[OPE-L:1854] Re: the money supply

Subject: [OPE-L:1854] Re: the money supply
From: Gerald Levy (glevy@PRATT.EDU)
Date: Tue Dec 07 1999 - 12:36:40 EST

Claus wrote in [OPE-L:1853]:

> It seems to me that the way you propose to
> conceive the concrete to be investigated, in the case of money, is
> inadequate. I can't see why to restrict the examination of the subject to
> post-1971 history. The understanding of the ongoing facts requires to
> examine the previous facts as well. I don't mean to say that the sequence
> of facts is the key to understand what happens today, but if we see the
> concrete as a process, the historical dimension is a moment of the
> understanding. Thus, starting from the concrete includes its process of
> evolution.

OK, fine. If you want to put the post-1971 history/facts in the context of
how you interpret the pre-1971 history/facts, that's great. My point is
that the post-1971 history/facts have to be included in at attempt to
understand the role of gold in the contemporary international capitalist
economy (as well as individual economies, of course).
> On the other hand, unless I have missed something, the present debate has
> not been
> so much about what the present facts are, but about how to explain them.
> The facts
> we have been dealing with are basically two: the roles of both gold and the
> purely abstract currencies or standards of prices in the monetary system at
> present. According to one side in the debate, the relevance of gold is
> negligible as a monetary category, in spite of its lasting presence as a
> central banking reserve; according to the other side the abstract
> currencies should be examined as instruments of circulation based on a
> money commodity, in spite of the absence of an explicit link between
> them.The first side sees Marx's theory of money as an inadequate tool for
> the understanding of the present monetary system; the second side views
> that theory as an adequate starting point.
> Would this be an acceptable summary of the debate?

What's wrong with the summary from my perspective is that it assumes that
all those in this debate who believe that gold is not currently the money
commodity in the international economy thereby see "Marx's theory of money
as an inadequate tool".

While this seems to be Allin's position, it is not mine. From my
perspective, the role of gold as a money commodity is not an *essential*
(i.e. non-contingent) part of understanding capitalism. Thus, if we say
that gold is no longer the money commodity (which I don't believe it is)
then nothing crucial to Marx's theory is thereby lost. And, yes, I
recognize that you conceive of the role of gold within Marx's theory in a
different way. Perhaps this relates to our different understandings about
what are necessary vs. what are contingently necessary aspects of
both Marx's theory and capitalism.

> If it is, it seems to me
> that what is at stake is the validity of Marx's theory of money. The
> inadequacy of Marx's theory of money has been supported by two different
> arguments: one was based on the alleged superiority of another theory
> (Allin's defense of Wray's post-Keynesian monetary approach), and the other
> on the argument that Marx's theory has
> been outdated by the evolution of the monetary system, which seems to be
> your view.

See above.

> My feeling is that the later argument is supported mainly on two
> empirical facts: the end of both the monetary role of gold and of the
> official definition of the currencies in terms of their gold content.
> The two critics are obviously of different kinds, and are perhaps able of
> offering strong points against Marx's theory. However, what I claim is that
> they should provide an explanation, alternative to Marx's, in the first
> place of his theory of money and of credit money as a whole, and secondly
> of the connection between prices and the labor content of the commodities.
> >From a strictly Keynesian point of view this doesn't seem to be a problem,
> since Keynes' theory doesn't accept the labor theory of value.

Yes, I agree that this isn't a problem from a Keynesian perspective.

I also agree that an alternative explanation in which there is no longer a
money commodity needs to explain how the magnitude of value comes to be
measured and determined. As I noted in my last post, Marxian empirical
research has generally skipped-over this question.

On the other hand, have there been any empirical investigations using value
categories which have assumed that gold *is* the money commodity?

In solidarity, Jerry

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