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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.
This is true if we think for example a vilage of goldminers, where the
gold they discover exchange directly with other goods. In fact in some
Economic History books (Rockoff?)one finds descriptions of such a
process where the shopkeepers have scales to weigh gold. In other words
it is true that when gold is immediately money gold has no price,
because money doesn't have price etc. But from that to conclude that
> So, strictly speaking, the
> process cannot be 'the same as for other industries'.
doesn't follow at all.
> 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.
In Marx there is a kind of quantity theory (money necessary in
circulation) which operates differently, both in causation and
determination as I explained in my previous note and retain below. If
the monetarists claim that the increase in the quantity of money leads
to an increase in the price level (ceteris paribus). Marxists do not
necessarily oppose (incidentally this is not a bad idea in general)to
such a (monetarist) claim. It is true on empirical grounds that the
money supply and the price level correlate. After all monetarism is a
popular current in the history of economic thought and if monetarists
were claiming nonsense they wouldn't be popular at all.
> capital moves into the gold industry (and, incidentally, it is not critical
> whether this takes a long time or other mines are discovered)
Yes, it is crucial because gold belongs to exhaustible resources and the
issue of rent is important. It is not so simple to just expand the
supply of gold. Gold (or techniques for its extraction) must be
discovered and this happens only if the price of gold increases
substantially. See for instance Vilar's book.
> 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?
I just retain the part of my previous post for which I did not see any
comment except that is simply wrong because ultimately the expansion of
supply of money _MAY_ lead to a rising price level.
> >> 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. HOW
> >> WOULD THAT HAPPEN WITHOUT THE QUANTITY THEORY?
My comment was:
> >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
> >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.
> >Lefteris Tsoulfidis
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