From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Sun Nov 21 2004 - 20:33:21 EST
At 8:00 PM -0500 11/19/04, Allin Cottrell wrote: >On Fri, 19 Nov 2004, Rakesh Bhandari wrote: > >>Value is measured in dollars. The question is what determines the >>value of the dollar. > >If your first sentence here is true, the answer to the question in >the second is that the value of the dollar = 1, by definition. > >In marxist parlance, value is generally measured in hours of >socially necessary labour time. Price is 'measured' (more properly, >'expressed') in dollars (or whatever national currency unit) and the >price of the dollar is indeed identically 1.0, unless we're talking >about the currency exchanges. > >If the real question is 'What determines the amount of socially >neccesary labour time, embodied in commodities, that is commanded in >exchange by 1 dollar?', then there is no simple answer: it depends >on the policies of the Fed and the US fiscal authorities as well as >trends in the productivity of social labour. > >Allin. Yes, I am asking what you would call the real question as is obvious in the entirety of the post. I was criticizing Fred's formulation which he attempts to differentiate (in my opinion unsuccessfully) from the quantity theory of money. Basically Fred gives no explanation for what determines the quantity of money put in circulation by the Fed. In order to answer what you call the real question--the amount of socially necessary labor time commanded in exchange by one dollar--Fred's theory demands that we know the quantity of money. But Fred has no theory for what determines that quantity. An attempt to understand how Greenspan is determining the level of liquidity probably takes us back to Baker's commodity index. Rakesh
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