[OPE-L:1396] Re: Gold & credit money

Duncan K Foley (dkf2@columbia.edu)
Sat, 9 Mar 1996 09:36:20 -0800

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On Fri, 8 Mar 1996, Paul Cockshott wrote:

> Duncan
> -------
> The immediate effect of a change in speculative opinion in gold prices of
> commodities would come from the direct transactions in stocks of gold and
> stocks (or futures contracts) in commodities. These transactions will
> move prices, and, allowing for smoothing, will eventually influence the
> prices at which newly produced commodities sell as well.
> Paul
> ----
> Are you assuming the existence of state fiat money here or a gold
> coinage?

I think it's best to work this out first on the assumption of a gold
standard regime, in which there is either a gold coinage or credible
convertibility between paper and gold at a fixed standard of price.

> If the latter, what do you mean by transactions in stocks of gold?
> Surely you do not mean the buying and selling of gold, since that
> is just the conversion of bullion into coin, which the mint will
> do for free.
I the first instance it does matter whether the gold is in the form of
bullion or coin. A speculator who wants to get rid of it will buy
commodities, and a speculator who wants to acquire gold will sell
commodities. Your point about the mint underlines the reasonableness of
abstracting from the difference between bullion and gold in considering
the influences on relative gold and commodity prices.