Actually during the circulation the coins abrade and a part of precious metal disappears. Besides growths the demand of gold in industry, medicine and among supplies. And the main the goods circulation on a scale of trillions of US dollars, tenge, franks and other monetary units is impossible to cover by gold.

A transfer to a fiduciary circulation sharply widened the commodity exchange limits. Paper money – banknotes and treasury notes – are obligatory for acceptance in the quality of a payment mean on the territory of the State. Its value is determined only by the quantity of goods and services which could be purchased on it.

Thus the XX^>th century is marked by a transfer to a paper money circulation and gold and silver conversion into the commodity which could be purchased at a market price.

Paper money should be understood as a monetary unit which is issued directly or indirectly by the Treasury Department for the budget requirements and provided with a compulsory purchasing power. They include the treasure notes, different types of substitutes (government bills, government bonds, some kinds of consolidated stocks and token money).

Paper money is a monetary unit inconvertible on metal supplied with a compulsory nominal and issued by government to cover its expenses.

Modern money is a social phenomenon appointed by the governmental authorities. Its color, size and artistic features are not important for buyers and sellers. A trust to money is determined by a trust to a credibility of some or another governmental authority. The society represented by the government can easily appoint the other in form and images paper or plastic notes to perform the functions of money and the individuals will use them as money to cover their needs. That’s why nowadays money is called fiat money».

The government keeps control of the circulation emission of currency. If the money issue was unlimited or could be done by everyone thus the prices would grow sharply, money would devaluate and wouldn’t be used. The society would return to an exchange in kind.

Paper money is unstable in itself, i.e. as a rule it devaluates because it is issued for the budget deficit coverage. It is not exchanged on gold and does not have its own inmost value thus the mechanism of spare money withdrawal from circulation the «mechanism of trea- sure» does not work here. Consequently paper money issued above the norm is stuck in the channels of circulation and devaluates. The depreciation of money is an exchange of one paper monetary unit purchasing power (but not all the paper monetary stock).

There are two forms of the monetary depreciation:

Internal is a depreciation in respect to the goods on domestic market, i.e. the increase of prices;

External is a depreciation of money in respect to the foreign currency, i.e. an exchange fall (drop) of the national currency.

Credit money is a collective term appeared on the basis of the private individuals’ or government’s real obligations substitution. It occurred due to the money function as a mean of payment where money acts as an obligation which should be redeemed by a real money according to a due date. Credit money includes bills, banknotes, cheque, electronic money.

Banknote is a perpetual debenture guaranteed by the Central Bank of the State. Initially the banknotes had a gold guarantee of exchange onto the gold. They are issued with a strictly defined denomination and in principle are concerned as a national money on all the State territory.