In reply to Paul C.'s OPE-L:5171:
Duncan asked:
>> 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?
>>
Paul C. replied:
>
>because it is legally tender, valid for payment of all private and
>public debts and recognised as such by the courts. Capitalists and others
>are also obliged to make payments in dollars as taxes by law, this
>gives it an enforced circulation resting on social relations outside
>of commodity production.
Duncan responds:
But I don't think this is what "legal tender" means. Under the gold
standard it meant that the paper $ had to be accepted as the equivalent of
gold, but now, I don't think it means anything, and certainly doesn't force
anyone to accept $ in exchange for commodities if they don't want to. They
could use pounds sterling, or marks or yen instead of $ (as for example
German capitalists used guilder and pounds in their transactions with each
other during the German hyperinflation of the 1920s), or even gold or oil
futures. I think this idea of "enforced circulation" is misleading in
monetary theory. For example the majority of the U.S. currency issue is in
fact held by foreigners, who aren't compelled by any U.S. legislation to
hold $.
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