exchange rate fluctuations and Marx's theory of money

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andy g
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Mar 20 2012 11:10
exchange rate fluctuations and Marx's theory of money

can anyone point me in the direction of good analysis of how the contemporary monetary system works?

Marx's theory of money isn't the easiest to grasp - I'm sure we've all reached for the paracetamol after struggling with those opening chapters of "Capital" vol 1. TBH I've always struggled with how it can be developed to apply to a world system of floating currencies that are "inconvertible" into a common money commodity. The Gold Standard or Bretton Woods made things so much clearer! How does the labour theory of value help us understand exchange rate variations for instance?

yourmum
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Mar 20 2012 11:22

it doesnt.

unfortunately i cant point you to any insightful texts about exchange rate variations either.

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Noa Rodman
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Mar 20 2012 12:25

Well the currencies fluctuate around the money commodity gold I would imagine. Maybe it can be compared to how the price of a normal commodity fluctuates around its own value.

There is an interesting blog called critiqueofcrisistheory, the part is perhaps relevant in the last post about why Volcker shock was necessary:

http://critiqueofcrisistheory.wordpress.com/responses-to-readers-austrian-economics-versus-marxism/the-failure-of-capitalist-production-by-andrew-kliman-part-2

But I don't think you can take for granted that Marx's theory of money is taken as valid by everyone for the period of the gold standard. In the 20s this was already a controversial issue (in today's debate Hilferding would be a proponent of MELT):

http://libcom.org/library/measure-value-under-paper-money-currency-%E2%80%93-wolf-motylev

http://libcom.org/library/hilferding-or-marx-v-poznjakov

yourmum
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Mar 20 2012 13:01
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Well the currencies fluctuate around the money commodity gold I would imagine

erm whats that supposed to mean? how would that work?

OP might wanna check on this:

http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm

wont help with exchange rates variations of credit money from what i remember, didnt read through it again so you might still be lucky.

andy g
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Mar 20 2012 13:23

cheers for links - will look into later...

I've read the chapters in Capital many times and I get where Charlie is coming from with the argument symbols of the money commodity can function as a mediun of circulation. His assertion that the "value" of these aggregate of these representations in circulation is determined by the value of the mass of the money commodity that would be required in the same circumstance also seems to make sense. Not sure where it fits in to non-Marxist debates on the role of the money supply....

Marx's argument seems to suppose a single issuing authority though and doesn't deal with the interaction of different paper currencies

yourmum
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Apr 12 2012 18:18
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His assertion that the "value" of these aggregate of these representations in circulation is determined by the value of the mass of the money commodity that would be required in the same circumstance also seems to make sense.

I dont really understand this.. is this the case of monetarism your making? more paper money = paper money worth less? if yes it is 1. wrong and 2. not from marx. I havent noticed this before but in the inflation explanation marx gives some precise hints towards your initial question: http://www.marxists.org/archive/hardcastle/inflationfacts.htm

Quote:
Marx pointed out that beyond a certain point an excess issue of notes will result in money “falling into general disrepute”.

That is indeed the whole thing about paper currency exchange rate variations.

edit: the above sentence is clearly wrong, i meant to say this is the whole thing about inflation.

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jura
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Mar 20 2012 14:04

I think some of this was touched up on in the other debates on here. On the neoclassical theory of the money supply and its relationship to Marx's theory of the money-commodity, I found John Weeks' article The theory and empirical credibility of commodity money quite interesting. For those who read German, Stephan Krüger's Politische Ökonomie des Geldes seems worthwhile.

yourmum wrote:
more paper money = paper money worth less? if yes it is 1. wrong and 2. not from marx.

Are you sure about this?

Marx wrote:
The State puts in circulation bits of paper on which their various denominations, say £1, £5, &c., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold (or silver as the case may be) which would actually circulate if not replaced by symbols. Now the quantity of gold which the circulation can absorb, constantly-fluctuates about a given level. Still, the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience. The fact that this minimum mass continually undergoes changes in its constituent parts, or that the pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circulation. It can therefore be replaced by paper symbols. If, on the other hand, all the conduits of circulation were to-day filled with paper money to the full extent of their capacity for absorbing money, they might to-morrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceed its proper limit, which is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £1 would be the money-name not of 1/4 of an ounce, but of 1/8 of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as a standard of prices. Those values that were previously expressed by the price of £1 would now be expressed by the price of £2.

(from Ch3 of Volume 1) http://www.marxists.org/archive/marx/works/1867-c1/ch03.htm)

I take this to mean exactly what andy g suggests above.

yourmum
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Mar 20 2012 14:17
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In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself.

or even nicer:

Quote:
A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold.
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jura
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Mar 20 2012 14:11

And? What Marx says is that if quantity of notes in circulation exceeds the quantity of the actual money-commodity that would otherwise be required, the amount of value that a single note represents decreases accordingly. Isn't this what andy g meant?

yourmum
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Mar 20 2012 14:12

well depends if he was talking pre-bretton or not. from what i understood he wasnt.

andy g
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Mar 20 2012 14:30

cheers Jura - the quote from "Capital" is what I was referring to in my previous post. I can see how any analysis of "valueless money" could come to any other conclusion. As i said though, my thinking on this one not at it's clearest....

I've read Weeks' article and, as is almost always the case, he makes a lot of sense. Or at least the bits I follow so far do. The footnotes give lots of suggestions for further reading too.

andy g
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Mar 20 2012 14:34

what does "pre-Bretton" mean in this context anyway?! If we accept that paper money is "anchored" in an actual money commodity surely this remains the case whatever the institutional framework through which the financial system is managed? Therefore if the nominal value of paper currency in circulation exceeds that of the money commodity it is "representing" the unit value of the currency declines?

yourmum
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Mar 20 2012 14:42

but its not anchored anymore since the 70s...

andy g
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Mar 20 2012 15:07

hence my question and the reference to Bretton Woods. John Weeks seems to argue that all major international transactions are carried out in one of a handful of major currencies. These "anchor" the minor currencies. He then goes on to posit the "value" of these can be rooted in that of a real money commodity. Just can't quite get how since, as you say, the US dissociated the dollar from a prescribed gold measure in the early seventies

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Noa Rodman
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Mar 20 2012 17:35
yourmum wrote:
Quote:
Well the currencies fluctuate around the money commodity gold I would imagine

erm whats that supposed to mean? how would that work?

The differences/fluctuations in their price are a reflection of their different value, but the expression of the proportion of these differences is not 1:1
Something like that surprised

yourmum
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Mar 20 2012 17:56

the money commodity gold could just aswell be the money commodity potatoes. the reason its gold is because potatoes rot and you'd need a wagonload of them to buy a little gold so its quite impractical. there really is no other reason for gold being money then its usefullnes in terms of practical handling and it has long quitted its service to pure value, in digital form or written on paper / printed on low-value metals. its been said that earlier on in history money was an IOU on gold. its also been said that this isnt the case anymore so if anyone could come up with a reason for this dubious connection gold - money still existing id really like to hear it.

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Noa Rodman
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Mar 20 2012 18:23

the answer is 42

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Noa Rodman
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Mar 20 2012 18:26

http://www.treasury.gov/resource-center/data-chart-center/IR-Position/Pages/03092012.aspx

Gold stock is valued monthly at $42.2222 per fine troy ounce.

yourmum
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Mar 20 2012 18:26
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Binary representations, base thirteen, Tibetan monks are all complete nonsense. I sat at my desk, stared into the garden and thought '42 will do'. I typed it out. End of story.”
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Mar 20 2012 18:36

But the Germans value their gold stock at 1319.07 euros per fine troy ounce

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Noa Rodman
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Mar 20 2012 18:37

No wonder gold accounts for the majority of their reserves

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Noa Rodman
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Mar 20 2012 18:38

if the US went by market price of gold it would also make up like 80% of their foreign reserves

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Noa Rodman
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Mar 20 2012 18:40

(Ron Paul 4 president!)

andy g
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Mar 20 2012 21:23

can see this ones died a death.....

Angelus Novus
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Mar 21 2012 00:51

Noa's holed up with a militia in the Montana wildnerness for when the Federal Reserve sends in the UN black helicopters to take his guns and gold.

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Mar 21 2012 01:18

http://www.nytimes.com/2012/03/21/business/bernanke-the-professor-debunks-the-gold-standard.html

http://blogs.wsj.com/economics/2012/03/20/bernanke-chinas-dollar-peg-like-being-on-gold-standard/

JM
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Mar 21 2012 06:13

This may help you out: Currency and its Value: The Competition of Nations for the Wealth of the World

andy g
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Mar 21 2012 11:52

cheers JM - more bedtime reading!!

the articles Noa's linked are surely testimony to the continuing need to attempt to ground national currencies in some "real" measure of value i.e. a money commodity of some sort, as is the necessity for central banks to stockpile precious metals to "support" currencies

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Mar 21 2012 21:15

There are some other relevant articles from the same journal (Pod Znamenem Marksizma), in the year 1924 for instance:
no. 8-9. B. Lifshitz: On positing the money problem
or in 1927
no.12 Z. Atlas: Problem of world money currency (review)
and in 1928
no.4. G.M. Dashevskij: Nominalism and the problem of the value of money
no.6 S. Legezo: Quantitative theory of money
no.10. I. Markov: Marxist theory of credit in the 'treatment' of Hilferding
etc.

Only a few libraries in the world have these issues. I'm not able to make these articles available.

An expert on money commodity was Faddei Il’ich Mikhalevskii who wrote about gold during many different epochs including the second world war (often people just explain the entire period 1914-1946 as a big mess).

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jura
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Mar 22 2012 07:29

Noa, have you tried getting those issues via an inter-library loan?

andy g
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Mar 22 2012 10:55

yourmum:

I'd be interested to know who has said what and where on the issue. Marx's analysis of money and its functions depends on the existence of a money commodity, surely? How can a symbol (whether virtual or printed on paper or a base metal) serve as a measure or store of value? money can only act as a univeral equivalent because the money commodity itself has value as a product of abstract human labour. Representations of the money commodity can serve as media of circulation but in the absence of a connection to an underlying money commodity I don't understand how they can act as stores of value. Isn't this why there is the rush to "hard currencies" or even precious metals in credit or monetary crises? This doesn't mean fiat money must be directly convertible into bullion at a prescribed rate but it surely does mean some basis in an actual money commodity is indispensible?