From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Mon Jul 19 2004 - 13:01:28 EDT
At 10:55 PM -0400 7/18/04, Allin Cottrell wrote: >On Sun, 18 Jul 2004, Rakesh Bhandari wrote: > >>But if in so regulating credit and the supply of paper money >>Greenspan succeeds in maintaining the "value" of the dollar as a >>determinate quantity of a composite commodity, will he not have >>succeeded in giving the dollar a value as the value of that >>composite commodity? > >I'd say one cannot "give something value" other than by applying >socially necessary labour time in its production, which is clearly >nothing to do with Greenspan's action in relation to the dollar. > >By (roughly) maintaining the exchange ratio of the dollar against some >basket of commodities he is doing nothing less nor more than. A=B B=C Therefore, A=C xdollar equals y of a composite commodity that requires z labor hours to produce; hence x dollars is equivalent to z labor hours. From this equivalence one can calculate the MELT and the "value of money". Which is not to say that Greenspan understands that is what he is doing. Having abandoned the value concept, bourgeois economics is forever lost in a world of shadows. > >But notice that maintaining _constancy_ of this sort of exchange ratio >is not in fact Greenspan's object, nor has it been the historical >result. He, along with many other central bankers, seems to accept >the case for a small positive rate of ongoing inflation. Yes, the basket is allowed to increase in price at a small positive rate. Greenspan attempts to inspire confidence that the increase will be no more than that. The dollar remains tied to a basket of commodities. I don't see how this changes things. The composite commodity is allowed to rise, say, 2% per annum in price; this will only slightly complicate the calculation of the MELT each year. > >>To maintain the dollar as nearest substitute for world money and the >>attendant privileges to the US financial sector and the USG, >>Greenspan has to build confidence that the "value" of the dollar--or >>rather its equality in physical terms to a composite commodity--will >>not fall.... > >The dollar has for several decades been the "nearest substitute for >world money", and the "attendant privileges" have been evident, >despite the fact that it has depreciated more or less monotonically >against most baskets of commodities (and a fortiori against labour >time, since the labour time required to produce most commodities has >also been falling more or less monotonically). Yet because the dollar is maintained as equivalent to a certain quantity of a composite commodity that itself has value it can then measure the value of other commodities. Otherwise, one would not know how many slips of worthless paper to demand for alienating this or that. > >The most relevant requirement, I believe, is that the investors >believe that the dollar will not depreciate substantially and abruptly >relative to other national (or supra-national) currencies that could >reasonably be regarded as competitors for the role of quasi-world >money. What happens if investors lose confidence in the dollar while not gaining confidence in other currencies? At any rate, confidence in the dollar has been bolstered by the activities of Asian central banks. The US financial sector gets international confidence in the dollar so that it remains near world money, and the US financial sector thereby enjoys economies of scale over all competitors; the USG is also getting its war related deficits financed cheaply (the bi-partisan supported occupation of the Arab world is also meant--if Hans Ehrbar and David E. Spiro are right and Cyrus Bina and Paul Krugman wrong--to maintain for the US financial sector both control over the recycling of petro dollars and more importantly the international status of the dollar as the currency that best approximates the universal equivalent in exclusively being directly convertible into a basket of the core commodities of oil, gold and grain); and Asian mfg remains competitive vis a vis its North American counterparts as the dollar is not allowed to depreciate fully. The danger here is that the US will end up deindustrialized (the only industries that can remain competitive with and even benefit from a strong dollar are quasi technological monopolies, what James Galbraith calls the K sector), and run more specifically by the Wall Street Pentagon complex, rather than the Wall Street Treasury complex that Jagdish Bhagwati has criticized. The former has more retrograde political and cultural implications. The culture that suits being the world's banker and biggest arms runner will consist of a general denigration of socially useful productive activity, authoritarianism, global racism--these are the hallmarks of our American society. Doubtless this is a caricature as the late Edward Said reminded his third world readers but unlike those stereotypes that Americans have of, say, the Arab world or Europe it is not altogether inaccurate. > For a long time there has been no plausible competitor. One >might say that nowadays the Euro is a candidate, but it's early to >tell. > >Allin.
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