**From:** Fred Moseley (*fmoseley@MTHOLYOKE.EDU*)

**Date:** Sat Dec 04 2004 - 18:17:10 EST

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Claus, thanks again for this interesting and productive discussion. Unfortunately, this is a busy time of the semester for me, so I don't have much time (I will have more time in January), and my replies will have to be brief and will continue to focus for now on the quantitative determination of the MELT. On Mon, 29 Nov 2004 cmgermer@UFPR.BR wrote: > The MELTp would then be: MELTp = Gl/Dp = (Gl/Dg).(Mp/M*) And a little later, Claus wrote: > MELTp=(Gl/Dg).(Mp/M*), instead of (l/Lg)(Mp/M*). The formulation on right is my interpretation of Marx's determination of the MELTp in the case of inconvertible paper money. We can see that the right-hand factor in both of these formulations of the MELTp is the same - [Mp / M*]. The only difference between them is the left-hand factor. The term Dg is inessential; it is the official amount of gold per dollar (which we will see later it ultimately cancels out). I would be happy to accept Claus's formulation on this point. The other difference between these two formulations is that, where I have [1 / Lg], i.e. the inverse of the labor-time required to produce a unit of gold, Claus has Gl, the amount of gold produced in one hour. I don't see how this makes any difference (a quantity is always equal to the inverse of its inverse), so I will accept Claus' formulation for now, and see where it leads. Let's go back to the right-hand factor: [Mp / M*]. Mp is the quantity of paper money forced into circulation and M* is the quantity of gold that would be required for circulation if commodities sold at their gold prices, or their gold-dollar prices. According to Marx's theory, M* is determined by the sum of gold-dollar prices (P), adjusted for velocity (V): (1) M* = P / V Further, according to Marx's theory, the sum of gold-dollar prices is determined by the sum of labor-times contained in commodities (L), the value of gold (Lg), and the gold content of the dollar (Dg): (2) P = [1 / Lg Dg] L Claus objects to the term [1/Lg], so let's replace it with his Gl. Then we have: (3) P = [Gl / Dg] L Substituting equation (3) into equation (1), we obtain: (4) M* = [Gl / Dg] L / V Now substitute equation (4) into Claus' equation for MELTp: (5) MELTp = [Gl / Dg] [Mp / M*] = [Gl / Dg] [Mp / (Gl L / V Dg) = [Gl / Dg] [Mp V Dg / Gl L] We can see that Gl is in the numerator of the left-hand factor and in the denominator of the right-hand factor. Therefore the Gl's cancel out. Similarly, Dg is in the denominator of the left-hand factor and in the numerator of the right-hand factor, so the Dg's cancel out as well. Canceling out, we obtain: (6) MELTp = Mp V / L This expression for the MELTp is exactly the same as my expression for the MELTp, discussed in previous posts. Therefore, we arrive at the same conclusion as in my last post: the MELTp does not depend on Gl, just as the MELTp does not depend on [1/Lg] in my formulation. A change in the value of Gl does not affect the magnitude of the MELTp. For example, if Gl were to double, then the left-hand factor in equation (5) would double, but the right-hand factor would be cut in half, so that the net effect on the MELTp would be ZERO. Claus objects to my equation (3) on the grounds that the labor-times have already been converted into prices, and therefore can no longer be represented as labor-times. Accepting this for now, I will not substitute equation (3) into Claus' equation for the MELTp, so that Claus' equation becomes: (7) MELTp = [Gl / Dg] [Mp / M*] = [Gl / Dg] [Mp / (P/V)] = [Gl / Dg] [Mp V / P] However, it remains true that, according to Marx's theory, individual prices, and thus the sum of individual prices, depend on Gl and Li, and thus will change if Gl changes. For example (same example as above), if Gl were to double, then individual prices would double, and the sum of individual prices (P) would also double. In this case, the left-hand factor in equation (7) would double, but the right-hand factor would be cut in half (because P doubles), so that the net effect on the MELTp would once again be ZERO. In other words, as I have concluded before, the MELTp does not depend on Gl, or on [1/Lg]. Even though equation (7) makes it appear that the MELTp depends on Gl, it does not, because Gl is also implicit in P. The same conclusion also applies to Dg. Claus, I don't think there is any way you can avoid this conclusion. To prove otherwise, you would have to show how a change in Gl would change the magnitude of the MELTp, and I don't think that is possible, according to Marx's theory. Comradely, Fred

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