Lew wrote:
>The main purpose for gold these days is settling international exchange
>rates between currencies.
Gold has minimal international functions. I have no idea what you're
talkinga bout when you say its main purpose is settling international
exchange rates. Those are set on foreign exchange markets. There's an
implicit gold price involved, but it's just a reflection of what the FX
markets decide. With fixed-rate currencies - there are a few left, though
their number is dwindling - their value is tied to another currency, like
the US dollar or French franc.
>>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.
Capital vol. 3, pp. 648-649 of the Vintage/Penguin edition: Marx said that
in crises, commodities cannot be transformed "into money, i.e. into their
own purely fantastic form." To reverse a drain of gold, for example,
interest rates are driven up "to guarantee the conditions of this
convertibility.... But the basis for it is provided by the basis of the
mode of production itself. A devaluation of credit money (not to speak of a
complete loss of its monetary character, which is in any case purely
imaginary) would destroy all existing relationships. The value of
commodities is thus sacrificed in order to ensure the fantastic and
autonomous existence of this value in money. In any even, a money value is
only guaranteed as long as money itself is guaranteed. That is why many
millions' worth of commodities have to be sacrificed for a few millions in
money. This is unavoidable in capitalist production, and forms one of its
particular charms...."
>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.
Keynes never deserves contempt, but I'll forget about that for the moment.
In actual practice, banks extend credit and seek to fund their loans later.
This happens at the level of an individual bank and also at the systemic
level. Under modern systems, credit growth is driven by private demand and
the central bank is called upon to provide the reserves to validate the
credits. Marx is usually considered an endogenist theorist of money,
meaning that the supply of money follows the needs of circulation rather
than vice versa, the exogenous approach of Friedman and the monetarists.
Doug
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