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

From: cmgermer@UFPR.BR
Date: Mon Nov 29 2004 - 18:19:01 EST

On Wed, 24 Nov 2004 fmoseley@MTHOLYOKE.EDU wrote:

> On Tue, 23 Nov 2004 cmgermer@UFPR.BR wrote:
>> If you are merely interested
>> in knowing how the prices will change with a change in the quantity of
>> paper money,
> Well, I would not say "merely" interested in.  I would say that I am
> "mainly" interested in this question right now, which is not to say that
> other questions are not important.  I think the quantitative aspect of
> Marx's theory is very important.  Indeed, the main goal of Marx's theory
> is to explain dM, a definite quantity, which depends in part on the
> MELT.  Therefore, it is important to figure out this quantitative aspect
> of Marx's theory, including the determination of the MELT in today's
> monetary conditions.


I need an answer of yours about the main point in the post you replied, so
that I can figure out what your central point is. I used the term ‘merely’
in case you were just talking about the change in paper money prices when
inconvertible paper money is forced into circulation in excess of the
necessity, but ASSUMING THAT GOLD IS MONEY. You actually said that gold
could go on performing funtamental functions. In this case the problem is
simple and what you do in your paper can be interpreted just as a
suggestion of an equation to calculate the paper money prices in the above
case. However, I pointed out that at the same time you said that paper
money and credit money became in fact the general equivalent, and in this
case gold would no longer perform monetary functions. What is confusing is
that you said that it makes NO DIFFERENCE whether or not gold is still the
“fundamental money today”. In this case you were NOT MERELY talking about
paper money prices.

The statements of yours that caused my question were the following:

“I argued in my next-to-last post 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 MELT = MV / L.
“Or, if so, then I have shown (paper attached again) that Marx's
determination of the MELT in this case is equal to MV / L, which is the
ratio that I have argued determines the MELT today, without reference to
gold.  So, once again, with respect to the determination of the MELT, it
does not make any difference whether or not one assumes that gold is still
the fundamental money today.”

>> this is in principle very simple in Marx’s theory: whenever
>> there is paper money (which means inconvertible paper money issued by
>> the
>> state) IN EXCESS of the needs of the circulation, the paper money will
>> depreciate and the prices expressed in terms of paper money will rise,
>> i.e., there will be inflation, although the money prices (expressed in
>> real money, i.e., gold) remain unchanged. In one paper of mine I called
>> the former ‘standard prices’ and the latter ‘money prices’ in order to
>> distinguish them clearly. However, the paper standard goes on
>> representing
>> a definite amount of gold, smaller than the official standard, as you
>> mention in your working paper in the section about inconvertible fiat
>> money.
> As I said in my last post, I agree with this, except that I think it can
> be made more quantitatively precise.  Not just that "excess paper money
> causes prices to rise", but also that the increase of prices is
> proportional to the excess of money, as I showed in my last post.
> Agreed?

I would agree if you were talking MERELY about the determination of paper
money prices as an expression of the same gold prices, without meaning
that gold (i.e., the money commodity) is displaced from its fundamental
role of equivalent of value. On the other hand, if you are suggesting that
the MELTp is independent from a money commodity, and that commodity money
is not necessary, then you are not MERELY interested in just making the
determination of paper money prices quantitatively more precise, on the
contrary, you are in fact suggesting that a commodity can be replaced by
paper money as the general equivalent. Thus it makes a lot of difference
whether you define money as a commodity or not. Considering that in Marx’s
theory the equivalent of value has of necessity to be a commodity, the
concept of a paper money equivalent would require a new theory of money
based on the labor theory of value.

> Claus, which paper of yours are you referring to here?  I would like to
> take a look.

It has been published in the International Journal of Pol. Economy, v. 27,
n. 1, Spring 1997, pp. 43-72. Title is “Credit money and the functions of
money in capitalism’.


> Comradely,
> Fred

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