that the direct possession of this money does not generate income, that is, they do not automatically become capital. In this they differ from financial capital in the form of money on deposit.

Each firm seeks to reduce the turnaround time of capital, as this means less money to support production and, accordingly, more efficient operation of the firm is ensured. The desire to reduce the time of capital turnover leads to specialization of forms of capital . Thus, money capital is transformed into loan capital , that is, there are specialized financial organizations involved in the accumulation of free cash in the economy and providing them to subjects in the form of a loan.

32. Market of loan capital and loan interest. Demand and supply of loans. Interest rate. nominal and real interest rates.

In a developed market economy, the main object of the loan is money. As highly liquid funds, they are able to turn into any commodity, including the necessary means of production. Money intended for the acquisition of means of production act as investment resources. If this money has been borrowed for a certain time on terms of repayment and payment of interest, then it takes the form of loan capital. Here, lending money means making it possible to acquire capital as a factor of production.

The emergence of a temporary need for additional funds for some economic entities and the appearance of temporarily free funds for others creates the need and possibility for the formation of loan capital.

An important role in the formation and distribution of loan capital

played by financial institutions, primarily banks involved in

the accumulation of temporarily free funds from various subjects of the economy and their placement among those who experience a temporary need for them. Financial institutions contribute to the formation and functioning of loan capital markets, in which, on the one hand, there is a demand for money as loan capital, and on the other hand, its supply is formed. It should be noted that, unlike the usual money market, where you can offer or borrow different needs money, the loan capital market is associated with investment - the transformation of borrowed money into productive capital. The transfer of loan capital from the hands of its owners to the hands of those who will use it in production involves remuneration for the owners of capital. The form of such remuneration is loan interest.

The source of loan interest is the natural interest on capital as a factor of production. However, the one who uses it in production disposes of it.

The interest of the owners of loan capital in the return of the loan and in the receipt of interest makes this form of capital very active and active. Loan capital tends to go where there is the possibility of effective application and high interest. Since its use involves the acquisition of means of production and their use in enterprises, the direction of this capital in the relevant areas and industries leads to the distribution of capital resources in these areas and industries.

Interest rate- the price paid for the use of other people's money. It can be changed in absolute terms or as an appropriate percentage of the amount of money borrowed.

There are "nominal" and "real" interest rates. The nominal rate is calculated in monetary units at the current rate. The real rate is equal to the nominal rate reduced for inflation.

33. Short-term and long-term demand for investment. Influence of the interest rate on decision-making on long-term investments. Discounting the value of future earnings.

For creation and increase of the capital investments of money resources - investments are necessary. Investing is the process of creating or replenishing a stock of capital. Usually, the investment process is understood as the inflow of new capital in a given year. There are gross and net investments. Gross investment is the total increase in capital stock. Gross investment is compared to replacement costs. Reimbursement is the process of replacing depreciated fixed capital. Net investment is gross investment minus funds to be reimbursed. Gross Investment - Recovery = Net Investment.

Most investments are long term. This is primarily investment in fixed capital The useful life of fixed capital is the period during which capital assets invested in the expansion of production will bring income to the company (or reduce its costs). To calculate the return on long-term capital investments, the firm must, firstly, determine the useful life of the fixed capital and, secondly, calculate the annual premium on income from the operation of fixed assets. Assume that I is the marginal cost of investment, R j is the marginal contribution of investment to increasing income (or reducing costs) in the j-th year of service. Then the marginal return on capital investments for the first year can be calculated by the formula:

Estimating future returns plays an important role in investment decisions. To do this, use the concept of net present value (Net Present Value - NPV).

NPV \u003d π 1 / (1 + i) + 2 / (1 + i) 2 + ... + n / (1 + i) n -I, where I - investments;

N - profit received in the n-th year; i - discount rate (the rate of reduction of costs to a single point in time).

This problem is solved through discounting , that is, an operation that brings the value of the money we will have in the future to their present real value. Discounted value actually shows how much money must be spent today in order to receive a certain income in the future at the current interest rate.

The present value is actively used in making investment decisions.

Investment is the process of increasing the stock of capital at a given point in time. A firm decides to raise capital using two approaches:

1) Comparison of the demand and supply prices of capital assets (equipment).

2) Use of limit values.

In accordance with first approach the firm compares the price of the capital asset that it is willing to pay with the price offered by the manufacturer of this equipment (capital asset) and purchases the equipment if they match. Equality determines the optimal amount of purchased equipment. If less equipment is purchased, then profits are reduced, since the company will produce insufficient quantities of products and will not satisfy the needs of the market. If the equipment is purchased more than the optimal volume, then part of the products manufactured by the company with the help of this equipment may not be sold.

Second approach based on comparison of limit values. In economic analysis, the concepts of marginal investment efficiency are used. ( MEI) and the marginal efficiency of capital ().

Marginal investment efficiency shows the additional net income that an investor receives from an additional unit of investment.

When implementing investment projects, the MEI is compared with the interest rate or another investment option with the same degree of risk. He chooses the option that will bring him the highest income. Therefore, he will invest if the MEI is greater than the interest rate. If MEI is less than the interest rate, then in this case it is more profitable for the subject to put money in the bank. If MEI is equal to the interest rate, then in this case the subject is in a state of equilibrium, that is, he does not care where to invest money. The analysis shows that the firm must carry out such an amount of investment in order to reach a state of equilibrium.

Similar information.

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Money-capital, already converted into means of production and labor power, the combination of these two material forms of capital in the process of production, forms in its totality the form of productive capital. If production is continuous, then capital is constantly in this form.

Money-capital, as a form permanently inherent in all circuits, carries out this circuit precisely because of that part of capital which produces surplus-value, because of the variable capital. The normal form of advance wages is payment in money; this process must be constantly renewed at short intervals, because the worker is only interrupted from payment to payment. Therefore, the capitalist must constantly confront the worker as a money capitalist, and his capital as money capital. On the other hand, part of the surplus-value brought by variable capital is spent by the capitalist on his personal consumption, which belongs to the sphere of retail trade; he ultimately spends this part in cash, in the form of money of surplus-value. Whether this part of the surplus value is large or small does not change matters in the slightest. Variable capital constantly reappears again and again as money-capital expended on wages (M-R), hell as surplus-value expended to cover the personal needs of the capitalist. Hence M, the value of the advanced variable capital, and q, its increase, must be kept in the form of money in which they are to be spent.

Money-capital exists here from the very beginning, neither as the original nor as the final form of capital-value, because the M-C phase, which completes the C-M phase, can only be passed through a second ejection of the money-form. The money advanced here to the worker is only the converted equivalent form of a certain part of the value of the commodity produced by the worker himself. And for this reason alone, the act M-C, inasmuch as it is an act M-R, by no means represents a simple replacement of a commodity in money form by a commodity in use form, but includes other elements independent of the general circulation of commodities as such.

Money capital is accumulated in this case only nominally. What actually accumulates is money claims, which turn into money (if they ever turn into money) only because an equilibrium is established between deposits in the bank and the reverse demands of money. In the form of money, there is only a relatively small amount in the hands of the bank.

The money-capital thus liberated by the mere mechanism of the movement of revolutions (along with the money-capital formed as a result of the successive return of fixed capital, and along with the money-capital which is necessary in every labor process; for variable capital) must play a significant role, as the credit system develops, and at the same time dodge l form one of its foundations.

The money capital of such a company, formed from the sale of its shares, is called share capital.

Money-capital can be increased by the fact that with the expansion of banking (see below the example of Ipswich, where in the few years immediately before 1857 the contributions of farmers quadrupled), what used to be the treasure of a private person or a coin supply is transformed for a certain period into loaned capital. Such an increase in money-capital expresses just as little an increase in productive capital as, for example, As long as the scale of production remains unchanged, this increase only causes an abundance of loanable money-capital in comparison with productive capital.

Money capital is accumulated, transformed and distributed by monetary institutions, as well as by industrial corporations. The created financial system of mobilization of free monetary resources of the population serves real capital, its accumulation. TAXES, mandatory payments levied by the state from individuals and legal entities (individual citizens and enterprises) on the basis of current legislation and credited to the budget.

Money-capital is, first of all, nothing but a sum of money, or the value of a certain mass of commodities fixed in the form of a sum of money. If a commodity is loaned as capital, then it is only a disguised form of a sum of money. Because what is lent as capital is not so many pounds of cotton, but such and such a quantity of money existing in the form of cotton as the value of the latter. How then can a sum of value have a price other than its own price, other than the price expressed in its own money-form. After all, price is the value of a commodity (this also applies to the market price, the difference between which and value is not qualitative, but only quantitative, relating only to the magnitude of the value), in contrast to its use value.

Money-capital can be increased by the fact that with the expansion of banking (see, for example, the example of Ipswich, where in the few years immediately before 1857 the contributions of farmers quadrupled), what used to be a private person's treasure or coin supply is converted into a certain term into loan capital. Such an increase in money-capital expresses so little an increase in productive capital as, for example, As long as the scale of production remains unchanged, only the abundance of loaned money-capital in comparison with productive capital causes an increase.

Money capital is the first form of capital. Here money becomes capital, because it becomes an instrument for the exploitation of wage-workers. Thus, the function of money capital is that it creates the conditions for combining labor power with the means of production.

Money capital, productive capital, commodity capital are forms of industrial capital, each of which performs certain economic functions.

Money capital can be used as loan capital, which is made available to a legal entity for a certain fee in the form of loan interest.