Re: [OPE-L] Where does the money comer from : was Why aren't non-labourers sources of value?

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed May 04 2005 - 05:01:51 EDT

In relation to the question of the need for more money in simple
reproduction and expanded reproduction.
There seems to be implicitely in Marx´s analysis (Chapter XVII Circulation
of surplus value, vol. II of Capital) some sort of competition between
gold production and credit system. In so far as the credit system raises
"the functional capacity of the quantity of money really functioning" it
diminishes the need for metallic money.
The question is then not one of  "downgrading the theoretical importance
of money" but rather to investigate how the credit system downgraded the
importance of gold within expanded reproduction.
I would like to understand better the relationship between credit system
and gold. For instance: if the credit system developed the way Marx
suggets, would this slow down the production of gold because since demand
falls prices would fall bellow prices of production? Which mechanism is
there connecting gold production and credit system?

There was clearly a mechanism by which the credit system displaced gold.
The mechanism could not have been the issue of paper money as suggested
by Gerry as the 1844 bank act set a tight limit on the fiduciary issue
of notes, other notes had to be backed by gold.

On the other hand bills of exchange and cheques were not covered by this
restriction and could act as means of payment.

It is not, within Marx's analysis, possible to have the sort of feedback
relationship suggested by Paulo. He is implying that a shortage of gold
would cause the exchange value of gold to rise above its value. This
of course is what Ricardo said, but Marx disputed this arguing that
gold would continue to exchange at its value.
I have never found Marx's objections to Ricardo on this point convincing.

If the exchange value of gold rose, that would imply a general deflation
which is also excluded in the formulation of the circuit m-c-m'-c'-m''.

If we assume that cheques and bills of exchange provided the means by which
the circulation was achieved in the presence of a gold shortage, then
this has implications for the view we have of capital.

The account book capital of a firm would comprise:
stocks of commodities+
holdings of gold coin+
holdings of state paper/base coin+
holdings of private debt-
liabilities as private debt.

Taken across the whole capitalist class the last two entities cancel
out. The sum of bank money comes to zero.

Now look at the first 3 items. Only the first two actually embody
labour and constitute value. Holdings of state paper money do not
constitute value - instead they are proof of the unproductive 
consumption of value by the state in the past. Should they
be ignored in computing the sum of social capital or should
they be subtracted from the total?

Today, is the sum of capital equal to 
stocks of commodities - notes and coin

or is it simply

stocks of commodities

In either case, in the modern world, money can not constitute
part of the total capital value.

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