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

From: cmgermer@UFPR.BR
Date: Sun Nov 21 2004 - 13:17:32 EST

Hi, Fred,
in an answer to Paul Bullock you wrote:

> 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)
> 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.  Instead pure credit money,
> 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.

You might be right in suggesting that gold is no more the measure of value
for the reason you raise. But this doesn’t make credit money the measure
of value. The statement you quote is just one isolated statement of the
theory that corroborates your opinion. Against this statement there are
dozens of statements where Marx coherently defines money as a commodity.
Aren’t they relevant too? Especially relevant are the ones where the
commodity nature of money is reiterated after the analysis of the credit
system, the central bank and credit money, in Capital III. You may observe
that the same statement you quote contradicts your thesis that credit
money could be the general equivalent today: “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”. Credit money, however, is not a commodity.
Thus, according to your interpretation of Marx in this paragraph, gold
could not be the equivalent today because it doesn’t directly exchange
with the ordinary commodities, but credit money couldn’t either, because
it is not a commodity.

Marx’s theory of money *in advanced capitalism* is a complex system of
statements. In this system credit money is clearly not money, but an
instrument of circulation where money itself (the general equivalent),
commercial credit, and bank credit are combined. In the advanced stages of
capitalism it is credit money which performs all the circulation functions
of money, in other words, credit money “represents” money in the
circulation functions. Money is not extinguished because it is represented
by something else.

Fred wrote:
> 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.

In 1933 it was the crisis in the banking system which forced the
suspension of the convertibility in the USA, as had been usual in those
cases in all countries, in order to prevent the banking system from
loosing its reserves (gold). But the standard of prices went on being
represented by the gold content of the dollar, which means that there was
no replacement of a paper money standard of prices for the gold standard
of prices. In 1934 a new official standard was introduced: 1 dollar = 1/35
of an ounce of gold (the dollar was devalued at the same time as the gold
clause of the contracts was abolished. The two measures were an attempt to
alliviate the burden of debts, allowing the paymentS to be made with a
dollar of a smaller value). The dollar was not convertible in the country,
but was convertible for payments abroad, and the gold standard of prices
was never replaced by a paper standard, which proves that the internal
convertibility is not needed in order to support the standard of prices
based on gold. I think this the whole story of the Bretton Woods system
can be taken as a confirmation of Marx’s following statement:
“The entire history of modern industry shows that metal would indeed be
required only for the balancing of international commerce, whenever its
equilibrium is momentarily disturbed, if only domestic production were
BANKS, which resort to this expedient in all extreme cases as the sole
relief” (C, III, p. 517).

Is this passage not an indication that Marx did not consider the
prevalence of credit money in the circulation functions of money to imply
that gold has lost its role of equivalent of value? In the beginning of
the same paragraph he says:

"It is a basic principle of capitalist production that money, as an
independent form of value, stands in opposition to commodities, or that
exchange-value must assume an independent form in money; and this is only
possible when a definite COMMODITY becomes the material whose value
becomes a measure of all other commodities..."

> 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.  I won't
> go through the algebra here, but it is in my paper, and I would be happy
> to discuss.

Isn’t the ratio MpV/L of the same nature as Duncan’s original MELT? Duncan
relates the total money value added (which is a part of the total money
value of the product - TMV, or MpV when expressed in terms of
inconvertible paper money) to the total *living* labor employed (LL),
while you relate the total money value of the product MpV to the total
labor (dead labor + living labor) contained in it. Your equation is
MELTp=MpV/L=TMV/L, while Duncan’s is MELT=MVA/LL. Thus, doesn’t your
equation incurr in circular reasoning too, as you say about Duncan’s?
I wonder whether it is really necessary to go through the algebra as you
did, since the relation MV/L seems to be intuitive: if one knows that the
money values of commodities represent amounts of social labor, then it is
intuitive that the ratio TMV/L (or MV/L) gives the average money value of
a unit of labor time. But this is empirical ex post calculation, if L
could be estimated.


> 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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