I wrote: >>However, I think that at this point there is enough unity
amongst the leading capitalist powers that instead of there being a flight
to gold when and if a US financial crisis hits, there will be a flight to
Yen or similar fiat currencies.<<
alfredo writes: >I am not clear about this: Jim, do you think that this
would happen mainly because of political considerations, with gold (say)
still able (at least potentially) to play an important role as 'general
equivalent' (perhaps at some point later on), or because there is no
alternative to fiat currencies in modern capitalism?<
I think gold could (potentially) play a role as general equivalent under
capitalism at some point in the future. But I think the kind of capitalism
it would prevail in would be quite different one from the one we currently
live under. Gold seems most appropriate for a world economy dominated by
competing nation-states all trying to promote their own national
development, as in the era before 1945. To have a world fiat currency, all
these nation-states would have to agree. I see reliance on gold as a sign
of lack of political unity. According to Kindleberger, the gold standard
worked _best_ (with fixed exchange rates) when this system was dominated by
a single financial hegemon, the UK, but it worked passably during the 1920s
until the strains put on it by the world crisis led to its abandonment
(especially as adherence to the gold standard encouraged countries to
collapse). The whole system also required institutions of wage- and
price-setting that allowed deflation, since the supply of gold seems to
steadily fall behind the demand for it as a capitalist economy grows. (This
all assumes fixed exchange rates. The system seemed to deal with
"fundamental disequilibrium" by having countries leave the system
temporarily. They'd all do so during wars.)
In terms of promoting the workings of a capitalist economy in which prices
and wages don't fall easily in many sectors, a fiat money system seems most
appropriate. But to have that kind of system requires some sort of world
state or some substitute to force the circulation of fiat money. During the
last 55 years, the substitute for that world state has been US military,
industrial, and financial hegemony, with the financial side organized
through the IMF (and sister institutions such as the Bank of International
Settlements). This has promoted a decline in inter-state rivalry within the
imperialist core, which has encouraged the persistence of the dollar
standard which has acted as an anchor for the "managed floating" system.
Is there an alternative to fiat currencies in modern capitalism? yes, the
gold standard. But the institutions of modern capitalism would have to
change dramatically. (South Africa would also have to be able to con the
world, too.)
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~JDevine/JDevine.html
