From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Sun Jul 18 2004 - 20:53:25 EDT
At 12:55 PM -0300 7/17/04, cmgermer@UFPR.BR wrote: > >It seems to me that the problem you raise does not referr to the nature of >money. What Greenspan is doing in your example, in my opinion, is to >elaborate a specific price index for his particular purpose of attempting >to regulate the supply of credit, instead of a composite-commodity money. >In terms of Marx’s theory I would say that, since the 1970s the dollar is >an ‘inconvertible paper money with compulsory circulation’ (CI, ch. 3, >section 2.c), which means that its issue exceeds the ability of the state >to pay. Thus, in the monetary tradition until the 1970s the situation can >be interpreted as there being both an official standard of prices (1 oz >gold=$42.22), and a depreciated paper standard (where 1 oz of gold >exchanges for a fluctuating amount of dollars, that has been ketp around >$300 approximately during the past 20 years or so). In terms of Marx’s >theory one can say, I think, that, other things being constant, the degree >of depreciation varies according to the degree by which paper money >exceeds the needs of the circulation. Thus, Greenspan’s method would >consist in using a specific price index in order to measure approximately >the degree of the excess paper money. > >> But if in so regulating credit and the supply of paper money Greenspan succeeds in maintaining the "value" of the dollar as a determinate quantity of a composite commodity, will he not have succeeded in giving the dollar a value as the value of that composite commodity? I am not saying that Greenspan is doing this but that he is being pushed to do this. To maintain the dollar as nearest substitute for world money and the attendant privileges to the US financial sector and the USG, Greenspan has to build confidence that the "value" of the dollar--or rather its equality in physical terms to a composite commodity--will not fall; that in turn means he has to demonstrate that he will and can take the steps to do this (this means that the US has to have the economic and political power to influence other central banks). For example, why else would Greenspan have raised rates with the marginal efficiency of capital remaining quite depressed as indicated by the pile up of cash in corporate coffers. Isn't this an indication that he is trying to preserve the commodity basis of the dollar, the "value" of the dollar as a physical quantity of a composite commodity? Of course he is going slow because some of the price rise of oil may prove to be temporary, and the price of gold has not risen. > >I agree with you in the importance of the stability of the value of money >as measure of value. This, I guess, has always been one of the >characteristics which the money commodity has been historically required >to have. But it is interesting to note that, contrary to your assumption, >as far as I know the greater stability of the value of gold, among other >relevant properties of it, as compared to all other commodities which have >functionned as money, including silver, has been one of the reasons for >gold having finally become the money of capitalism. But would a composite commodity provide more stability? Is that the modification to the gold standard that has evolved under the former gold bug Greenspan's watch? > But relative stability >is not fixity. I’m not sure that the gradual rise in the value of gold as >a result of de decline in the fertility of the active mines has been more >important than the deflationary episodes caused by the accumulation >crises. Yes, I think you are very right about this. > >On the other hand, the supposed forms of fiat money have not provided >price stability either. It seems to me that the inflationary crises caused >by the issue of inconvertible paper money of the state (or fiat paper >money) have been far more important than the gradual deflationary bias of >gold money. But in the US inflationary crises have been more than tamed, no? >This may be taken as corresponding to Marx’s assertion that > >“Various forms of money may correspond better to social production in >various stages; one form may remedy evils against which another is >powerless; but none of them, as long as they remain forms of money, and as >long as money remains an essential relation of production, is capable of >overcoming the contradictions inherent in the money relation, and can >instead only hope to reproduce these contradictions in one or another >form. One form of wage labour may correct the abuses of another, but no >form of wage labour can correct the abuse of wage labour itself. >(Grundrisse, p. ) I like very much the dialectics of this formulation. > >Somewhere else Marx says that the contradictions derived from money at one >level are avoided only by projecting them to higher levels of the monetary >sphere, where they will cause larger scale contradictions. > >Finally, what do you mean when you say that ‘the gold standard had to be >abandoned’? I was thinking of the 30s. > If you referr to the events following the end of the >convertibility of the dollar into gold by the USA in 1971, then, in my >opinion, the cause was clearly not the deflationary consequences of gold >money, but the usual cause in the monetary history: the USA state did not >have enough reserves of money (=gold) to honor its liabilities. It had >issued dollars much in excess of its ability to pay. The refusal to >convert the excess dollars in circulation was an illegal act based on the >military and economic power of the USA. The result was, as has been usual >in the monetary history as well, the depretiation of the paper dollar as >compared to the official gold dollar. And the USA did not refuse to >convert because of the unimportance of gold, but because it did not admit >its reserves to vanish. So you are saying that gold basis of a form money can be abolished without a collapse of that form of money if unequal development is such to concentrate overwhelming economic and military power in the nation state that issues that form of money? > >I don’t claim that either money being a commodity, or gold being that >commodity, is good or bad. Money exists because the commodity producing >economy is an unplanned, hence a chaotic economy. Many of the >contradictions of the capitalist economy derive specifically from this >fact, and they are unavoidable, although they may be remedied to some >extent and at some levels. All I say is that in the framework of Marx’s >theory money has to be a commodity. Which is why I have been trying to understand the dollar as a commodity, albeit a composite one. > My interpretation about Marx’s theory >may be wrong, or Marx’s theory of money itself may be wrong, but this has >to be consistently proven, which I think has not been made so far. I also >say that the prevalence of inconvertible paper money in the circulation >and its effects upon prices, as well as the complete withdrawal of gold >from the circulation and its replacement by different forms of credit >money, have a well defined place in Marx’s theory and don’t contradict it. >On the contrary, Marx’s theory explains them far better and in a more >integrated way then the other existing theories. I also call attention to >the fact that gold still performs relevant monetary functions and that the >situation today is consistent with well known previous situations in >monetary history. I’m aware that all of this is controversial and requires >a lot of research. > >Claus. thank you for the very stimulating posts. I look forward to reading your contribution in the new book edited by Fred. Yours, Rakesh
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