# Re: [OPE-L] (OPE-L) recent references on 'problem' of money commodity?

From: Fred Moseley (fmoseley@MTHOLYOKE.EDU)
Date: Sat Dec 04 2004 - 18:17:10 EST

```Claus, thanks again for this interesting and productive discussion.
Unfortunately, this is a busy time of the semester for me, so I don't have
much time (I will have more time in January), and my replies will have to
be brief and will continue to focus for now on the quantitative
determination of the MELT.

On Mon, 29 Nov 2004 cmgermer@UFPR.BR wrote:

> The MELTp would then be:   MELTp = Gl/Dp = (Gl/Dg).(Mp/M*)

And a little later, Claus wrote:

The formulation on right is my interpretation of Marx's determination of
the MELTp in the case of inconvertible paper money.

We can see that the right-hand factor in both of these formulations of the
MELTp is the same - [Mp / M*].  The only difference between them is the
left-hand factor.  The term Dg is inessential; it is the official amount
of gold per dollar (which we will see later it ultimately cancels out).
I would be happy to accept Claus's formulation on this point.

The other difference between these two formulations is that, where I have
[1 / Lg], i.e. the inverse of the labor-time required to produce a unit of
gold, Claus has Gl, the amount of gold produced in one hour.  I don't see
how this makes any difference (a quantity is always equal to the inverse
of its inverse), so I will accept Claus' formulation for now, and see

Let's go back to the right-hand factor: [Mp / M*].  Mp is the quantity of
paper money forced into circulation and M* is the quantity of gold that
would be required for circulation if commodities sold at their gold
prices, or their gold-dollar prices.  According to Marx's theory, M* is
determined by the sum of gold-dollar prices (P), adjusted for velocity (V):

(1)     M*   =   P / V

Further, according to Marx's theory, the sum of gold-dollar prices is
determined by the sum of labor-times contained in commodities (L),
the value of gold (Lg), and the gold content of the dollar (Dg):

(2)     P   =   [1 / Lg Dg] L

Claus objects to the term [1/Lg], so let's replace it with his Gl.  Then
we have:

(3)     P   =   [Gl / Dg] L

Substituting equation (3) into equation (1), we obtain:

(4)     M*   =   [Gl / Dg] L / V

Now substitute equation (4) into Claus' equation for MELTp:

(5)     MELTp   =   [Gl / Dg] [Mp / M*]

=   [Gl / Dg] [Mp / (Gl L / V Dg)

=   [Gl / Dg] [Mp V Dg / Gl L]

We can see that Gl is in the numerator of the left-hand factor and in the
denominator of the right-hand factor.  Therefore the Gl's cancel
out.  Similarly, Dg is in the denominator of the left-hand factor and in
the numerator of the right-hand factor, so the Dg's cancel out as
well.  Canceling out, we obtain:

(6)     MELTp   =   Mp V / L

This expression for the MELTp is exactly the same as my expression for the
MELTp, discussed in previous posts.

Therefore, we arrive at the same conclusion as in my last post: the MELTp
does not depend on Gl, just as the MELTp does not depend on [1/Lg] in my
formulation. A change in the value of Gl does not affect the magnitude of
the MELTp.  For example, if Gl were to double, then the left-hand factor
in equation (5) would double, but the right-hand factor would be cut
in half, so that the net effect on the MELTp would be ZERO.

Claus objects to my equation (3) on the grounds that the labor-times have
already been converted into prices, and therefore can no longer be
represented as labor-times.  Accepting this for now, I will not substitute
equation (3) into Claus' equation for the MELTp, so that Claus' equation
becomes:

(7)     MELTp   =   [Gl / Dg] [Mp / M*]

=   [Gl / Dg] [Mp / (P/V)]

=   [Gl / Dg] [Mp V / P]

However, it remains true that, according to Marx's theory, individual
prices, and thus the sum of individual prices, depend on Gl and Li, and
thus will change if Gl changes.

For example (same example as above), if Gl were to double, then individual
prices would double, and the sum of individual prices (P) would also
double.  In this case, the left-hand factor in equation (7) would double,
but the right-hand factor would be cut in half (because P doubles), so
that the net effect on the MELTp would once again be ZERO.  In other
words, as I have concluded before, the MELTp does not depend on Gl, or on
[1/Lg].  Even though equation (7) makes it appear that the MELTp depends
on Gl, it does not, because Gl is also implicit in P.  The same conclusion
also applies to Dg.

Claus, I don't think there is any way you can avoid this conclusion.
To prove otherwise, you would have to show how a change in Gl would change
the magnitude of the MELTp, and I don't think that is possible, according
to Marx's theory.