Finance, Credit, Investments

Scientific works on the theories of finances and credit are characterized as many-sided and many-leveled, according to the specification of the research object.

The definition of totality of the economic relations formed in the formation, distribution, and usage of finances, as money sources are widely spread. For example, in “The General Theory of Finances,” there are two definitions of finances:


1) “…Finances reflect economic relations, formation of the funds of money sources, in the distribution and redistribution of national receipts according to the distribution and usage”. This definition is given relative to the conditions of Capitalism when cash-commodity relations gain universal character;

2) “Finances represent the formation of centralized and decentralized money sources, economic relations relatively with the distribution and usage, which serve to fulfill the state functions and obligations and also the provision of the conditions of the widened further production.” This definition is brought without showing the environment of its action. We partly share such an explanation of finances and think it reasonable to make some specifications.

First, finances overcome the bounds of distribution and redistribution service of the national income, though it is a basic foundation of finances. Also, the formation and usage of the depreciation fund, which is part of the financial domain, belongs not to the distribution and redistribution of the national income (of newly formed value during a year) but the distribution of already developed weight.

This latest first appears to be a part of the value of main industrial funds; later, it is moved to the cost price of a ready product (that is to the deal, too), and after its realization, it is set to the depression fund. Its source is a depression in the consistency of the ready products’ cost price.

Second, the main goal of finances is much wider than “fulfillment of the state functions and obligations and provision of conditions for the widened further production.” Finances exist on the state and the manufacturer’s and branches’ levels; in such conditions, most manufacturers are not stated.


V. M. Rodionova has a different position on this subject: Real formation of the financial resources begins on the distribution stage when the value is realized, and concrete economic forms of the realized value are separated from the consistency of the profit.” V. M. Rodionova accentuates finances as distributing relations, while D. S. Moliakov underlines the industrial foundation of finances. Though both of them give quite substantiate discussion of finances as a system of formation, distribution, and usage of the funds of money sources, that comes out of the following definition of finances: “financial cash relations, which forms in the process of distribution and redistribution of the partial value of the national wealth and total social product, is related with 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 economic (cash) relations, with the help of which, in the way 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, raising the material and cultural level of the people and for satisfying other general society requests .”The creation and usage of necessary funds of cash resources to guarantee socialistic widened further production represents exactly the finances of the socialistic society. And the totality of economic relations arisen between state, manufacturers and organizations, branches, regions, and separate citizen according to the movement of cash funds make financial relations”. As we’ve seen, definitions of finances made by financiers and political economists do not differ greatly.

In every discussed position, there are:

1) expression of essence and phenomenon in the definition of finances;

2) the definition of finances as the system of the creation and usage of funds of cash sources on the level of phenomenon.

3) Distribution of finances as a social product and the value of national income, the definition of the distribution planned character, main goals of the economy, and economic relations for servicing of which it is used.

I refuse the preposition “socialistic” in the definition of finances; we may say that it still keeps actuality. We meet with such traditional definitions of finances without the adjective “socialistic” in the modern economic literature. We may give such an elucidation: “Finances represent cash resources of production and usage, also cash relations appeared in the process of distributing values of formed economical product and national wealth for the formation and further production of the cash incomes and savings of the economic 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 the created economical product, also the partial distribution of the value of national wealth.” This latest is very actual, relative to the privatization process and the transition to privacy, and is periodically used in practice in different countries, for example, Great Britain and France.

“Finances are cash sources, financial resources, their creation and movement, distribution and redistribution, usage, and also economic relations, which are conditioned by entering calculations between the economic subjects, movement of cash sources, money circulation, and usage.” “Finances are the system of economic relations, which are connected with firm creation, distribution, and usage of financial resources.”

We meet with absolutely innovative definitions of finances in Z. Body and R. Merton’s basis manuals. “Finance is the science about how the people lead spending `the deficit cash resources and incomes in the definite period. The financial decisions are characterized by the expenses and incomes, which are 1) separated in time, and 2) as a rule, it is impossible to take them into account beforehand neither by those who get decisions nor any other person”. “Financial theory consists of numbers of the conceptions… which learns the subjects of distribution of the cash resources systematically relatively to the time factor; it also considers quantitative models, with the help of which the estimation, putting into practice and realization of the alternative variants of every financial decision take place”.

These basic conceptions and quantitative models are used at every level of making financial decisions. Still, in the latest definition of finances, we meet with the following doctrine of the financial foundation: the main function of the finances is in the satisfaction of the people’s requests; the subjects of economic activities of any kind (firms, also state organs of every level) are directed towards fulfilling this basic function.

For the goals of our monograph, it is important to compare well-known definitions of finances, credit, and investment to decide how and how much it is possible to integrate these into one total part.

Some researchers think that credit is a consistent part of finances if discussed from the position of essence and category. The other, more numerous group proves that an economical category of credit exists parallel to the economical category of finances. It underlines the impossibility of credit’s existence in the consistency of finances.

N. K. Kuchukova underlined the independence of the credit category and noted that it is only its “characteristic feature the turned movement of the value, which is not related with transmission of the loan opportunities together with the owners’ rights.”

N. D. Barkovski replies that the functioning of money created an economic basis for apportioning finances and credit as an independent category and gave rise to credit and financial relations. He noticed the Gnoseological roots of science in money and credit. The science of finances has business with researching economic relations, which lean upon cash flow and credit. Let’s discuss the most widespread definitions of credit. In modern publications, credit appeared to be “luckier” than finances. For example, we meet the following credit description in the finance-economical dictionary: “Credit is the loan in the form of cash and commodity with the conditions of returning, usually, by paying percent. Credit represents a form of movement of the loan capital and expresses economic relations between the creditor and borrower”.

This is the traditional definition of credit. In the earlier economy dictionary, we read: “Credit is the system of economic relations, which is formed while the transmission of cash and material means into the temporal usage, as a rule under the conditions of returning and paying percent.” In the manual of the political economy published under the reduction of V. A. Medvedev, the following definition is given: “Credit, as an economical category, expresses the created relations between the society, labor collective and workers during formation and usage of the loan funds, under 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 is the system of money relations, which is created in the process 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 to provide further production of the state and other needs. Credit differs from finances by the returning character, while the state’s financing of manufactures and organizations is fulfilled without this condition”.

We meet the following definition of “the course of economy”: “Credit is an economical category, which represents relations, while the separate industrial organizations or persons transmit money means to each other for temporal usage under the conditions of returning. Credit creation is conditioned by a historical process of fulfilling the economic and money relations, the form of which is the money relation”.

The 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 under the conditions of returning and paying the percentage rate by the borrower”. Credit gives the temporally free money sources or commodities as a debt for the defined terms by the price of a fixed percentage. Thus, credit is a loan in the form of money. In this loan’s movement, definite relations are formed between a creditor (the loan is given by a juridical physical person who gives certain cash as a debt) and the debtor. Combining every definition named above, we come to the idea that credit is giving money capital to a commodity as a debt for certain terms and material provisions under the price of the firm percentage rate. It expresses definite economic relations between the participants in the capital formation process. The necessity of credit relations is conditioned, from one side, by gathering a solid quantity of temporarily free money sources. From the second side, the existence of requests of them.


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