Russian version

State banknotes (T-notes) not backed by metal

In 1762, in order to put the first paper money into circulation as soon as possible, a new requirement in Moscow and Saint-Petersburg prescribed at least 20 percent of tax payments’ sum total to be made in 25-rouble assignations132

At the time, credit money in Russia had already developed into currency — the monetary unit of a certain country stipulated by law, the sole means of tax settlement and repayment of State credits.

"Credit, too, as a public form of wealth, forces money out133 and usurps its place"134.

V.A. Byelov describes currency as follows: «…objects, which conform to legal requirements and are accepted by the State as the sole means of payment with a compulsory exchange-value, and take the form of a national monetary unit.

Paper money is yet another kind of monetary unit, identical to billon coins by its economic nature. Face value of paper money was considerably higher than their cost as objects (paper notes made and dyed by a certain method). Money circulation was provided for by the State, which established and protected its compulsory exchange-value, i.e. its obligatory acceptance for all payments at its nominal cost.

Banknotes (bank notes and bills; in Russia, one also points out assignations [1769–1849] and credit bills [1841–1919]) are bank bills (in Russia — only State banks or the Treasury) in the form of self-addressed orders to pay their bearer immediately upon presentation the amount of money, indicated as a round number, in small coins of full value or paper money. By their economic nature, these are transferable selfaddressed bearer bills, with the payment date specified as «upon presentation »… In England, the first attempt was made to regulate the issue of such documents. Bankers’ self-addressed bills became known as «bank notes» and a special system of legal regulations was also created. The usage of promissory notes in inner market circulation began to dwindle. Moving into international trade and replacing money and monetary units, in inner circulation promissory notes themselves were replaced by receipts "135

Money, which is deprived of its intrinsic value, is called «decreted», or paper money. The Anglo-American term is fiat money, and it derives from fiat — decree, edict; because paper money is put into circulation by a Government decree. For instance, we may compare the official paper dollars (printed to order of the USA Government) and paper dollars used in the «Monopoly» board game (printed by Parker Brothers game company). Why only the official paper dollars are suitable for buying things in the real world? The answer is obvious: because the USA Government announced that these dollars are a legitimate means of payment and on each of them it is said that: «This note is legal tender for all debts, public and private"136

An episode from the reign of Holy Roman Emperor Frederick II (1194–1250), described by L.V. Orlenko, is a curious example. The Emperor tried to make his subjects accept gilded leather «augustals» at the nominal value of gold137However, without a firmly defined legal base and the State’s real authority, the attempt was doomed.

"Reflecting on the general abandonment of the gold standard in money circulation, we must note that the role of gold in the period of capitalism is quite ambivalent. On the one hand, it’s always in view and is perceived by the society as the sole form of full value money, and also as the embodiment of wealth. On the other hand, it isn’t anymore the only available form of money and is forced to share this role with the offspring of capitalism — the rapidly progressing credit money. The ambivalent role of gold has been hidden for a long period of time, because credit money emerges and develops on the base of gold, performs an increasing amount of work, but without the dramatic effects that accompany the functioning of gold at the time.

In a capitalist society the role of money in the economic process undergoes drastic changes. In the epoch of trade money played an intermediate part in a trade agreement as a means of circulation and payment, as well as a means of wealth accumulation. However, at present the main role of money is to be the necessary prerequisite for and the starting point of capital turnover, and then an essential part of capital.

Money is necessary to put productive capital to work, to get it moving and constantly keep it moving. To achieve this, money must be constantly moving itself. However, this is not a basic movement, but a movement during which the value of capital grows, thus, the sum of money that represents this value must grow to an equal measure.

Gold turns out to be unfit for this task. One is forced to provide for accumulation of the sum of money, which represents the growing value of capital, in a mechanical way, i.e. by increasing the mass of collected gold. With the development of capitalism, especially with the approach of the industrial capitalism era, it is immediately discovered that there’s simply not enough gold! More and more gold must be mined just for the purpose of minting coins and putting them into circulation. All this effort, apparently, is almost entirely useless, because money only serves the movement of capital, acting — as «the uninitiated» see it — as the unavoidable, but unavailing intermediary, with whose presence on the stage of economic life one has to put up.

A significant amount of gold can be saved when paper money, convertible into gold, is used in circulation. However, even in this case there’s not enough gold. The motif of the insufficiency of gold for monetary purposes is constantly present in economic works on this subject throughout the 19th — early 20th centuries.

That despite the shortage of gold, the monetary system was still able to fulfill its tasks, is explained by the fact that since its very onset capitalism creates and puts into its own service more and more credit money, which, instead of gold, successfully serves a growing number of settlements. However, because this credit money exists on paper, because it has to use paper as its bearer, contemporaries don’t recognize it as independent money of a new, higher degree, but perceive it as simple paper money convertible into gold, which serves only as the replacement of gold in circulation. This confusion is in place up to present date, when the term «credit-paper money» is used in economic literature when referring to modern credit money138

«The reasons why real money (silver and gold coins) were forced out of circulation by unchangeable paper money are often explained by the fact that gold serves barter only transiently, turning into ideal money. Money circulation itself separates the real content of a coin from its nominal content, separates its metal being from its functional being. In circulation itself already there is a hidden opportunity to replace metal money by its function, replace coins by monetary units made from other materials or just by basic symbols. Thus, paper money originates from the function of money as the means of circulation»139. Credit money originates at a certain stage of commodity production development, when payment by installments becomes widespread. In K. Marx’s Capital credit money140is defined as money in the form of a liability.141


Banknotes and coins of the Central Bank are defined as unified by sum «self-addressed» State bearer bills with their term defined as «upon presentation» and with a blank endorsement..

In contrast with the previous type of banknotes, the right to claim gold in exchange for the banknote has been lost. All the other properties have remained.

As well as the bearer of a banknote with metal backing, the bearer of a State banknote without metal backing not only has the proprietary right to the paper note with the inscription itself, but also possesses the right to make by this note any payment within the country. However, contrary to the first case, the State banknote embodies only the unconditional abstract right to be presented as a means of payment in the situation of paying tax.


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