[OPE-L:1320] Re: Gold & credit money

Duncan K Foley (dkf2@columbia.edu)
Tue, 5 Mar 1996 08:36:32 -0800

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On Mon, 4 Mar 1996, Costas Lapavitsas wrote:

> I also have a question regarding the theoretical price of gold in
> Duncan's [1262], related to John Ernst's points.
> It seems to me that no significant generality is lost if we disregard
> absolute and differential rent in gold mining (as well as seignorage
> for minting). It suffices to establish that gold is subject to the
> transformation process, as are all other commodities. The question I
> have is, what form will the transformation take? There is no gold
> price of gold, or no realisation is necessary in gold production:
> the capitalist buys directly with the output. Consequently, what is
> the production price of gold, and how does it relate to its mint
> price?

It is certainly true that gold does not need to be "realized" by exchange
against itself in the way that other commodities have to be sold. But
this doesn't prevent one from calculating a rate of profit on gold
production, since the gold-producing capitalist has to lay out money
capital to buy intermediate inputs and hire labor. Once the gold is
produced it does not need to await sale, but one can calculate the profit
(the excess of the value of the gold produced over the costs of
production) and a profit rate.

The mint price (Marx's "standard of price") functions to define the
value of the monetary unit, rather than the relative gold price of
commodities. In the U.S. after 1791, for example, the Congress defined
the dollar to be 1/20th of an ounce of gold of a certain fineness, and
the U.S. maintained convertibility of the dollar into gold at this rate
except for the 1861-1879 period when convertibility was suspended for
"greenbacks" issued to finance the Civil War.

> Costas