Subject: [OPE-L:1833] Re: Re: Re: Re: the money supply
From: Duncan K. Foley (foleyd@cepa.newschool.edu)
Date: Sat Dec 04 1999 - 18:32:54 EST
This passage in Marx refers to a situation in which paper money is
circulating alongside gold, but its rate of convertibility into gold is not
guaranteed by the State (as in Britain during the Napoleonic Wars, or in
the greenback era in the U.S.). In this situation there is a market between
the paper money and gold, in which a discount of paper against gold is
determined. Marx thought that this discount would settle at a level where
the total gold value of the paper money was equal to the amount of gold
that would have been necessary to circulate commodities. (In fact,
speculation also plays a role.) Gold continues to measure the value of
commodities, and the paper money prices of commodities are mediated
transparently by the discount of paper against gold.
I don't think it is easy to generalize this point of view to the
determination of the value of state credit money in the contemporary world
monetary system, especially the value of the reserve currencies.
Duncan
>On Wed, 1 Dec 1999, Akira MATSUMOTO quoted Marx:
>
>> If the paper money exceed its proper limit, which is the
>> amount in gold coins of the like denomination that can
>> actually be current, it would, apart from the danger of
>> falling into general disrepute, represent only that quantity
>> of gold, which, in accordance with the laws of the
>> circulation of commodities, is required, and is alone
>> capable of being represented by paper.
>
>I think this is a roundabout way of saying that putting more
>paper money into circulation more money cannot of itself
>generate an increase in the aggregate commodity values. (The
>"correct amount of gold" can just be cancelled out of the
>argument: it is a dangling quantity, derived from the value of
>commodities to be circulated, the value of gold, and velocity of
>circulation.) The revised statement is not strictly true, since
>under certain conditions a monetary expansion can call forth
>increased output and employment.
>
>Allin Cottrell.
Duncan K. Foley
Department of Economics
Graduate Faculty
New School University
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