In article <[EMAIL PROTECTED]>, J.WALKER, ILL
<[EMAIL PROTECTED]> writes
>Thanks for all your replies but now I am completely confused.
>
>How can money - as the universal measure of value - function if it
>does not itself have any value? If value is determined by the labour
>time necessary for its production.
>
>Obviously gold need not be used money of account or the circulating
>medium but surely in the exchange C-M-C the three items must be
>commensurable. If 2 coats = hundredweight of corn then M must embody
>the same amount of socially necessarry labour time as is contained in
>the coats and the corn. Is this wrong?
It's not wrong. As Hans explained, the crucial factor was the currency
being freely convertible into gold on demand and so therefore the
currency was "as good as gold".
>The last problem I have with the replies is that why does the Bank of
>England still hold gold reserves for all the UK banks and moves them
>from one to another at the end of the days trading? This is also done
>at Fort Knox for balancing the accounts between countries. Is this
>just because they misunderstand that it is only paper money enforced
>by military power that gives value.
The main purpose for gold these days is settling international exchange
rates between currencies. Basically, with convertibility (into gold) the
price level is determined by the total amount of gold in circulation
(the situation in the UK up till 1914). But with inconvertibility the
required level of currency is determined by the total amount of
commodities in circulation. Gold no longer has a role in fixing the
value of a currency within a country.
In article <[EMAIL PROTECTED]>, Hans Ehrbar
<[EMAIL PROTECTED]> writes
>
>In response to John Walker's inquiry regarding the link
>between money and gold:
>
>According to Marx, the first function of money is "measure
>of value." Capitalism can only function if there is a
>reliable and stable way to measure the values of the
>commodities, so that the capitalists know whether they are
>making profits or not. At Marx's time, the stability of
>money as a measure of value was guaranteed by the
>convertibility of money into gold.
This is true.
>This guaranteed the value of money alright, but it was very
>harsh; a lot of output had to be sacrificed in order to
>maintain the value of money.
This is not true: there is nothing in Marx or a Marx inspired reading of
the evidence to suggest such a conclusion.
>During the Great Depression, the gold standard was replaced
>by inconvertible credit money. This made things much more
>elastic, and therefore provided the institutional
>underpinnings for monopoly pricing, regulation of wages by
>collective bargaining, deficit spending by the public
>sector, and lender of last resort interventions. This
>``greatly contributed to the amazing economic expansion of
>the first two postwar decades.'' (Robert Guttmann, ``How
>Credit Money Shapes the Economy'' M.E. Sharpe, 1994).
I think you might find a more plausible explanation in the rising profit
rates and expanding markets in the post-war period rather than political
fixes concerning the form of money.
In article <l03130300b37e6fa986b0@[137.92.41.119]>, Rob Schaap
<[EMAIL PROTECTED]> writes
>G'day John,
>
>Haven't got my *C* with me ...
>
>My understanding of the way things are today is that banks create over 90%
>of the money in circulation through the provision of credit.
If you take a look at your currency you will see that it is produced by
your equivalent of a government central bank. Private banks lost the
right to issue their own currency some time ago. Contrary to what the
voodoo economists will tell you, private banks cannot create something
out of nothing. The idea that banks can create credit "at the stroke of
a pen" is a piece of bullshit instigated by Keynes. Treat it with the
contempt it deserves.
--
Lew
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