Quasi Money

Quasi Money theory – Some people contend that outside legal tender money, nothing else can serve as money. Note however that in our definition we accepted that anything can function as money, for example demand deposit or other objects. Therefore to us, demand deposit alongside legal tender constitutes the money supply. Demand deposit or chequing accounts represent an obligation off a bank to pay says Dollar amounts, immediately or on demand.

A cheque is a written business order to the bank specifying how much and to whom the payment is made. It is merely a means of transferring ownership of a deposit demand deposits therefore meet the  primary requirement of good money in essence they serve as medium of exchange by being generally acceptable in payments for goods and services and their quantity is sometimes limited by our monetary authority, hence its inclusion in the money supply. In some economics too, a predominant volume of all monetary involves the use of cheques.

Some economics also contend that the above definition of money supply is narrow and argue that time and savings deposits should be included on the kinds of money we have. Our response to these people in that the last items just mentioned are not payable on demand. They attract interests to their owners an investment and there is also a time element involved in their maturity, hence in our view they do not constitute money.

We therefore regard them as quasi-money, in essence near money. They are usually convertible into cash before use. Thus the further away money is from legal tender, the greater the risk and the interest while the converse is also tree. The ranges of assets are given here and their nearness to currency or cash makes them quasi money or not.

Monetary Standards Introduction (Quasi Money)

A monetary standard includes the overall sets of laws practices and customers that influences quantity and quality of money within a given monetary system. Specifically the standard money is the monetary system to which other kinds of money are related through conversion. The purpose of adopting a particular type of monetary standard is measured or is to make that type of money the basis for measuring value. Two broad types of monetary standards are identifiable;

  • Commodity standard – generally metallic
  • The in-convertible (or managed) paper standard

Commodity standard

When a unit of money is defined as a given quantity of a commodity and that commodity is used for redemption of the monetary unit, the money standard is known as commodity standard. There are three basic types of this standard.

Monometallism – This is a situation where the money is redeemable in one metal only, for example gold or silver (where the money is redeemable in only one recognisable metal) example of monometalism includes the following;

  • Gold coin
  • Gold bullion
  • Gold exchange

Bimetallism – This is a situation where the redeemable in fixed proportion of several commodities (redeemable in fixed proportion of several commodities).

Symmetalism – This is a situation where a composite commodity money is proportionally explained as a metal only with each of the coin containing more metals in a fixed proportion (this entails when the composite commodity money defined in terms of metal only, each coin contained the metal proportion required to have work out well).

Monometallic Standard – The monometallic standard by all calculations and reviews consists of the following;

  • Gold coin
  • Gold bullion
  • Gold exchange

The best known monometallic standard money is gold although many metals have served as the monetary standards at one time or the other. Gold standard was used during the Byzantune Empire (AD 330-14533). Silver standard pre dates the gold standard but later was more popular and is adjusted to have produced the most stable monetary system.


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