Re: (OPE-L) Re: on money substance and abstract labor

From: cmgermer@UFPR.BR
Date: Tue Jun 15 2004 - 09:18:13 EDT

Hi, Allin, I thank you for your post and apologize for a new delay in
answering to it. I've been out of town until yesterday. I will comment on
your first point, leaving the other ones for the next post.

> Claus wrote:
> "Now, the widespread view today is that money is no more a commodity,
> because gold not only does not circulate, as is also not used
> officially to define the standard of prices. In my opinion this
> conclusion has two problems:"
> "1) it does not account for the role played by gold in the monetary
> system of our days. This account seems to me to be necessary, since
> gold is present in very expressive amount as an official international
> monetary reserve and in even greater amount as private reserves;"
> Petroleum also bulks large in national reserves; so do wheat and
> butter.  The role of gold in present-day monetary systems seems
> nugatory, a mere historical hold-over.  You wrote earlier:

Petroleum, wheat, butter and the like are not monetary reserves, they are
reserves of raw materials, dependent on technological and market structure
characteristics of the particular sectors of production and also on
national security reasons, which is a totally different thing. You are not
going to find petroleum, wheat and butter in the statistics of the
international reserves of the central banks published by the IMF and other
monetary institutions.

Your interpretation of the role of gold today seems to be the standard
interpretation in textbooks and monetary common sense, but can hardly be
taken as a scientific interpretation without a closer analysis. Although I
don’t think we are going to get to consistent conclusions just by looking
to the facts without a theory, in an inductivist way, we cannot ignore
them either. And about gold my simple point is this: first, there is a
consistent theory – Marx’s – which locates gold as money with great detail
in a complex frameword, where it performs different functions in an
integrated way; second, gold goes on clearly functionning at least as
means of hoarding in the banking system and in private hoards. Thus,
although it is no surprise that non-Marxist writers dismiss the monetary
role of gold, I don’t think Marxists should do the same.

Gold goes on being produced, year after year, with increasing output, a
great proportion of which goes into hoards. It is a well known fact that
the demand for gold and its price increase in the crises and decrease in
normal times, which is the opposite of what happens with raw materials and
other assets. Isn’t this the usual working of money in its hoarding
function? I would ask: how do you explain this? Do capitalists also build
reserves of wheat, butter, petroleum and so on as hoards? Do you think
that the gold privately held by capitalists today is of the same kind of
the other raw materials, or would you think that it is motivated by a
sentimentalist historical hold-over?

It may seem that the official gold reserves lay inactive in the vaults of
the central banks, but this is not true. I’ll provide a very empirical
example: in a speech recently at a conference a senior manager of the Bank
of England explained that the gold reserves of the Bank are managed ‘on a
day to day basis’, ‘aimed at achieving a return on them, by lending a
portion to the market’. The Bank is also ‘a very significant custodian of
physical gold’, belonging primarily to other central banks but also to
commercial firms, which is in part ‘lent on to the market in our own name,
at a margin to reflect the cost and credit risk incurred’. Isn’t this
called banking credit? And what is the object of banking credit if not

I don’t intend to mean that examples like this prove anything more than
that gold is not an irrelevant monetary element today. But I do think that
it is very relevant, although its relevance is not evident to the monetary
common sense, because the operations with gold are limited to the very
high spheres of economic life, between central banks and governments and
big private banks and corporations. And, last but not least, Marx’s theory
provides a framework for the understanding of the role of gold today,
contrary to the other available theories. So, why not analyse gold within
this framework?


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