From: Paul Bullock (paulbullock@EBMS-LTD.CO.UK)
Date: Sun Nov 28 2004 - 16:47:08 EST
Rakesh, The US dollar didn't 'usurp' the role of gold as the money commodity. It became the accepted paper representative on a massive scale following a victory in an inter imperialist war. Both US economic productiveness and its growing grasp of global assets allowed this. First tied with some fixity, then less so, but not because more dollars circulated whilst gold production itself was relatively limited. The fall in the relative value of the dollar against other currencies, reflected the relative decline in the comparative productivity of US capitals compared to other states. This decline itself was slowed because of a new kind of 'forced course' ( Gerry... blood 'courses', circulates, lets allow for Mandels /translators literary qualities, it is not a change in Marx's sense), that is the force of imperialist 'indirect'/ financial control, using dollars, of so much other production in other countries. Nevethless it continues to decline. US imperialism has drastically to force up the rate of exploitation AND extend the ambit of its exploitation to 'save' the dollar. Thus as a crash - slower or faster - in the dollar occurs, out of it must come a continued aggressive search for global control. And of course this goes for the 'new' 'united' EU, as we can see in the Ukraine now. Now, US control of so much of the world's production, either directly or by financial claims, by bloody extortionate relations, is being challenged by a collective ( uncoordinated of course) range of activity. The EU and China, for a start. The quantity of dollars circulating is too great with respect to the demand for its use (in the many ways it is used). Since Claus has responded to Fred in a way in which I would entirely agree, there seems little more for me to say there, thanks Claus. With respect to other comments on gold, then certainly gold production is labour intensive. This limitation is itself a result of the need to compress as much human labour as possible (socially, politically acceptable) into each ounce, to ensure that the maximum quantity of surplus labour is contained in each ounce, an aim that can be pursued since gold is not in competition with any other commodity for its role as money, and is not forced to cheapen itself. Regards Paul Bullock ----- Original Message ----- From: "Rakesh Bhandari" <bhandari@BERKELEY.EDU> To: <OPE-L@SUS.CSUCHICO.EDU> Sent: Wednesday, November 24, 2004 8:17 PM Subject: Re: [OPE-L] (OPE-L) recent references on 'problem' of money commodity? > At 1:02 AM -0800 11/24/04, Rakesh Bhandari wrote: > > > >Hasn't the world been on a dollar rather than gold standard? And the > >US the beneficiary of exorbitant privileges? If we say that gold is > >still world money, then we are discouraged from understanding what > >has allowed to dollar to usurp that role to this day. And whether > >that usurpation is unravelling before our eyes. > > > >Rakesh > > > Claus and Paul B, this is the article that I had in mind. > rb > > > The dollar and the deficit > Sep 12th 2002 > >From The Economist print edition > > Why the dollar still rules the world-and why the world should be grateful > THE dollar is looking vulnerable. It is propped up not by the > strength of America's exports, but by vast imports of capital. > America, a country already rich in capital, has to borrow from abroad > almost $2 billion net every working day to cover a current-account > deficit forecast to reach almost $500 billion this year. > > To most economists, this deficit represents an unsustainable drain on > world savings. If the capital inflows were to dry up, some reckon > that the dollar could lose a quarter of its value. Only Paul O'Neill, > America's treasury secretary, appears unruffled. The current-account > deficit, he declares, is a "meaningless concept", which he talks > about only because others insist on doing so. > > The dollar is not just a matter for America, because the dollar is > not just America's currency. Over half of all dollar bills in > circulation are held outside America's borders, and almost half of > America's Treasury bonds are held as reserves by foreign central > banks. The euro cannot yet rival this global reach. International > financiers borrow and lend in dollars, and international traders use > dollars, even if Americans are at neither end of the deal. No asset > since gold has enjoyed such widespread acceptance as a medium of > exchange and store of value. In fact, some economists, such as Paul > Davidson of the University of Tennessee and Ronald McKinnon of > Stanford University, take the argument a step further (see references > at end). They argue that the world is on a de facto dollar standard, > akin to the 19th-century gold standard. > > For roughly a century up to 1914, the world's main currencies were > pegged to gold. You could buy an ounce for about four pounds or > twenty dollars. The contemporary "dollar standard" is a looser > affair. In principle, the world's currencies float in value against > each other, but in reality few float freely. Countries fear losing > competitiveness on world markets if their currency rises too much > against the greenback; they fear inflation if it falls too far. As > long as American prices remain stable, the dollar therefore provides > an anchor for world currencies and prices, ensuring that they do not > become completely unmoored. > > In the days of the gold standard, the volume of money and credit in > circulation was tied to the amount of gold in a country's vaults. > Economies laboured under the "tyranny" of the gold regime, booming > when gold was abundant, deflating when it was scarce. The dollar > standard is a more liberal system. Central banks retain the right to > expand the volume of domestic credit to keep pace with the growth of > the home economy. > > Eventually, however, growth in the world's economies translates into > a growing demand for dollar assets. The more money central banks > print, the more dollars they like to hold in reserve to underpin > their currency. The more business is done across borders, the more > dollars traders need to cover their transactions. If the greenback is > the new gold, Alan Greenspan, the Federal Reserve chairman, is the > world's alchemist, responsible for concocting enough liquidity to > keep world trade bubbling along nicely. > > But America can play this role only if it is happy to allow > foreigners to build up a > huge mass of claims on its assets-and if foreigners are happy to go > along. Some economists watch with consternation as the rest of the > world's claims on America outstrip America's claims on the rest of > the world. As they point out, even a dollar bill is an American > liability, a promise of ultimate payment by the US Treasury. Can > America keep making these promises to foreigners, without eventually > emptying them of value? > > According to Mr Davidson, the world cannot risk America stopping. > America's external deficit means an extra $500 billion is going into > circulation in the world economy each year. If America reined in its > current account, international commerce would suffer a liquidity > crunch, as it did periodically under the gold standard. Hence > America's deficit is neither a "meaningless concept" nor a lamentable > drain on world savings. It is an indispensable fount of liquidity for > world trade. > > Spigot by nature > > But is the deficit sustainable? Many of America's creditors, Mr > McKinnon argues, have a stake in preserving the dollar standard, > whatever the euro's potential charms. In particular, a large share of > America's more liquid assets are held by foreign central banks, > particularly in Asia, which dare not offload them for fear of > undermining the competitiveness of their own currencies. "Willy > nilly," Mr McKinnon says, "foreign governments cannot avoid being > important creditors of the United States." China, for one, added $60 > billion to its reserves in the year to June by ploughing most of its > trade surplus with America back into American assets. > > This is not the first time America's external deficits have raised > alarm. In 1966, as America's post-war trade surpluses began to > dwindle, The Economist ran an article entitled "The dollar and world > liquidity: a minority view." According to this view, the build-up of > dollar claims by foreigners was not a "deficit" in need of > "correction". Rather, the American capital market was acting like a > global financial intermediary, providing essential liquidity to > foreign governments and enterprises. In their own ways, Mr Davidson > and Mr McKinnon echo this minority view today. A "correction" of > America's current deficit, they say, would create more problems than > it would solve. Whether the world's holders of dollars will always > agree remains to be seen. > > > "Financial Markets, Money and the Real World" by Paul Davidson. > Edward Elgar 2002. > > "The International Dollar Standard and Sustainability of the U.S. > Current Account Deficit" by Ronald McKinnon 2001. Available on > www.stanford.edu/~ mckinnon/papers.htm > > > > Copyright © 2002 The Economist Newspaper and The Economist Group. All > rights reserved. > >
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