From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Thu Jul 08 2004 - 18:07:00 EDT
> > I am. Some sum of money, say $1000, has to stay constant as a > quantity not of one commodity but a basket of commodities--e.g. x > barrels of oil, y oz of gold, and z bushels of grain. This is > probably what Greenspan aims to do more than maintain price stability > per se. And this is what Greenspan has to do if he wants the dollar > to remain the closest appromixation to world money (and thus preserve > the attendant privileges to the US financial sector and US govt). So > just as Greenspan seems to be running a modified gold standard, I > subscribe to a modified Germer theory of commodity money. There can > at best be a partial dissolution of the fetishistic commodity basis > of money as long as capitalist relations of production prevail. To > maintain the commodity basis of and the constant value of the dollar, > Greenspan has to sacrifice the economy at the altar not of gold but > a basket of things. > Rakesh, how would you determine the MELT (the money new-value produced per hour of socially necessary labor-time) in your suggested case that money is a "basket" of commodities, rather than a single commodity? "The quantity of labor-time required to produce a unit of a "basket" of commodities" makes no sense, because a basket of commodities HAS NO UNIT, in physical terms. Fred, This may be a serious problem but I don't see it yet. Please take this as an attempt to think aloud. I am not committed to these positions. If $1000 is set equal to x barrels of oil, y oz of gold, and z bushels of grain (and I am assuming that Greenspan aims to maintain the value of dollar as just that over the medium term) and the socially necessary abstract labor time required to produce that basket then decreases--say it took 1000 hours and now only takes 500 hours--then the MELT changes correspondingly, no? Before $1000 represented 1000 hours; now it represents only 500 hours.The MELT (the money new-value produced per hour of socially necessary labor-time) has thus increased: 1 hour of labor now adds $2; before 1 hour added only $1. $1000 only purchases half the labor time that it used to: Foley's value of money has thus decreased. Now say someone produced cuisinarts. It once took him 50 hours to produce one; now it only takes 40 hours. The cuisinart would have inititally cost $50 at the old MELT; now it will cost $80 at the new MELT. The cuisinart is now more expensive in money terms even though its production now takes less time in absolute terms. If the cuisinart now only took 15 hours to produce, its price would be $30 at the new MELT. Of course if it now took 25 hours to produce, its money price would not have changed at the new MELT. If Greenspan had to stick to a gold standard, how would things work out? Say $1000 is set to w oz of gold. Where it once took 1000 hours to mine that amount of gold, it now takes 1500 hours in the mines that have not been tapped out. The MELT (the money new-value produced per hour of socially necessary labor-time) would now be 67 cents. $1000 would now purchase 1.5 x the labor time that it purchased before. The MELT has decreased; the Foley value of money increased. The cusinart that now took 15 hours to produce would only sell for $10 at the new MELT. The money price would have just crashed; cuisinarts had been selling at $50 given the old level of productivity at the previous MELT. Under such a money standard debts contracted at an earlier time would probably become intolerable. For this reason, the gold standard is impractical. I am just proposing a hypothesis of how Greenspan may be conducting monetary policy with an eye to sensitive commodity prices. I have not understood Allin's objections to the thesis that to measure value money has to be a commodity--they may of course be persuasive. Claus' theoretical points seem persuasive to me at this point. So I am just trying to figure out the different ways in which money could still be understood as a commodity in a world of fiat, non covertible money Yours, Rakesh
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