[OPE-L:5887] Commodity Money - some responses to recent posts

Michael Williams (Michael@MWILLIAM.U-NET.COM)
Tue, 23 Dec 1997 00:01:50 +0000

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In his Sat, 13 Dec 1997 18:08:31 -0500 (EST) Duncan wrote:

>The phrase "fiat money" ... is potentially extremely misleading.
>Essentially national currencies are held voluntarily as assets, and
>can't actually be "forced" on anyone. In principle firms and
>households could carry on their business in a foreign currency, or
>gold if they don't want to use the national currency."

Abstractly, I do not disagree with this. Indeed Duncan's insistence
on this, as part of his account of determination of the value of a
currency by speculation has been, for me, a revelation. However,
there remains the question of 'legal tender'. I believe it is the
case in the UK that, with some caveats about relevant denominations,
traders are legally obliged to accept payment in sterling - they
cannot, for example, insist on payment in gold or US$. More
pragmatically, any agent other than the representatives of
multinational capital are usually not able to insist on anything
other than the local currency - I cannot buy petrol in the UK with
the DM I happen to have over from a trip to Germany.

In his Wed, 10 Dec 1997 17:16:17 +000, James Heartfield wrote:

>Necessary components of [Marx's argument ... on the elaboration of
>the money commodity out of the value form] are that money is a
>commodity ... .

This is certainly the standard interpretation, but is it right? Is
the necessary connection that Marx is making not rather between Money
and Commodity, as categories? That is between Money and the
capitalist generalized commodity production system.

This interpretation facilities the understanding of the subsequent
developments of non-commodity money to which James then points.

(Simmel has been sitting unread on my shelf for at least 2 decades -
perhaps I had better read it to prepare my defence against charges of
aiding and abetting his attack on Marx ... .)

In his Tue, 9 Dec 1997 15:03:07 GMTOBST Massimo writes:

>The open question for us would be to identify within the form of
>(commodity-money) general equivalent the seed for its transformation
>into paper money general equivalent, and at the same time to see how
>this transformation was historically possible.

Well .. maybe. But perhaps a prior historical question as to whether
any intrinsically valuable object has really been the kernel of the
historical development of money. Paul C. has indicated to us from his
obviously quite extensive reading of the history of money that 'unit
of account' may actually be the more appropriate trans-historical
organizing category. As to the 'development' in Marx's account of
Money, I see that as more dialectical logical than historical.

Massimo goes on to question the necessity for the 'general relative
social form of value' to be borne by any particular object, let alone
commodity. These are indeed probing and pertinent questions - to
which my value-form account provides one kind of negative answer.

In his Thu, 4 Dec 1997 14:33:03 -0200, Claus writes:

>In spite of [strong commitments over 20 years to reduce the role of
>gold as a reserve], gold has not significantly dropped as a
>proportion of the total reserves.

Given the massive holdings of gold reserves, and their long-standing
position as a reserve, I do not find these transitional hiccups very

Claus goes on:

>... it seems unnecessary to mention that the recognition of the
>monetary role of gold doesn't mean it should, or even could, take
>over again *circulation* functions, even at the international level.

Well, this is perhaps worth mentioning: 1) in the light of my
argument that as a store of value (is that all there is to the
'reserve' function?) in the absence of the other social functions of
money a flight to gold is a flight *from* Money; 2) because Mar makes
a direct link, via the very anachronistic mechanism of melting-down
gold currency is in excess supply, for re-coining in another currency,
between gold-money as store of value, and as national and
international means of circulation; 3) because gold reserves then
seem to be little more than one possible form of 'collateral' for
international loans.

Claus then refers to a quote that I also use in my recent long posts
on Money:

>"with the development of the credit system, capitalist production
>continually strives to overcome the metal barrier, ..., but again
>and again it breaks its back on this barrier"

As I argue in my paper, this is a clear anachronism. The
over-extension of credit and over-valuation of capital in, for
example, South Korea, is about to break its back not on any gold
shortage, but on the imperatives of the IMF.

Later Claus says:

>the function of measure of value ... is crucial in Marx's theory
>because the need to convert private labour, objectified in
>commodities, into social labour

I have great difficulty with this: it is the value-form association
(grounded, perhaps contingently, in ubiquitous markets) that performs
this crucial function. It is clear how markets effect and reproduce
this transformation. It is totally opaque how the existence of gold
reserves, with at most a residual 'collateral' function, can have
anything to do with it.

In his Fri, 28 Nov 1997 11:56:41 +0000, Paul C. writes:

>The changes in social relations necessary to effect [the development
>of paper money] ... are orthogonal to changes that might be involved
>in the ratios between values and prices of production.

May be, but the transformation is part of the mediation between
embodied labour and prices that invalidates models of
a self-regulating dual system of embodied labour values underlying -
and regulating - the price system.

In his Fri, 28 Nov 1997 10:24:28 -0200,
Clause writes (amongst much else):

That he has not read all of Reuten and Williams 1989.

Claus, perhaps my recent long posts will save you the trouble?

Claus goes on:

>from 1971-1993 the monetary gold reserves of the world ... have
>dropped from 1.175,9 to 1.143, 7 million ounces; the gold reserves
>at international monetary institutions (IMF etc) have *increased*
>from 145,6 to 204,8 m.o.

I agree that the exact role and effectivity of gold reserves in the
world monetary system is worth investigating. (Though I think the
best approach would be survey and participation observation amongst
the leading 'bankers'.) But as they stand, these figures have nothing
to say about the commodity basis of Money. Apart from anything else,
during the same period the Abstract Labour incorporated in
commodities worldwide over the same period presumable expanded

Claus continues:
>gold reserves (...) as a proportion of total world reserves have
>also dropped very little (if at all), from 32.2% to 28.4% along the
>same period.

I do not think this contains very much relevant information: it
doesn't prove that these gold reserves act effectively as a monetary
base; gold as a store of value of last resort, or as a confidence
boosting 'collateral' is not sufficient to make gold Money; if
anything, gold may be playing some role as part of the fragmented
surrogate for the absent effective world monetary authority.
"Books are Weapons"

Dr Michael Williams
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