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Posts Tagged ‘commodity money’

How Did Antistatism Get Here?: A critique of David Graeber’s “Debt”

November 23, 2012 4 comments

In his book, “Debt: The First 5000 Years”, David Graeber levels the accusation against the Left, that it lacks imagination to see beyond present society. I think Graeber’s accusation is accurate and can be seen in his own antistatist (i.e., anti-political and anti-economic) argument. Contrary to Graeber’s argument that money has no essence, it is precisely because money has an essence that fascist state issued debt monies (treasuries) represent a world historical money-form: this debt-money implies money itself has become obsolete.

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Fiat currency: “No more money than a theatre ticket is”

June 9, 2012 5 comments

I am adding additional comments to my reading of Weeks’ paper, “The theoretical and empirical credibility of commodity money” (PDF). In my first reading, I identified a problem with Weeks’ presentation of what he asserts is empirical evidence supporting a link between commodity-money and price. In my second reading I explained how Weeks’ real contribution to my understanding is his analysis of the neoclassical theory of money. In this reading, I am trying, based on Weeks’ argument to define exactly what the dollar and other fiat currencies are; and their relation both to commodity money and the circulation of commodities.

The problem posed by most Marxist attempts to analyze fiat currency is that state issued fiat is treated as if it is money when it is not; and prices denominated in a fiat currency are treated as if these prices express the value of commodities, which they do not. For years now Marxists have been asking if money can be a valueless piece of paper in Marx’s theory — the answer is no. This answer is unpalatable to many Marxists because they think it suggests Marx’s theory of money is invalid for purposes of analysis. My assumption in this post is that Marx’s theory is and remains valid AND this valueless currency is not money.

So if the dollar is not money, what is it? Why is it used for transactions? To answer these questions, we have to begin by understanding exactly how the currency works according to neoclassical theory.

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Worthless money as a rational absurdity

June 5, 2012 3 comments

INTRODUCTION

For a while now, I have been trying to come to grips with the neoclassical theory of money, which states anything can serve as money and that money doesn’t have to be a commodity. The theory is patently theoretically absurd, contradictory and internally inconsistent as John weeks explains in the paper I discuss in my post. Despite these defects, however, neoclassical money theory not only maintains its dominance in economics, its alternative, commodity money theory, is ridiculed and marginalized even among Marxist theorists.

While reading the John Weeks paper, it began to dawn on me why this is true. I had been spending my effort trying to argue for the superiority of commodity money theory, when I should have been trying to understand the circumstances under which neoclassical money theory made sense. Weeks, in his paper, explains two assumptions which are necessary for neoclassical money theory: 1. the economy has to produce only one composite commodity; and 2. the state must be able to control the money supply.

Weeks thinks both of these conditions make neoclassical money theory wrong, but now I believe he is wrong on this. In the capitalist mode of production, the only true commodity is labor power — the single composite commodity required by neoclassical theory. Moreover, contrary to Weeks’ assertion, the state can control the money supply, if we a speaking of classical commodity money. It need only declare commodity money is not money and replace this money in circulation with its own token, i.e., impose an inconvertible currency in place of gold. This was done in the 1930s in the US and Europe. The state can control the money supply, if by “control” that term includes also setting that supply to zero.

The result was a bit of an epiphany for me, since Weeks is describing how Washington directly manages the US economy as a single giant corporation, despite the economy appearing superficially as numerous separate capitals.

The article was rushed and is in need of serious editing, but I welcome criticism and challenges to this idea.

*****

I want to recommend everyone read John Weeks’ paper, “The theoretical and empirical credibility of commodity money“, because he presents a key to the analysis of neoclassical economic theory that unlocks its inner logic. I missed the juicy goodness of his argument in my first read because I have an aversion to mixing math with social criticism. However, in his math Weeks uncover why money is not a commodity-money in neoclassical theory, and why it cannot be a commodity-money.

Weeks tries to make sense of a troubling rejection by neoclassical economic theory to admit to the obvious internal consistency of Marx’s commodity-money theory:

Th[e] theoretical superiority of commodity-based monetary theory has had little practical impact because of a perceived empirical absurdity of the commodity money hypothesis.

I came to my understanding of fascist state issued fiat money based on one closely held idea that neoclassical economics is not irrational, capitalism is. Yes, capitalism is as irrational as it has been declared by Marxists to be, however no one but an idiot would buy into the neoclassical argument unless it made sense in the context of fascist state economic policy. Since capitalism itself is irrational, a rational person looks like an idiot when he buys into its propositions; on the other hand, accepting the irrationality of capitalist relations of production as the basis for formulating fascist state economic policy is rational.

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Capitalism without Crises?

February 6, 2012 Leave a comment

At the end of his paper, Fred Moseley makes several statements that are important to parse. (PDF: )

This conclusion suggests that the debate over whether or not gold still plays a role in the function of measure of value in today’s economy is less important for Marx’s theory than previously thought. Whether or not gold still plays such a monetary role, i.e. whether it is assumed that credit money represents SNLT directly by itself, or indirectly through gold, it does not make any difference to the quantitative determination of the MELT in Marx’s theory. In both cases, the MELT is equal to the ratio Mp V / L, as in equation (7). Therefore, it also does not make any difference to the determination of the aggregate price level, nor of the total surplus-value produced.

Moseley argues Marx’s theory of money can be dispensed with, since it plays no role in determination of value, prices, and surplus value. As a practical matter, Moseley appears to be right on this: even in the absence of commodity money, labor produces value and surplus value. And, commodity money plays only a symbolic or token role in prices. Finally, if I interpret Marx correctly, money and the circulation of commodities occupy antagonistic poles not only in circulation itself, but between circulation, on the one hand, and a hoard of gold, on the other. Which is to say, between capital (as wealth in circulation, as self-expanding value) and money (as wealth at rest.).

If capital was not prone to crises arising from the mode of production itself, money in Marx’s sense of that term would be unnecessary. This is the side of the equation that Moseley grasps onto as if it is the whole of Marx’s theory of money. Mosley’s argument requires a capitalism without overaccumulation (overproduction) of capital, without crises and stoppages of industry. Once all these elements of capitalism are reintroduced into his argument, that argument collapses and must collapse. Now, the circulation of commodities is no longer smooth and unvarying, but subject to interruptions, imbalances, even periodic collapses. During these periods of crises what serves as money is of acute importance — it cannot be symbolic or token money, but must be actual gold.

During crises, the nominal value of token money, bills of exchange, derivatives, bonds, etc. vanish — as is happening right now in Europe. This devaluation of token money and credit money is expressed as the sudden appreciation of gold “prices” against all symbolic monies.

What remains to be shown is that even if we assume no overaccumulation, crises or industrial stoppages, Moseley never shows in his paper that symbolic or token money can not only serve as measure of the value of commodities, but actually materialize this value in its own form — these two are not the same thing.

To understand the difference consider the difference between labor power employed to produce an automobile or a manicure, and that employed to clear an occupation, or a village in Afghanistan. In the first case labor power is employed to produce a thing having value — even if this employment itself produces no material object. In the second case labor power is not employed to produce anything but broken bones and corpses. In either case tokens can be used to purchase the labor power employed, but only in the first case does the labor power replace its value.

If we consider the capitalist mode of production as the continuous circulation of value through the process of self-expansion the result is obvious: in the first case we get not only the replacement of the value of the labor power, but an additional surplus value; while, in the second case, we get neither replacement of the value of the labor power, nor any
surplus value — just piles of dead bodies.

The quantity of value in circulation has undergone a contraction in the second case of unproductive employment of labor power. Yet, there is no alteration of the quantity of symbols of money in circulation. While it is true these symbols of money now expressed the diminished quantity of values in circulation just as readily as they did the larger quantity previously, it is also clear that they express it the same way a bucket expresses the quantity of water it contains. There is, in fact, no way to tell how much water there is in the bucket merely by examining its outside. Is the bucket full? Half full? Or, empty? Does the bucket contain only water, or does it also contain oil or some other contaminant? If the bucket contains both water and oil, in what proportion are the two liquids present in the bucket.

The fact is, according to Marx’s theory of money, with debased tokens of money it is impossible to separate the socially necessary expenditures of labor time, from labor time that is wasted and unproductive. Without the ability to distinguish between the productive expenditure of labor time and unproductive expenditure of labor time we are led into the fallacy of neoclassical economic theorists who propose the prices of commodities are identical with their values. And, that the total sum of prices of commodities in circulation is identical with the total sum of values of those commodities.

When Andrew Kliman admitted that MELT is not a diagnostic tool, he was admitting that MELT was unable to distinguish socially necessary labor time of society, from labor time that is totally wasted and unproductive. But, the entire point of the social revolution is predicated on just this material differentiation. The whole of the struggle between the two great classes of capitalist society is a fight over what is socially necessary labor time. This takes the immediate form of the fight over the division of the social labor day between wages and profits, i.e., between value and surplus value. But, in the final analysis, it is a fight over labor time that is socially necessary in both these categories, and labor time that is superfluous to either category.

“Here, Fred. Fixed that for ya!”

February 3, 2012 5 comments

In his paper, THE “MONETARY EXPRESSION OF LABOR” IN THE CASE OF NON-COMMODITY MONEY,, Fred Moseley admits Marx argues money is a commodity, but Moseley wonders if this was not just due to the fact Marx was trying to explain 19th Century capitalism.

Some critics of Marx claim his theory is invalidated by the contemporary use of worthless paper money, and Moseley takes exception to this argument. Moseley is clearly trying to salvage Marx’s theory in the age of digital currency, and, I think, his heart is in the right place. But, somehow he just screws up early on in his argument, which leads him off along a tangent wide of his mark. Moseley tries to salvage Marx by throwing out the one thing that is unique to Marx’s labor theory of value — his labor theory of value.

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The Trouble with Marxism (Part Four): Moseley, Marx, Money and Symbols

February 1, 2012 Leave a comment

This section of my critical analysis of Fred Moseley’s “THE ‘MONETARY EXPRESSION OF LABOR’ IN THE CASE OF NON-COMMODITY MONEY” is presented after the generous input of Kirsten Tynan (twitter: @KirsteninMT), who gave up her time to help me decipher the silly equations Moseley uses to illustrate his argument. I take back what I said about the relation between math, autism and mental illness. In fact, @KirsteninMT took time from pressing personal concerns to give me her valuable input — and I want to acknowledge that.

In this section of my critical analysis of Fred Moseley’s MELT theory, my objective will be to get at the argument, behind MELT, that non-commodity money alone can serve as money. Once I have done this, I will be able to show that the confusion of price with exchange value prevent Marxism from making a materialist analysis of the role of the fascist state in the economy, capitalist overaccumulation, and to underestimate the possibility for realization of communist society.

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