[OPE-L:4662] Re: Re: Re: Re: Re: Re:Fiat money andTransformation

From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Sun Dec 10 2000 - 10:14:49 EST

Ajit here makes a common slip in suggesting that the "value of 
money", which is the inverse of the "monetary expression of value" 
might be the ratio of the value of the GDP to the money supply. Since 
GDP is measured in $/yr and the money supply as a stock of $, this 
ratio has the dimensions 1/yr, and is not the "value of money" but 
the "income velocity of money", the number of times the money supply 
conceptually "turns over" to circulate the GDP. (Of course in reality 
there are many transactions involving money that don't generate GDP.)

The "value of money" in the NI sense is the ratio of the labor time 
expended in a period to the value of the net product of the period 
(which is GDP less depreciation). It has the dimensions labor time/$.


>But the logic seems to be incomplete. The question, first of all, is 
>how is the
>value of fiat money determined? If you determine its value by taking the GDP
>and dividing it with total money supply, the problem you will have is that you
>cannot claim the the GDP measured by the prices assumed to be proportional to
>value and the GDP measured by the prices of production have any reason to
>remain the same. So, in effect, it amounts to the imposition of the same old
>condition that total values equal total prices of production-- thus no more
>mileage is gotten by this. Cheers, ajit sinha
Duncan K. Foley
Leo Model Professor
Department of Economics
Graduate Faculty
New School University
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