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The price of gold, in a world where the only money if gold, is in terms of
gold. Hence it cannot fall. To put it in different terms, gold is not sold
but directly buys. It is immediately money. So, strictly speaking, the
process cannot be 'the same as for other industries'.
Other theoretical mechanisms have to be put forth for the rate of profit in
the gold industry to decline back to normal (or rise). The obvious one is
for other prices to rise. But, and that seems to me the problem from a
Marxist standpoint, that relies on the quantity theory. Specifically,
capital moves into the gold industry (and, incidentally, it is not critical
whether this takes a long time or other mines are discovered), more gold is
produced and enters circulation, other prices rise, the rate of profit for
gold falls. For Marxist monetary theory, that seems to me unacceptable.
What would be a solution from a standpoint that rejects the QTM?
>At 02:25 PM 1/13/00 +0200, you wrote:
>>> I HAVE NOT ASSUMED ANYTHING ABOUT TECHNICAL CHANGE NOR ABOUT THE VALUE OF
>>> GOLD. WHAT I WOULD LIKE TO KNOW IS THE MECHANISM FOR BRINGING THE RATE OF
>>> PROFIT IN THE GOLD INDUSTRY BACK TO AVERAGE, IF IT IS ABOVE IT. FOR OTHER
>>> COMMODITIES WE USUALLY ASSUME THAT THIS HAPPENS THROUGH CAPITAL MOVEMENT,
>>> CHANGE IN SUPPLY, AND FALL IN PRICE. FOR GOLD THIS CANNOT HAPPEN. THE RATE
>>> OF PROFIT OF THE GOLD INDUSTRY COULD ONLY FALL IF OTHER PRICES WENT UP.
>>> WOULD THAT HAPPEN WITHOUT THE QUANTITY THEORY?
>>Well, the mechanism in the case that there are excess profits in the
>>gold industry is the same as with the other industries. The acceleration
>>of capital accumulation in the gold industry will increase the supply
>>and the price of gold will fall until profits become normal. But here we
>>must be careful this process does not work smoothly because in the gold
>>industry we do not have discoveries of new (more productive) gold mines
>>or techniques for its extraction any time but after long periods
>>provided that the excess profits in gold have increased substantially.
>>Finally, gold is a special commodity perhaps the only one that is not
>>wasted. Whatever has been produced up until now has been either used or
>>stored somewhere. If the price is right then the supply easily can
>>increase. See what happened in the last months with the Central Banks in
>>There is a price of gold and it is quoted in dollars, pounds etc. There
>>is a market for gold and a price. Is there something that I miss?
>>The (direct) price of a commodity A equals to to the labor value of
>>commodity A divided by the value of gold and all that multiplied by the
>>exchange rate of currency (dollars) for gold. The direct price is
>>supposed to be the center of gravity of market prices.
>>Clearly, if there is a discovery of new gold mine or techniques in the
>>extraction of gold then the value of gold will decrease and that will
>>lead to the increase in the direct price and if we generalize to the
>>price level. Is this a QTM? the answer is no, this is the labor theory
>>of value (LTV) according to which the price level depends on three
>>(a) the value of commodities
>>(b) the value of commodity gold
>>(c) the exchange rate of currency for gold.
>>True if the supply of money increases (ceteris paribus)the price level
>>increases this is a result that both the QTM and the LTV agree, but for
>>different reasons. The difference between the two is that the QTM and
>>monetarism in general attributes everything to a single variable the
>>quantity of money.
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