Re: (OPE-L) recent references on 'problem' of money commodity?

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Nov 15 2004 - 23:53:01 EST

First, Allin, you are right--I'm not talking about Foley's value of
money. That was an earlier mistake I reproduced by reposting an old
message. Thanks for the correction.
Second, I just don't see the problem here with "the set equal to". As
I wrote on July 14th of this year: Say that Greenspan aims to ensure
that x barrels of oil, y grams of gold and z bushels of grain sells
for $1000 over the medium term. If that basket now comes to $1100, he
sells bonds; if it comes to $900 he buys bonds. It's a modified gold
standard in two ways: the commodity is composite, and Greenspan is
allowed some flexibility. He may go on buying bonds to inflate the
economy in a time of a crisis but will then will play catch up after
the crisis is over.
Third, I would like to know of the post keynesian theory of the
constraints under which Greenspan sets monetary policy; or an
explanation of why it is conducted the way it is in fact conducted.
It just seems that Greenspan is in fact running something like the
modified gold standard mentioned above. Or that he is being pressured
to do so by the discipline of the international money market.
Yours, Rakesh

At 10:19 PM -0500 11/15/04, Allin Cottrell wrote:
>"is set equal to": do you mean, if we suppose $1000 to be the actual
>price of the basket in some base period?  (Otherwise I can't attach
>any meaning to the proposition: you can't just stipulate that $1000
>is the value of any basket of commodities, since the dollar is a
>real thing in its own right and what it exchanges for is not a
>matter of stipulation -- unless unless we're talking about an
>imaginary accounting price for gold, that is not actually
>exchangeable at the notional price.)
>>and the socially necessary abstract labor time required to produce
>>that basket then decreases--say it took 1000 hours and now only
>>takes 500 hours--then the MELT changes correspondingly, no?
>The price/value ratio for that particular basket changes (unless the
>price changes in the same direction and proportion as the labor
>content -- that has not been specified).  But do we have grounds for
>supposing that the overall MELT has changed in the same direction
>and proportion?
>>Before $1000 represented 1000 hours; now it represents only 500
>For these particular commodities (if their dollar price remains
>unchanged); and not necessarily in general.
>>If Greenspan had to stick to a gold standard, how would things
>>work out? Say $1000 is set to w oz of gold. Where it once took
>>1000 hours to mine that amount of gold, it now takes 1500 hours in
>>the mines that have not been tapped out. The MELT (the money
>>new-value produced per hour of socially necessary labor-time)
>>would now be 67 cents. $1000 would now purchase 1.5 x the labor
>>time that it purchased before. The MELT has decreased; the Foley
>>value of money increased.
>I may be wrong, but as I understand it, the Foley value of money
>partakes of no such nonsense: isn't his MELT defined in terms of the
>entire net product (its labor content and its monetary value)?
>Allin Cottrell
>Department of Economics
>Wake Forest University, NC

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