[OPE-L:2376] Re:

Michael Williams (100417.2625@compuserve.com)
Mon, 27 May 1996 15:22:16 -0700

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Some more queries on your dialogue with Duncan. (You may already have implicitly
answered them in conversation with Duncan or others - I am a long way behind on
my OPE-L mail, and am dealing with the oldest first. In which case, feel free to
ignore them. I will come back to them if I still have queries.)

Chai-on writes (1):
The current production condition of gold must
determine the current price of gold. Its future condition of
production might impact on its market price. But, if the latter
is higher than its current production cost, then the production
of gold will increase to satisfy its increased demand. If it is
to the contrary, its current supply must shrink.

To which Michael W. responds (1):
This is of course the standard theory of market adjustments for any commodity.
But how well do they apply to gold as a monetised store of value: do CB's stocks
of Gold respond to perceived changes in demand? Is the world gold price
primarily market determined?
The first sentence is also suggestive of (linear) production theories of price
determination. But why do you believe that physical and technical conditions of
production are the attractors of fluctuating prices in any modern commodity
market, let alone in the monetised gold market? (I do not doubt that such
conditions provide some kinds of abstract outer bounds on persistent price
levels - but what reasons do we have for believing that these theoretical bounds
systematically, or even ever, come into play?

I am, of course, aware that it is the value-form view that has pushed furthest
out along the abstract labour axis of all Marxist (and post-Classical value
theories). So like all good defenders of an orthodoxy, you may prefer to dismiss
it out of hand. But I would be interested in any arguments or evidence that you
can refer to support your account of the gold market specifically.

Chai-on says (2):
Of course, U.S. government can never and will never return to gold.
But the world capitalism, too will not tolerate the US deficit
indefinitely. Otherwise, why does the US government bother with
the international balance deficits?

Michael (2) suggests:
You seem to be wanting to have your cake and eat it here. As long as US capital
supported by the US state is strong enough, the rest of the world ( as you have
pointed out several times) will have to accept the US deficit. To the extent
that that power has faltered, your earlier arguments about the strength of US
productive capital must also be adjusted, and the US CB (etc.) will have to pay
more actual and ideological attention to the US deficits. Once again, we have a
whole barrage of tendential determinants of world gold prices well short of the
current (or expected) costs of production coming into play - do we not?

With comradely greetings,

Michael W.