An interim answer of mine to the question I raised in [OPE-L:313].
Presuppositions:
(1) The amount of money socially necessary to finance the needs of trade
must be given in proportion to the total amount of transactions.
(2) A certain fixed ratio of the amount determined in (1) can be substi-
tuted by value symbols (coins, notes, bills, etc.). But Marx presumed
that upto the total amount of money that functions as the means of
circulation can be substituted with value symbols.
(3) The amount of social demand for real (gold) money can therefore be
confined to the function of hoarding. The amount of net hoarding
will be the minimum amount of social demand for the gold money. and
a certain amount that is necessary for the replacement of the deterio-
rated real (gold) money can be added to the social demand for (gold)
money.
(4) If the supply of gold is larger than the demand discussed in (3), the
price of gold (the purchasing power of money) may be smaller than its value.
But, if the supply of gold is smaller than the demand discussed in (3), the
price of gold (the purchasing power of money) may be larger than its value.
Well, however, the effects may be different from this. Instead of its price
being deviated from its value, the money rate of interest can be affected.
If S>D, the credit could be offered on the cheap. If S<D, higher interest
rate may be required. That is, if net hoard formation is bottlenecked by
the shortage of gold, the existent means of circulation (in real gold form)
might be withdrawn to be hoarded. The shortage of the means of circulation
will raise the price of credits, which means the higher rate of interest.
I prefer the latter explanation to the former. But, still I wonder which
principle, the marginal principle or the average principle, determines the
value of (gold) money.
Any help?
In solidarity.
Chai-on Lee <conlee@chonnam.chonnam.ac.kr>