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

From: cmgermer@UFPR.BR
Date: Wed Jun 16 2004 - 14:39:11 EDT

> Quoting cmgermer@UFPR.BR:
>> Claus:
>> 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.
> Yes but that is a historical hangover. The central banks still
> hold gold from the days when it was a monetary reserve.

What is the problem with the fact that the central banksí gold reserves
are of gold from that time? Perhaps you mean that the reserves of gold
have not increased, which is right, but they havenít decreased either,
despite the enormous efforts especially by the US, which makes the
non-decrease more important than the non-increase. But so far we are
talking just about the official reserves. If we take into account the
total reserves, including the private ones, this is not true, because they
have increased a lot. It should also be noted that after the suspension of
the convertibility of the dollar, in 1971, the law that since 1936
prohibited the private holding of monetary gold has been suspended in 1974
or 75, thus turning the private holding of monetary gold legal again.
Thus, private reserves of gold are also part of the total money in the
function of hoarding.

The private holdings of gold in the hoarding function of money have
significantly increased since then (caused by the uncertanty derived from
the crisis of the dollar since the late 1960s, and aggravated by the
increasing payments deficits of the US), which would not have been
expected if the monetary function of gold were in fact declining. Now I'm
not referring to the legal recognition of this function, but to the
dependency of this function on the actual functionning of the system, as
reflected in the performance of capitalists. It is this actual
functionning of the system that makes of gold a privileged means of
hoarding and prevents the monetary system from demonetizing it, which
would correspond to the interests of the US since the 70s. The fact that
it has not been possible shows that the law of motion of the monetary
system rules the actions of the big US power and not the opposite (which
is how I think one should interpret the facts from a materialist point of

The huge monetary reserves of gold, including official and private
holdings, around 120,000 tons, are a big problem if one attempts to
anticipate either a complete demonetization (if possible, which is not
obvious), or an official return to the convertibility of gold (which would
not need to include its circulation in the form of coins), which is not

> By the way, does the European Central Bank hold gold?
> If so where did it get it from?

I donít understand the reason for the question. Anyway, yes, the ECB holds
gold. It came from the share of each of the partner-countries to the
initial capital (Iím not sure of the figure, but I think it is 15% of each
countryís share). This looks curious indeed, if that is what you mean,
because the ECB, having been created when gold was no more officially used
in the circulation functions, the ECB did not have a historical hangover
of gold, thus it looks strange that it created something that is supposed
to have no actual relevance. What is it that you had in mind in making
this question?

>  >
>> 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. Isnít 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?
> I agree that there is some use of gold as a store of value, but
> the same applies to works of art, land etc. That does not make
> any of these into money.

Thatís right. Works of art are not commodities either, they are not
reproducible through labor, hence they cannot be money. Land is another
story, though it isnít a commodity either. I donít see the problem.

>> It may seem that the official gold reserves lay inactive in the vaults
>> of
>> the central banks, but this is not true. Iíll 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 Ďon
>> a
>> day to day basisí, Ďaimed at achieving a return on them, by lending a
>> portion to the marketí. The Bank is also Ďa very significant custodian
>> of
>> physical goldí, belonging primarily to other central banks but also to
>> commercial firms, which is in part Ďlent on to the market in our own
>> name,
>> at a margin to reflect the cost and credit risk incurredí. Isnít this
>> called banking credit? And what is the object of banking credit if not
>> money?
> A loan of gold by the Bank of England is quite distinct from the
> creation of money. The latter occurs by them creating an account
> denominated in sterling on which another bank can draw. The former
> is an intervention in the commodity futures market.

As I already said, in Marxís theory there is a clear difference between
money and credit money. Bank accounts are credit money. If one adopts a
chartalist point of view, this difference vanishes. Why donít you see any
difference between the workings of the commodity futures market and the
bank operations with gold?


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