Shane Mage wrote: > Marx wrote that in the quantity theory identity, mv=pq, it is the quantity > of transactions pq that is the determining factor, and that the money supply > is dependent (that is, v is roughly constant--Keynes would demur). ...
I agree that with the classic gold standard (which Marx reasonably enough assumed to apply, given the time in which he wrote), the supply of gold was relatively elastic. So was the bank money based on that base, so that the amount of money in circulation was largely endogenously determined (by pq). I agree with Keynes on the endogeneity of v, except under strict government regulation of the banking system. However, with fiat money (the current monetary system), the monetary base is no longer endogenously determined; it's determined by policy instead (the Central Banks's and indirectly, the government's). The positive price of these pieces of paper (their ability to buy commodities) is based almost completely on their scarcity. Put another way, a piece of paper money sells far above its value (the labor-time socially necessary to produce it) because its price is set by the CB's monopoly power. If the CB were to allow a supply more like that of a competitive market, the price of fiat money would fall toward its value, which is close to zero. That's severely rising prices. Banking regulation (reserve requirements and the like) keeps the supply of bank money from being extremely elastic these days, but velocity seems to fluctuate a lot, likely reflecting the deregulation trend. -- Jim Devine / "Nobody told me there'd be days like these / Strange days indeed -- most peculiar, mama." -- JL. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
