[OPE-L:5313] Re: OPE-L:5136 - Duncan's reply

Hans Ehrbar (ehrbar@marx.econ.utah.edu)
Wed, 2 Jul 1997 11:09:56 -0700 (PDT)

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In addition to Duncan's proposed mechanisms (1) - (3) in OPE-L 5311
how credit money can function as a measure of value, I would like us
also to consider the following mechanism:

(4) It is the purpose of monetary policy to manage the value of
money. The Fed is not trying to fix the labor content of a dollar,
but to maintain prices at a stable level (which means a declining
value of the dollar as productivity advances). But this is not very
different from a commodity money: if gold production were to
participate in an average manner in technical progress, then this
would also mean that the labor content of the gold dollar would
decline, but it would decline at the same rate as the other prices,
i.e., the price level would remain roughly constant. Marx
mentions this effect approvingly in Chapter Three of *Capital*.

One might question whether monetary policy is "real" enough. Can a
mere shuffling of papers, which is endogenous to the system, provide
an anchor for the system? I think monetary policy has its bite
because it is done by the state and backed by state power.
Monetary relations are inherently violent, therefore they need a
coercive apparatus backing up these relations. Also internationally,
the national currency of the USA was able to function as world money
during a time of the unquestioned military hegemony of the USA in the
capitalist world.

The question `what does the state owe me if I hold a
dollar?' is somewhat theoretical. I would try
to operationalize it by splitting it up into the following
two questions.

(1) if I no longer want to hold dollars, can I get rid of them?
(and the answer here is: domestically I always can use my dollars
for paying taxes, and internationally, the US dollar was able to
\serve as world currency, because in the first two decoades
after WWII, there were certain high-tech things which could only
be bought in the USA (especially arms).

(2) Can I rely on the Fed to maintain the value of the dollar at a
stable level in the long run? This was no problem as long as the USA
was the largest creditor nation in the world, but there are serious
doubts now since the USA has become the largest debtor nation of the