Monetary System
The modern monetary system is a complex scientific and technological system that interconnects and interpenetrates all levels of economic and social life. It is a key economic link that affects the coordination and balance of the national economy, stabilizes commodity prices, maintains exchange rate balance, and benefits the peoples livelihood.
The modern monetary system is composed of the money circulation system and the credit system. The money circulation system is mainly composed of money and circulation. Money is the universal general equivalent in modern society that freely exchanges cash. It mainly includes legal currency, fiduciary currency and prepaid cards, etc. The circulation is the transfer of money from one person, institution to another person or institution, which includes means such as deposits, loans and payments.
The credit system is composed of credit money, which is mainly used for loan and credit, and also includes collateral, which is mainly used for loan guarantee. The credit system is generally divided into the central banking system and the commercial banking system. The central banking system is managed and regulated by the central bank, mainly engaged in foreign exchange reserve management and financial supervision, affecting and controlling the credit and monetary environment in the country. The commercial banking system includes commercial banks, joint-stock banks, rural cooperative banks, urban credit cooperatives, etc. It mainly engaged in commercial loan and credit business, which plays an important role in the development of national economy.
In modern monetary system, the legal currency and credit are organically linked together by various monetary tools, taking full advantage of its respective strengths. Legal currency is a direct means of payment that has a wide range of circulation; while credit is mainly used to regulate commodity prices, maintain exchange rate balance, encourage economic development and benefit people’s lives.
Different countries or regions have their own monetary system formed due to the different monetary laws, legal systems, and economic development levels, as well as office of currency. For example, Chinas currency is the renminbi, which is also the legal currency of some neighboring countries; the U.S. dollar is the legal currency of the United States and many other countries. In the modern international monetary system, these different currencies are linked through the exchange rate mechanism and constitute an international monetary system.
In conclusion, in modern society, monetary system has played an important role in promoting the development of economy and improving the living standards of people. It is a complex scientific and technological system that links and penetrates all levels of economic life, providing a necessary environmental condition for economic growth.
