Re: (OPE-L) Re: Shopping with Claus

From: cmgermer@UFPR.BR
Date: Mon Jun 14 2004 - 09:18:16 EDT

Jerry wrote:

> Hi Claus.  For personal reasons, this will have to be a short reply.
>> However,
>> what seems to me that you want to say in your conclusion and in the
>> shopping story is that the thing that is money must circulate as means
>> of circulation, otherwise it cannot be money. Thus, gold would have to
>> perform this function today in order to be considered money.
> The point of "Shopping With Claus" was not only to suggest that gold
> no longer serves as a practical means of payment, but that  it indeed has
> significantly less *liquidity* than currency in circulation,  credit
> cards,
> travelers checks, and even personal checks.  It's one thing to suggest
> that in a money commodity system, the money commodity gradually is
> withdrawn from circulation.  It's quite another when those who are
> engaged in an exchange will accept just about any other symbol that
> passes as money as a means of payment _rather than_  the 'money
> commodity'.

Hi, Jerry,
I think the point you make does not add to your argument. With ‘withdrawn
from circulation’ I mean that gold does not circulate in its functions as
money. It obviously goes on circulating as industrial raw material and
final product in jewelry and so on. However, they are two different
commodities made of the same material but having two different use values,
which is not unusual at all. This means that one cannot compare the
behavior of industrial gold in the market with the behavior of the
monetary instruments of circulation like the ones you mentioned, which are
all derivations from credit money. Thus, the poorer performance of
industrial gold as a monetary instrument of circulation does not serve as
an argument against its possible monetary character in our days. If we
want to reach consistent conclusions about the role gold still plays as
money we have to look at what is going on with the presently existing
monetary gold, i.e., the gold that is stored by Central Banks and
international monetary institutions and privately by capitalists. We have
to examine the movement of all those stores, what functions they perform,
the evolution of the production of gold and the destination of the output.

The final retreat of gold from monetary circulation has been – as it must
be – an official decision: monetary gold has been declared a monopoly of
the State and gold coins have stopped to be minted. Thus, if there is no
gold in the form suited to circulate as money, there cannot be gold money
in circulation. Therefore, I think the problem with your argument is still
the one I pointed out in my previous post: in your view the performance of
the function of means of circulation by gold itself is a necessary and
sufficient condition for gold to be considered money. In this case
anything that circulates in the function of means of circulation would be
money, and anything that doesn’t would not be money. Is gold a store of
value? Yes, it is, hence it is money. Does gold function as a means of
circulation? No, it doesn’t, hence it is not money. Is this a sound theory
of money?

My argument is that, if one wants to put Marx's theory of money to test,
it is firstly necessary to see IF his theory requires the money commodity
to circulate in person (in monetary functions), and the conclusion is that
it doesn't (with which you seem not to agree). If this is so, then the
mere withdrawal of the money commodity from circulation doesn't allow the
conclusion that money is no more a commodity. The next question is: why
doesn't the money commodity have to circulate? The first part of the
answer is that in Marx's theory money has other functions besides the ones
that have to be performed in the circulation. One fundamental function is
of measure of value. Marx's explanation of that function requires, in my
opinion, that money be a commodity. Another part of the answer is that
money is spontaneously replaced by instruments of circulation that
represent money in the performance of its two fundamenal circulation
functions - of means of circulation and of means of payment. Thus, the
state *can* suppress gold totally from its circulation functions without
damaging the system, because the latter spontaneously does it.

Now, the development of the banking system lead by a Central Bank creates
a working mechanism that combines the hoarding function of the money
commodity and the production of the instruments of circulation that
perform the circulation functions representing money. This is logically
possible and has occurred historically. Thus, also on this account it is
not necessary to drop the theory of money as a commodity.

Finally, the course of development of the monetary functions of gold
during the 20th century is very important and has to be taken into account
in order to identify the role played by gold today. One of the very
important characteristics of the period is that when gold circulates and
private capitalists hold it as a hoard, their hoarding competes with the
hoards the banking system has to keep in order not to collapse. But in
times of crises private individuals go to the banks to withdraw gold,
which puts banks and the whole banking system at risk. This is one reason
why convertibility is suspended in those times. Now, the monopolization of
monetary gold by the State and the suspension of convertibility turns
gold, paradoxically, unable to function as means fo circulation and of
payment. But this is precisely what the Central Bank attempts to reach
through the inconvertibility of gold, and it does not damage the system
because it is the system itself which gradually withdraws gold from its
circulation functions.


> In solidarity, Jerry

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