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

From: Paul Bullock (paulbullock@EBMS-LTD.CO.UK)
Date: Fri Nov 19 2004 - 18:47:32 EST

Dear Fred,

Thank you. Clearly we disagree.
I have interpolated below in bold , 
best regards

Paul Bullock.

----- Original Message ----- 
From: "Fred Moseley" <fmoseley@MTHOLYOKE.EDU>
Sent: Friday, November 19, 2004 2:24 PM
Subject: Re: [OPE-L] (OPE-L) recent references on 'problem' of money commodity?

> Hi Paul, thanks for your comments.  My belated responses below.
> On Sun, 14 Nov 2004, Paul Bullock wrote:
> > Dear Fred,
> >
> > Just a couple of related questions to your idea that gold has been
> > de-monetised, since this seems to be your view.
> >
> > Why is it that gold is retained as part of the reserves of all central
> > banks? Why is it that  eg the Swiss Franc is still backed 40% ( I believe)
> > by gold, and it was 70% until very recently? Why do most central banks still
> > periodically issue  gold coin , issued in various quantities, if only in
> > thousands?   Since the 'price'  of gold has risen recently...( although gold
> > can have
> > no price if it is the money commodity and other commodities have their own
> > values expressed in quantities of gold), what is the nature of this
> > connection,
> > between paper money and gold?
> I don't see how gold can function today as the measure of value.
> In order to function as the measure of value, gold has to be the GENERAL
> EQUIVALENT, i.e. has to be DIRECTLY EXCHANGEABLE into all other
> commodities.  As Marx put it, with respect to the simple equivalent form:
> "We have seen that commodity A (the linen), by expressing its value in the
> use-value of a commodity B of a different kind (the coat), impresses upon
> the latter a form of value peculiar to it, namely that of the
> EQUIVALENT...   The coat is DIRECTLY EXCHANGEABLE with the linen; IN THIS
> WAY the linen in fact expresses its own existence as a value.  The
> EQUIVALENT form of a commodity, accordingly, is the form in which it is
> DIRECTLY EXCHANGEABLE with other commodities."  (C.I. 147; emphasis added)

As a matter of fact Fred, I know of no one who would not be prepared to accept a certain quantity of gold for any of their property , ( should they wish to sell it, even if they later had to exchange it for paper for  other reasons), that isd to say that this commodity remains the money commodity, par excellence..
> The same point applies to gold as the general equivalent.  By making gold
> directly exchangeable with all other commodities, gold becomes the measure
> of value for all other commodities.  Gold cannot be the measure of value
> unless it is directly exchangeable with all other commodities.  Gold today
> is not directly exchangable with all other commodities.  Therefore, gold
> cannot function as the measure of value today.
But Fred you are confusing a matter of the practical use of fiducuary issue ( there isn't enough gold to go around and in any case its safer not to phyically circulate it, so paper money and even drafts/cheques on deposits ( hoards) are enough)  with the real basis of its existence. That  'credit' is issued  ( by which I suppose you mean bank loans and not trade credit), is simply another practical step  which allows bourgeoise confidence free reign in the face of an actual shortage of gold. It does not invalidate the fact that gold must be the continued point of reference... 'in last resort'....the centre of gravity.... which is of course seen  brutally  when commodities are overproduced in relation to the rate of profit they offer, and the capitalist ( pantingly) turns back to gold.

  Instead pure credit money,...what is this 'purity? does the sudden separation of 1lb of sterling silver  from its paper name become absolute ? How did this historical feat occur? Why does gold still weigh so heavily on the minds of those who would banish it as a constraint on their free exchanges  ? If you are saying that the forced circulation of paper money by the state, the use of its 'imprint' to make it used, can replace gold, then you are saying that the state  is the key actor, and this leaves the door open for all sorts of subjectivism, relativism and apologetics for the powerful states that take the 'lead' role.

> not backed by gold, is directly exchangeable with all other
> commodities.  In this way, credit money, of necessity and by default,
> becomes the general equivalent, and hence the measure of value of all
> commodities, in a different quantitatively way than gold.
What do you mean 'quantitatively'..... ????> 

> > Finally if money need not be a commodity 'at heart', then what is the way in
> > which paper money is accepted as  a valid expression of abstract, social labour.
> > Who does the guessing?
> I am not talking about anybody guessing anything.  Rather, I am talking
> about the determination of the MELT, by an objective, but unconscious, law
> (by the ratio of MV to L).

Fred, this seems to me to be casuistry... not guessing, but unconscious..Are you saying that the trader can 'unconsciously' make a calculation of the relative value of the paper money against all other products? The determination of price requires a general equivalent. Only once this has happened can a quantity of 'credit  money', a loan of a certain size, can be calculated.
> In a modern capitalist economy, in a given period, there exists a certain
> quantity of L (or SNLT) that must be objectively expressed in some way,
> and there is no other way except credit money. Why is there no other way? 
 The existence of the gold markets demonstrates a continuous attempt to 
 provide the discipline necessary to manage a fiduciary issue.
 At the same time, there
> also exists a certain quantity of M (adjusted for V) that is available to
> represent L.  Therefore, the quantity of M that represents one hour of L
> is determined by the ratio of these two objective, aggregate quantities
> (MV / L).  But how are these quantities objectified? In what? Credit is a claim on social labour,
 the value of that social labour is expressed in money before the credit figure is calculated, 'credit money', the loan has to find  a money value attached to the products already... where does this come from, how is this 'nominal' price determined? Or are you saying that commodities have no value until the credit money is circulated? others in this discussion have implied this; that you have in fact turned to monetarism.

In this way, pure credit money ( the ambitions and hopes of the bankers and their clients?) 
performs the necessary function of the measure of value: one hour of L is represented by a definite
> quantity of pure credit money; i.e. by MV / L.
> The crisis of the 1930s forced capitalists to accept credit money as the
> general equivalent, directly exchangable into all other commodities,
> without backing by gold.  Until the 1930s, capitalists required that the
> general equivalent had to be a commodity, or at least convertible into a
> commodity at legally defined rates.  However, in the Great Depression, it
> became impossible to maintain the convertibility of paper money into
> commodity money.  Convertibility required tight monetary policy, which was
> making the depression worse.  In order to escape this "cross of gold",
> governments ended convertibility, and made credit money, without gold
> backing, the general equivalent.  Capitalists had no choice but to accept
> credit money by itself as the general equivalent, and hence as the measure
> of value.  There was no alternative at that point.

> However, an interesting conclusion that I have reached recently (which I
> discuss in the working paper that I have attached to previous messages) is
> that, with respect to the determination of the MELT, it DOES NOT MAKE ANY
> DIFFERENCE whether or not credit money still is tied to gold in some
> way.  In both cases, the MELT is determined by the ratio MV / L.
But which is 'unembodied', according to you, except in, one supposes a chain of individual equivalent values, 
and finally an 'unconscious' process which gets us all to accept 10 or 6 or 5 bits of green paper, barely of intrinsic worth, as a universal equivalent for whatever we are offering. So not only are the 'credit money' makers ( the banks) computational wizards of universal capacity, but unconsciously, complete masters of humanities pyschological dynamics. 

Fred, so far i am not even slightly convinced, you seem to want  the function of money without its credentials.

best regards


 I won't  go through the algebra here, but it is in my paper, and I would be happy
> to discuss.
> There may be some reasons for wanting to determine whether or not paper
> money is still based on gold in some way (for example, related to the
> function of money as store of value), but the determination of the MELT is
> not one of them.   The determination of the MELT is the same in both
> cases.  Hence the theory of value and surplus-value is the same in both
> cases.
> I look forward to further discussion.
> Comradely,
> Fred

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