# [OPE-L:2124] Re: Re: Re: Re: gold

From: Akira MATSUMOTO (akiram@mail.ucr.edu)
Date: Wed Jan 12 2000 - 22:05:24 EST

Dear member

I agree with Clauses' opinion in general. But I try to explain about the
gold price in detail.

What is the price is the expression of a commodity value by a certain
volumes of gold. So the gold price should have been * the expression of a
gold value by a certain volumes of gold*. That is, 1g gold = 1g gold. It
doesn't make sense at all. Therefore *the gold price* has another
theoretical concept. It is *the standard of price*.
In this means the changing of gold value doesn't consist with the changing
of gold price at all.

Btw,

a commodity price = (the commodity value /the value of a unit gold)*the
price of a unit gold -------(A)

Therfore, the purchaising power of gold is the followings

The purchaising power of gold = (the price of a unit gold /the price of a
the commodity ) = the price of a unit gold/{(the commodity value /the value
of a unit gold)*the price of a unit gold}----------------(B)

The purchaising power of gold = the value of a unit gold/the commodity
value------------------------(C)

Here we change the above (C) to the index expression.

The purchaising power index of gold = the value index of a unit gold/the
commodity value index-----------------------(D)

Consequently, if we abstract the alienation problem of the commodity price
from its value with the business cycle, what is the purchaising power index
of gold is the ratio between the fluctuation of the gold value and the
fluctuation of the ordinary commodity value. This has no connection with
the Quantity Theory of Money at all.

We are in turn faced to the problem under the unconvertibility system. I
try this problem in the next letter.

bye

At 8:26 PM +0000 00.1.12, coslap@aueb.gr wrote:
>A response to Clauss' [OPE-L:2107] comments on gold industry profit rates.
>(in capitals).
>
>I do not see an easy answer and the issue goes to the heart of the labour
>theory of value.
>
>Costas
>
>
>At 09:16 AM 1/12/00 -0200, you wrote:
> >
> >In [OPE-L:2061] Costas wrote:
> >
> >>
> >> I have a question on this. If the gold industry is subject to profit rate
> >> equalisation (as I agree that we must assume), how will this happen
> >without
> >> resorting to the quantity theory of money? Profit rate equalisation
> >relies
> >> on, say, increased supply driving own price down and bringing the rate of
> >> profit down to the average. For gold, that means increased quantity
> >driving
> >> other prices up (own price being one). That's the quantity theory.
> >>
> >
> >I don't think so. First of all, gold doesn't have a price, thus there
> >cannot
> >be a fall in its price. Whatever the labour content of an ounce of gold, it
> >will always be converted into the same number of coins or credit money.
>
>CREDIT MONEY IS SUPERFLUOUS HERE - WORSE, IT COULD CONFUSE THINGS. IT SEEMS
>TO ME THAT THE ISSUE SHOULD BE SETTLED IN A RICARDIAN WORLD OF N
>COMMODITIES, ONE BEING MONEY. SO GOLD DOES HAVE AN IMPLICIT PRICE.
>
> >The case you make seems actually to be a simple example of a drop in the
> >value of gold (=money), resulting from technical improvement in production,
> >which translates into an increase in the prices of the commodities,
> >assuming
> >their values remain constant.
>
>I HAVE NOT ASSUMED ANYTHING ABOUT TECHNICAL CHANGE NOR ABOUT THE VALUE OF
>GOLD. WHAT I WOULD LIKE TO KNOW IS THE MECHANISM FOR BRINGING THE RATE OF
>PROFIT IN THE GOLD INDUSTRY BACK TO AVERAGE, IF IT IS ABOVE IT. FOR OTHER
>COMMODITIES WE USUALLY ASSUME THAT THIS HAPPENS THROUGH CAPITAL MOVEMENT,
>CHANGE IN SUPPLY, AND FALL IN PRICE. FOR GOLD THIS CANNOT HAPPEN. THE RATE
>OF PROFIT OF THE GOLD INDUSTRY COULD ONLY FALL IF OTHER PRICES WENT UP. HOW
>WOULD THAT HAPPEN WITHOUT THE QUANTITY THEORY?
>
>The velocity remaining also constant, there
> >must be an increase in the amount of money in circulation, but this is not
> >the cause of the increase in prices, but its result, contrarily to the
> >quantity theory. Isn't that correct?
>
>FOR THE CASE YOU ARE EXAMINING, I.E., FALL IN THE VALUE OF GOLD AS A RESULT
>OF TECHNICAL CHANGE, THAT SEEMS TO ME CORRECT. BUT THAT IS NOT MY QUESTION.
>
>PERHAPS WE COULD FIND AN ANSWER BY DEVELOPING A SEPARATE THEORY OF HOARDING
>(I.E. DEMAND FOR MONEY TO HOLD). THERE ARE OLD GERMAN DEBATES ON THIS. THAT
>WOULD PROBABLY HAVE TO BE COMBINED WITH A THEORY OF GOLD DEMANDED AS
>PRODUCTION/CONSUMPTION GOOD. OR IT COULD BE DONE IN TERMS OF PRICE LEVEL
>CHANGES IN THE COURSE OF THE BUSINESS CYCLE OVER SEVERAL BUSINESS CYCLES.
>
>I hope this makes my query clearer.
>
>Cheers
>
>Costas
>

#############################################
MATSUMOTO, Akira

Visiting Scholar
Department of Economics,
University of California, Riverside
1150 University Avenue
Riverside, CA 92521-0427 USA
Phone 909-787-5037x1575 or X1570
Fax 909-787-5685
Email: akiram@mail.ucr.edu
________________________

Associate Professor on Money and Banking
Department of Comprehensive Policy Making
school of Law & Letters
EHIME University
Matsuyama, Ehime
790-8577, Japan
Tel:+81-89-927-9237(office)
FaX: +81-89-927-8916
E-mail: amatsu@ll.ehime-u.ac.jp
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