From: cmgermer@UFPR.BR
Date: Sat Dec 04 2004 - 15:24:40 EST
On Dec 2 Michael H wrote: > It is the first time, that I take part in the discussion, so at first I > have to apologize for my poor English and especially for the lack of > some special terms, but I hope I can make my point clear. > > The controversy about selling a house or a boat against gold or not, is > a pretty thing. But by such examples we cannot decide, whether gold is > the money commodity or not. That something serves in a special > situation as money or not, is not enough. Remember credit money: when a > paper on which is written, that I will pay 100 $ next month, is accepted > from a seller, then this paper serves as money, but it is not money. It > is a substitute of money, which serves as money. > > We have to distinguish between > - serving as money (insofar it fullfills money functions as means of > circulation or store of value) > - and being money (what is not money is only a substitute for that, what > is really money) Claus: I think this is an important point, which I have been making and which corresponds to the view of Marx’s theory, and I’m glad you agree with it. It is important because it establishes that the fact that the money commodity (gold) does not circulate doesn’t mean that it is not THE money. But then your decisive argument is that today, in contrast to the 19th century, gold serves no longer as an anchor for the monetary system, meaning essentially that credit money was convertible at that time but not today. Thus, in the 19th century the central bank had to hold a definite amount of the money commodity. Today credit money is not convertible but the central bank goes on holding a large amount of gold. Instead of attempting to explain this by analysing how it came to this and how the system works, you jump to a thought experiment that may be plausible, but that is not a scientific proof, since the central banker is not making a scientific experiment and is not a judge of scientific matters. After that, based on the implicit supposition that you have proved your point, you reduce the gold held by central banks to “a historic relic”. However, your thought experiment doesn’t prove this, although it is a kind of common sense in the monetary literature of today. And I think your reasoning is very arbitrary: The FACT that large amounts of gold are held as reserves both by the central banks and by capitalists (in still larger amounts) is as much a FACT as it is that the circulation functions of money are performed only by credit money today. What a scientific criterium is the one that allows you to accept one fact (the one that supports your point of view) and reject the other (teh one that doesn’t support your point of view) as an irrational relic? You argue that everybody will ACCEPT credit money instead of gold as means of circulation and of payment, and you consider this to be a good argument, but when it comes to the reserve function of gold by central banks and private capitalists you don’t interpret this as an ACCEPTANCE by them of gold as a store of value. What is going on? Who forces central banks and private capitalists to take and hold gold? If you suggest that they hold it against their will, what allows you to say that credit money is not held against the will of the people who accept it? Inconvertible paper money is taken by people not because they like it, but because they have no other alternative. Would you deny that the dollar has been crowned as the international currency by an arbitrary act of the US? You are certainly aware of the fact that Germany and France – the two other major capitalist powers along with the US at that time - attempted to convert their dollar holdings into gold in the late 60s, and that this has been one of the reasons for the unilateral decision of the US to declare the inconvertibility of the dollar. You also say that central banks ‘try to get rid of’ their gold holdings, but the facts don’t support your opinion. If you look at the figures of the IMF you will see that the total gold reserves of central banks and international monetary institutions have remained almost the same since 1982, I think. The only aspect in which the facts agree with your opinion is that there has been an explicit intention to eliminate GOLD’S MONETARY FUNCTIONS, but this is strictly true only for the US. However, this is not the same as saying that the US intended to eliminate GOLD from THEIR reserves, and they haven’t. On the other hand, I don’t think you will find statements from the main central banks saying that they intend to eliminate gold from their reserves or from the monetary functions it performs. This doesn’t agree with your thought experiment. On the contrary, the gold agreement of 1999, which has been reaffirmed two months ago, says that it is a compromise of these central banks to preserve the monetary functions of gold. On the other hand, even if a decrease in the gold reserves were to take place, this would not necessarily indicate a decrease in the relevance of the monetary functions of gold. Finally, the fact that some central banks reduce their holdings of gold doesn’t have a clear meaning except if you make explicit the relevance and the place of each in the international system. Thus, if you consider the reduction in the gold holdings of the central banks a strong argument in favour of your point of view, I think you would have to reconsider it. Michael H.: > > If someone maintains, that gold is the money commodity, then he or she > has to show clearly, where gold has a basic importance for the money > system. Such a demonstration I cannot see: that central banks possess > gold, is a historic relic, they try to get rid of; that some people use > gold as a store of value may be true, others use diamonds or land, so > what?. > Claus: I agree that it is not easy to demonstrate, but I don’t see a clear demonstration that gold is no longer money either. And dismissing the evidences which indicate that gold still serves in monetary funtions as just irrational historic relics is not a proof. By the way, if you have followed this thread you must have noticed that I’m not saying that I’m able to prove that gold is still THE money in the sense of Marx’s theory. I agree that this has to be proved, but the opposite opinion has to be proved as well, and so far hasn’t been. On the other hand, what I have been arguing is that there are strong evidences that gold still performs important monetary functions, and that the characteristics of the monetary system of today do not contradict Marx’s theory of money. Finally, your last paragraph below strikes me, because it contradicts your opinion that gold could be considered money in the 19th century because credit money was convertible etc. It raises the question of what is the theory of money on which you base your opinions? > The last argument in such discussions: In a crisis gold will come back, > then you will see, that gold is the money commodity. > May be that in a real deep crisis gold will again be used as money > commodity, but what would be proofed by this? > During the first years after World War II, the German "Reichsmark" was > devalued, cigarettes served as currency. But what was proofed by this? > That in Germany all the years before, the hidden but nevertheless real > money commodity was - Lucky Strike? > > > > cmgermer@UFPR.BR schrieb: >> In a reply to Paul B, Jerry wrote: >> >> Some time ago (on November 19) you wrote: >> >> >> As a matter of fact Fred, I know of no one who would not be prepared to >> accept a certain quantity of gold for any of their property , ( should >> they wish to sell it, even if they later had to exchange it for paper >> for >> other reasons), that is to say that this commodity remains the money >> commodity, par excellence.. <<< >> >> Jerry: >> Interesting, since I know of no one (save, possibly, Claus, Akira, or >> yourself) who would be prepared to accept a certain quantity of gold in >> exchange for their property. I know that if I wanted to sell property >> like a house (which I don't own) or a boat (which I do) I wouldn't >> accept >> gold as payment. To begin with, I would have no confidence that it was >> real or that it was 'pure'. I certainly wouldn't want to pay the extra >> expense and put up with a delay to hire an appraiser. Also, I would feel >> very uncomfortable accepting gold from a security perspective (I'd much >> rather receive a bank check). And then I'd have the hassle and delay >> of >> selling the gold. And -- given the frequent fluctuations in the price >> of >> gold (yes, gold _does_ have a price) -- I would feel uncomfortable >> holding on to the gold since I am not interested in gold speculation. >> And >> -- more to the point -- I know of no one in my community who would >> accept >> gold as payment for property of any significant worth. If someone went >> to my landlord's office and proposed to pay for real estate in gold, >> s/he >> would get laughed out of the office. >> >> Claus: >> You might be right in claiming that gold is no longer money today, but >> your arguments are unconvincing and don't support your claim. The >> essence >> of your argument is that gold is not money because it does not circulate >> as money. Well, such an argument is only acceptable in a quantity theory >> framework, because according to this theory money has only one function >> - >> that of means of circulation - and for this reason money cannot have >> value >> of its own. In the framework of Marx's theory your argument is >> unsustainable, because in this case the prevalence of the function of >> means of payment and the development of an integrated banking system >> imply >> that money does NOT need to circulate in person, without being displaced >> from its role as money. >> I think in normal conditions I would not accept (and I guess no one >> would) >> an uncertified piece of gold in the example you gave. I wouldn't because >> gold coins are not issued for the the usual functions of means of >> circulation and of payment. This doesn't prove your point either, >> because >> gold is issued in certified bars which perform very specific functions >> of >> money, allowed by the nature of the global monetary system (credit >> system >> in Marx's terms). Thus, the fact that you and I don't use gold bars in >> our >> activities does not prove that they don't perform functions of money. >> >> Comradely, >> Claus. >> >> >
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