Russian version

«Institutional Theory of Money»

During the first bank crisis in Russia in 1995, Moscow Interregional Commercial Bank (MMKB) - former Promstroybank, Moscow region - became the largest one out of a number of banks that collapsed. Despite the big amount of total assets, the bank returned very little funds to its creditors. Its lawyers had a large part in it as they took quite an interesting stand contradicting the economical interpretation of such category as 'money'.

Based upon the Civil Code of the Russian Federation which had been passed a year before, they claimed that money had a tangible nature. Since the money which remained in the bank assets was the money of individual investors, then, being legal entities, the creditors could not demand from the bank tangible things that did not belong to them.

There was some legal logic here and it produced certain results. If the bank clients could affirm that their money relations with the bank were obligatory and not proprietary, they could have recovered much more funds from the bank.

This problem is a rather big one for the Russian economy, since an extremely high risk of keeping and using funds via the banking system leads to reduction of non-cash operations in the country and, consequently, to the slump of GDP.

The practice of market relations just started to shape up. Still it defined noncash money as bank liabilities either on on-demand accounts or on thrift accounts respectively.

However, with regard to the paper money, the leading lawyers of the country remained adamant. They say that paper money is a physically tangible thing and they write in the article 128 of the Civil Code of the Russian Federation as follows: "To the objects of civil rights shall be referred the things, among them money and securities…"

  • Introduction
  • Part I. Why is an institutional theory of money needed?
  • Part II. Securities
  • Part III. Money
  • Part IV. Mistakes in legislation and the role of economic theory
  • Bibliography

    He wanted to provide them with such safety and security, whereby everyone within his rule could carry gold atop their heads without any danger (being robbed) in the same way people carry regular pots.

  • Purpose of the legislation
  • Part I. Law
  • Part II. Mongolian customs (moral standards)
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    Copyright © 2008 Andrey Gribov
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