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

From: cmgermer@UFPR.BR
Date: Mon Nov 29 2004 - 18:29:12 EST

Rakesh wrote:

> At 11:20 AM -0200 11/23/04, cmgermer@UFPR.BR wrote:
>>The fact that gold still performs fundamental functions of
>>money is clear before our eyes. Why should we deny it? ... (T)hus, if one
>>looks at the *monetary sphere* of today with Marxian eyes, one sees gold
>>very distinctly in fundamental monetary functions.
> OK,  Claus, gold was traditionally used by central banks as a 'war
> chest' to provide security in the vent of a crisis.

I would express this in a different way: in capitalism gold performs the
function of hoarding, representing the sum of different reserves which
each capital has to hold both as a condition as an effect of its regular
functionning. With the development of the banking system led by a central
bank, those reserves were converted into functionning capital through
credit and into a small single national reserve held by the central bank.
At this point the main functions of money (=gold) are three (since it no
longer functions as means of circulation): means of payment for the
payment of the balances of both domestic and international compensation;
and an additional fraction as a war chest in your terms. Thus, the latter
function is not an imposition of the process of reproduction of global

> However, it was
> of little use during the collapse of the Asian Tiger economies. Being
> less liquid than forex reserves, it can't be readily used to defend a
> national currency from speculative attacks. It was growingly
> considered more of a "commodity" than an "asset". Of course this may
> or is changing with a flight out of  all  major currencies to gold,
> and convertibility may be forced on central banks. But this is not
> yet clear before our eyes.  So I don't understand what proves to you
> (and Paul B) that gold is still performing in Nov 2004 the
> fundamental functions of money.

I think one has to examine the framework of the international monetary
system after the monetary crisis of the 60s and 70s. The US has been able
to impose a paper dollar standard and the abandonment of gold for
international payments. For international purposes the national standards
of prices are not defined in terms of gold, but in terms of a basket of
national currencies, and the dollar has been converted into the privileged
means of international payments and of international reserves. This has
been crucial for the US, since if gold went on being accepted as a means
of international payments, the gold reserves of the US would run out. On
the other hand, I think one cannot interpret this as an arbitrary
imposition of the US without economic grounds. The economic ground is
that, although a country cannot convert their dollars into gold, it is
able to convert it in almost every kind of asset Ė financial or physical Ė
in the USA and in other countries. I think if the US were unable to secure
its economic superiority (industrial and financial and military), it would
be unable to secure the position of the dollar as the world paper

What I think can be proved is that gold is still performing the functions
of money as an international monetary reserve, as private means of
hoarding, and also as part of the domestic monetary reserve of the central
banks. In addition to that, it must be performing the fundamental function
of measure of value if the theory that only a commodity is able to perform
the function of the distribution of social labor.

> Hasn't the world been on a dollar rather than gold standard? And the
> US the beneficiary of exorbitant privileges? If we say that gold is
> still world money, then we are discouraged from understanding what
> has allowed to dollar to usurp that role to this day. And whether
> that usurpation is unravelling before our eyes.

Iím not sure one can say that the world has been on a dollar RATHER THAN a
gold standard. Itís a ďPAPER DOLLAR standardĒ. The dollar is a standard of
prices officially defined in terms of gold (1 dollar = 1/42,2222 of an
ounce of gold). Since the US have been able to issue paper dollar in
excess of the needs of circulation, and force its acceptance by almost all
the nations, gold went out of the circulation and the paper dollar
depreciated. Of course the US is the beneficiary of exorbitant privileges
not only domestically (in this case the US government) but in the world,
in a way similar to what used to be true at the domestic level in older
times. To say that gold is still world money does not mean that the paper
dollar has not usurped its role in important functions, for instance as
means of circulation, means of payment and means of hoarding. However, if
it is true that the role of the equivalent of value as the instrument of
the distribution of social labor can only be performed by a money
commodity, then the interference into that function by way of the USís
attempt to completely displace gold from those functions must be seen as
the cause of a specific tipe of crisis in the world system. Money is for
capital, according to Marx, a contradictory thing, because on the one hand
capitalists donít want to immobilize their capital value into money, but
on the other side they have to do it as an imposition of both the process
of reproduction of capital and in part of the uncertainty about the


> Rakesh

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