Monetization From Wikipedia, the free encyclopedia (Redirected from Monetize) Jump to: navigation, search Monetization is the

process of converting or esta lishing something into legal tender! "t usually refers to the coining of currency or the printing of anknotes y central anks! #hings such as gold, diamonds and emeralds generally do have intrinsic value ased on their rarity or $uality and thus provide a premium not associated %ith fiat currency unless that currency is &promissory&: #hat is the currency promises to deliver a given amount of a recognized commodity of a universally (glo ally) agreed to rarity and value, providing the currency %ith the foundation of legitimacy or value! #hough rarely the case %ith paper currency, even intrinsically relatively %orthless items or commodities can e made into money, so long as they are difficult to make or ac$uire! #he term &monetization& may also e used informally to refer to e'changing possessions for cash or cash e$uivalents, including selling a security, charging fees for something that used to e free, or attempting to make money on goods or services that %ere previously unprofita le or had een considered to have the potential to earn profits! (ontents ) Monetizing de t )!) *ffects on inflation + Revenue from usiness operations , Monetization of non-monetary enefits ,!) Russian social %elfare monetization of +../ ,!+ 0nited 1tates agricultural policy 2 1ee also / References 3 *'ternal links Monetizing de t "n many countries the government has assigned e'clusive po%er to issue or print its national currency to a central ank! #he government treasury must pay off government de t either %ith money it already holds or y financing it y issuing ne% onds %hich are sold to either the pu lic directly or the central ank, in order to raise the funds re$uired to repay onds that have come due! #he central ank may purchase government onds y conducting an open market purchase, i!e! y increasing the monetary ase through the money creation process! "f government onds that have come due are held y the central ank, the central ank %ill return any funds paid to it ack to the treasury! #hus, the treasury may 4 orro%4 money %ithout needing to repay it! #his process of financing government spending is called 4monetizing the de t4!5)6 (entral anks are usually for idden y la% from purchasing de t directly from the government! For e'ample, the Maastricht #reaty (article ).2) e'pressly for ids *0 central anks4 direct purchase of de t of *0 pu lic odies such as national governments! #heir de t purchases have to e from the secondary markets! Monetizing de t is thus a t%o-step process %here the government issues de t to finance its spending and the central ank purchases the de t, holding it till it comes due, and leaving the system %ith an increased supply of money! *ffects on inflation When government deficits are financed through de t monetization the outcome is an increase in the monetary ase, shifting the aggregate-demand curve to the right leading to a rise in the price level (unless the money supply is infinitely elastic)!5+65,6 When governments intentionally do this,

they devalue e'isting stockpiles of fi'ed income cash flo%s of anyone %ho is holding assets ased in that currency! #his does not reduce the value of floating or hard assets, and has an uncertain (and potentially eneficial) impact on some e$uities! "t enefits de tors at the e'pense of creditors and %ill result in an increase in the nominal price of real estate! #his %ealth transfer is clearly not a 7areto improvement ut can act as a stimulus to economic gro%th and employment in an economy over urdened y private de t5citation needed6! "t is in essence a &ta'& and a simultaneous redistri ution to de tors as the overall value of creditors4 fi'ed income assets drop (and as the de t urden to de tors correspondingly decreases)! "f the eneficiaries of this transfer are more likely to spend their gains (due to lo%er income and asset levels) this can stimulate demand and increase li$uidity! "t also decreases the value of the currency - potentially stimulating e'ports and decreasing imports - improving the alance of trade! Foreign o%ners of local currency and de t also lose money, Fi'ed income creditors e'perience decreased %ealth due to a loss in spending po%er! #his is kno%n as &inflation ta'& (or &inflationary de t relief&)! (onversely, tight monetary policy %hich favors creditors over de tors even at the e'pense of reduced economic gro%th can also e considered a %ealth transfer to holders of fi'ed assets from people %ith de t or %ith mostly human capital to trade (a &deflation ta'&)! 8 deficit can e the source of sustained inflation only if it is persistent rather than temporary, and if the government finances it y creating money (through monetizing the de t), rather than leaving onds in the hands of the pu lic!526 Revenue from usiness operations "n some5%hich96 industry sectors, monetization is a uzz%ord for adapting non-revenuegenerating assets to generate revenue! Failure to monetize %e sites %as a pro lem that caused many usinesses to fold during the dot-com ust! We sites that do generate revenue are often monetized via advertisements or su scription fees! 8 previously free product may have premium options added thus ecoming freemium! Monetization of non-monetary enefits Monetization is also used to refer to the process of converting some enefit received in nonmonetary form (such as milk) into a monetary payment! #he term is used in social %elfare reform %hen converting in-kind payments (such as food stamps or other free enefits) into some &e$uivalent& cash payment! From the point of vie% of economics and efficiency, it is usually considered etter to give someone a monetary e$uivalent of some enefit than the enefit (say, a liter of milk) in kind! "nefficiency: in the latter situation people %ho may not need milk cannot get something of e$uivalent value (%ithout su se$uently trading or selling the milk)! :lack market gro%th: people %ho need something other than milk may sell it! "n many circumstances, this action may e illegal and considered fraudulent! For e'ample, Mosco% pensioners (see elo% for details) often give their personal cards that allo% free usage of local transport to relatives %ho use pu lic transport more fre$uently! (hanges on the market: supply of milk to the market is reduced y the amount distri uted to the privileged group, so the price and availa ility of milk may change! (orruption: firms that should give this enefit have an advantage as they have guaranteed consumers and the $uality of the goods supplied is controlled only administratively, not y market competition! 1o, ri es to the ody that choose such firms and;or maintain control can take place! Russian social %elfare monetization of +../ "n +../, Russia transformed most of its in-kind enefits into monetary compensation!

:efore this reform there %ere a large system of preferences: free;reduced price of travels on local transport, free supply of drugs, free health resort treatment, etc! for diverse categories of society: military personnel, the disa led, and separately, persons disa led due to WW"", (herno yl disaster &li$uidators,& inha itants of <eningrad during the siege, former political prisoners, and =ust for all pensioners (%omen //>, men 3.>)! #his system %as a legacy of the 1oviet 0nion, ut it %as heavily e'tended y populist la%s of central and regional authorities during the )??.s! :y the la% )++- of 22 August 2004 this system was converted into cash payments by various means: abolition of preference, compensated by raising of wage (e g free use of local transport for military personnel! or pension (e g different preferences for "hernobyl li#uidators! for three most important preferences (free local transport, $0%&price suburban rail transport, free supply of drugs!: a choice between this preference and some e'tra money (he main causes of friction in the reform were the following: technical and bureaucratic problems (e g for usage of $0% discount for suburban rail transport a person should present a paper from local )tate *ension +und office stating that he,she doesn-t choose monetary compensation!. separation of all preference&recipients into federal and regional accordingly to the body issuing a preference legislation (he largest group, that is pensioners, was regional /t was the main cause of problems: /n poor regions local government had to abolish these preferences with small or 0ero compensation 1ven if these preferences were retained, they could apply only to pensioners of this region, so, e g 2oscow 3blast pensioners cannot use 2oscow metro and buses freely (4ater these problems would be generally solved by a series of bi&lateral agreements between neighboring regions ! (he wave of protests emerged in various parts of 5ussia in the beginning of 200$ as this law started to wor6 7ut government measures (raising of compensations, normali0ation of bureaucratic mechanisms, etc ! eventually neutrali0ed opposition (he long&term effects of the moneti0ation reform varied for various groups )ome people received compensation in e'cess of the services they received (e g in rural areas without any local transport, the free transport benefit was of little value!, some have found that the compensation is insufficient to cover the cost of the benefits needed (ransport companies and railroad have obvious benefits from moneti0ation as they receive higher cash receipts when these categories use their services (previously in some regions more than a half of passengers did not pay for municipal transport, without sufficient compensation to the companies from the government! 1ffects on medical system are controversial 8octors and nurses have to use their time to fill in many forms to 9ustify free receipts, thus reducing time spent on services :nited )tates agricultural policy /n :nited )tates agricultural policy, ;moneti0ation; is a * 4 4<0 provision (section 20=! first included in the +ood )ecurity Act of >?<$ (* 4 ??&>?<! that allows private voluntary organi0ations and cooperatives to sell a percentage of donated * 4 4<0 commodities in the recipient country or in countries in the same region :nder

section 20=, private voluntary organi0ations or cooperatives are permitted to sell (i e , moneti0e! for local currencies or dollars an amount of commodities e#ual to not less than >$% of the total amount of commodities distributed in any fiscal year in a country (he currency generated by these sales can then be used: to finance internal transportation, storage, or distribution of commodities. to implement development pro9ects. or to invest and with the interest earned used to finance distribution costs or pro9ects @$A