In somewhat belated reply to Allin's OPE-L:5166:
>On Mon, 2 Jun 1997, Duncan K. Foley wrote:
>
>> But if you believe this, why do you think hard-headed capitalists are
>> willing to accept dollars in exchange for commodities at current price
>> levels?
>
>The dollar is legal tender in the US -- wouldn't they be
>breaking the law if they refused to accept dollars?
I don't think this is exactly what "legal tender" means. I think what it
means is that if you make a contract to sell land, say for $10,000, and the
other signee comes up with $10,000 in US currency, you can't go to court
and insist on payment in gold, or pounds. It doesn't require you to draw up
the contract in US $.
>Besides, what is the alternative? The transactions costs of
>barter are so high that it would take a disastrous inflation
>to make it worth the capitalists' while to try to flee the
>currency.
In most hyperinflations (for example, Germany in the 1920s) the relevant
alternative is not barter but payment in a stable currency. In Germany in
the 1920s the Dutch guilder and the British pound were used this way,
especially in transactions between capitalists.
>Most fundamentally, though, why should a
>capitalist, in 1997, be concerned about the rate of exchange
>of the dollar for _gold_ in future, rather than the future
>rate of exchange of dollars for labour-power and other
>commodities.
I think I agree with this point. But doesn't this lead back to a theory of
a speculative immediate determination of the value of the $?
Cheers,
Duncan
Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
(212)-854-3790
fax: (212)-854-8947
e-mail: dkf2@columbia.edu