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term that actually refers to two concepts: the abstract unit of account in terms of which the value of goods, services, and obligations can be compared; and anything that is widely established as a means of payment.
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(in Russian, valiuta). (1) The monetary unit of a country and its nature (gold, silver, paper).
(2) Monetary tokens of foreign states, as well as credit instruments and payment papers (such as promissory notes and checks), made out in foreign monetary units and used in international payments. Up to the 19th century the only two systems in general use were silver and bimetallist currencies, silver and gold being used simultaneously in the second system. At the beginning of the 19th century, England, and during the second half of the century other capitalist countries as well, began to make general use of gold as a currency. The period of the general crisis of capitalism is characterized by the use of paper currency, that is, of banknotes and paper money not convertible into gold or silver. Nonconvertible banknotes and paper money are subject to inflation and consequently to depreciation, and the amount of gold actually represented by the paper currency unit changes, with the result that the rate of exchange of the currency is reduced in relation to foreign currencies.
Modern capitalism is characterized by unstable and declining currencies. Currency depreciation is accompanied by a decline in the gold content of the monetary units. During the entire postwar period there has been chronic inflation and systematic currency devaluation, including mass devaluations in 1949 and 1967. In these conditions some capitalist countries try to maintain artificially the nominal gold value of their currencies. For example, in the United States, where in 1969 the level of prices for goods, even according to official figures, was more than 2.5 times the prewar price level, the gold content of the dollar, fixed at 0.888671 of pure gold on Jan. 31, 1934, remained unchanged until 1972. In many countries the exchange rate of the currency is maintained with the help of currency restrictions. Thus, out of the 115 countries that were members of the International Monetary Fund at the end of 1969, only about one-third did not make use of foreign-exchange restrictions.
The currencies of capitalist countries can be classified as convertible, partly convertible, and nonconvertible. The currencies of countries that have completely removed all currency restrictions, both for nonresidents (alien physical or juridical persons) and residents (physical or juridical persons of the country), are convertible currencies; that is, they can be exchanged for a foreign currency. These include the United States dollar, the Canadian dollar, the Swiss franc, the mark of the Federal Republic of Germany, and others. The currencies of those countries that have not removed restrictions on all currency transactions or have removed them only in the case of nonresidents are termed partly convertible. Such are the currencies of most of the Western European countries, including the United Kingdom, France, Italy, Belgium, the Netherlands, Sweden, Denmark, Norway, Finland, and Austria, all of which in December 1958 removed currency restrictions on nonresidents, so that these persons were able freely to transfer their export earnings and the sums they have in bank accounts in United States dollars or other fully or partly convertible currencies.
Nonconvertible currencies are those of countries that maintain currency restrictions on all currency operations both in the case of residents and nonresidents. These are, in particular, the currencies of dependent and developing countries, which are tied in the majority of these countries to the currency of the metropolitan or former metropolitan country and the exchange rates of which are fixed at levels benefiting foreign monopolies.
In the USSR and other socialist countries, the stability of the currency is ensured mainly by the volume of goods put into circulation through state and cooperative trade at planned prices. The currencies of the socialist countries are basically strengthened by the planned, crisis-free, and progressive development of the socialist economy, the planned circulation of money, and commodity circulation. The stability of the currencies of socialist countries also rests on the state gold reserve as a guarantee of the currency; on the planning of foreign economic ties, including currency receipts and payments; and on the state foreign-exchange monopoly.
V. A. MARKOV