[OPE-L:5376] Re: [ALLIN] Re: use-value of money

Duncan K. Foley (dkf2@columbia.edu)
Tue, 19 Aug 1997 11:30:03 -0700 (PDT)

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In reply to Allin's OPE-L:5359:

Allin says:

>I once wrote:

>> >Most fundamentally, though, why should a
>> >capitalist, in 1997, be concerned about the rate of exchange
>> >of the dollar for _gold_ in future, rather than the future
>> >rate of exchange of dollars for labour-power and other
>> >commodities.
>To which Ducan replied:
>> I think I agree with this point. But doesn't this lead back to a theory of
>> a speculative immediate determination of the value of the $?
>I agree that there is a speculative element here. I
>currently believe that the price level in the USA is likely
>to rise by a few percent each year for quite some time, and
>I act accordingly. If I -- and others -- believed that a
>drastic deflation were imminent than we'd be more inclined
>to hold money, which would contribute, in a self-fulfilling
>manner, to deflation. If we believed that a drastic
>inflation were imminent we'd be more inclined to "get rid
>of" dollars, which would tend to drive prices up.
>What, if anything "anchors" such speculation? At one time
>it may have been the prospects for gold production. At
>present, it seems to be central bank policy -- and, at one
>remove, the factors that bear upon such policy. Thst is, in
>forming an opinion on what's going to happen to prices next
>year, I'm really forming an opinion on what the Fed is going
>to do.
>Do we differ?

The problem for me is to understand how central bank policy affects the
price level, as opposed to the level and rate of growth of output through
its influence on the expansion of credit (both bank and other.) Are you
implicitly assuming a Phillips' Curve that links the expansion of the
economy to the rate of increase of money wages and prices?


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu