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Paul [OPE-L:1245] and Allin [OPE-L:2150] claim that the problem can be
solved by accepting the QTM. That is true, as I have also remarked. Yet,
the QTM creates even worse trouble. For it to work, gold has to flow
smoothly between nations, all of it has to enter circulation, and it cannot
be demanded for payment of old obligations (ie, there cannot be occasions
when only gold will do). But the most important and interesting monetary
phenomena of capitalism are, precisely, money flowing discontinuously
between nations (ie, settling balances and acting as world money), money
being hoarded (thus not entering circulation), money settling old debts and
allowing credit to flourish. If monetary theory leaves no room for those,
what's the point?
In my view, the problem with Ricardo's (unique) reconciliation of the QTM
with the LTV is not at all its 'inconsistency'. On the contrary, Ricardo's
theory is beautifully consistent and elegant. The problem is that it does
not explain half the things that one would like monetary theory to explain.
In seems to me that Marx was fully aware of that.
That is not to say, incidentally, that the QTM is invalid at all times.
Marx himself recognised its validity for fiat money. It's just not valid as
a general theory of money and commodities.
Which takes us back to the problem of gold profit rates (without the QTM),
for which I have no clear solution.
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