Question

distinguish between currency and deposit money

Answer 1

The difference between money and currency

Such is the basic difference between money and currency. While money stores intrinsic value within itself, fiat currency possesses buying power bestowed upon it by the government. But this was not always the case. At its’ inception the dollar was backed by gold and silver, which meant that every unit of currency in circulation was redeemable in gold and silver. In America, a person could walk into a bank, hand the teller his $100 bill, and have it cashed in gold or silver coins. Thus, at this stage currency was nothing more than a receipt redeemable in gold or silver for its face value. And even though the paper currency did not possess intrinsic value, under the gold standard it represented the buying power of gold and silver, which is set by the free markets. So, the absolute value of the precious metals transferred to the paper.

But what do you think happens if for some reason the currency is no longer “backed” by gold and silver? If the currency is supposed to represent the intrinsic value of gold and silver, then if you take the metals out of the equation, what value exactly does the paper represent? I’ll tell you what – the value of the power of a government mandate, whatever it is.

In America this finally happened in 1971, when President Richard Nixon announced that the U.S. currency was no longer redeemable in gold. The dollar had become completely a fiat currency for the fist time in history. The government gained an ability to print as much paper currency as was needed to cover its’ obligations since it was no longer necessary to collateralize it with anything other than the U.S. government’s promise to pay. Unfortunately, all this monetizing, or printing of currency, comes at a price. It inevitably leads to a terrible thing called inflation, which is just another form of taxation since it destroys the buying power of the currency. Let me explain.

I HOPE THIS WILL HELPFUL TO YOU

Answer 2

The difference between money and currency. Such is the basic difference between money and currency. While money stores intrinsic value within itself, fiat currency possesses buying power bestowed upon it by the government. ... So, the absolute value of the precious metals transferred to the paper.