Coin and
Symbols Of Value
The development of money as coin derives from its function as
currency. The function of minting coins, as with the legal
establishment of a standard or prices e.g. Pound, Dollar and so on,
is appropriated by the State. The fact that Gold and Silver coins
have different names, weights etc. in different countries is a
reflection of the fact of the separation of the circulation of
commodities into a national and an international sphere.
In international trade, payment is made in gold bullion rather than
coin. This illustrates that the only difference between bullion and
coin, as money, is the shape. The moment gold is minted into coin,
it has already begun its journey back to be melted into bullion. As
part of normal circulation, all coins are subject to wear and tear.
Coins made of precious metals are also subject to clipping, i.e.
slithers of gold are cut from coins, accumulated and then sold as
gold. This means that the coins continue to circulate at their face
value, although their actual value has been diminished. To try to
prevent this, the process of milling the edges of coins was
introduced.
But, coins still got worn down, so the actual value of the coin
determined by the amount of gold it contained, inevitably and
increasingly diverged from its nominal value based on how much gold
it was supposed to contain. In other words, even gold coins became
just symbols of the gold money they represented.
Marx points out that this caused considerable confusion over the
centuries about the real nature of money. Laws were introduced to
set the minimum weight of gold or silver that coins had to contain,
below which they ceased to be legal tender, and had to be withdrawn
from circulation. Even so, periodically the weight of gold in coins
was officially reduced, reflecting the fact that this was the case in
reality of the coins actually circulating. Marx gives extensive
details on the extent to which the actual value of coins had fallen
compared to their original value, so that they were often now just a
small fraction of their original value.
The fact, however, that even gold coins only ever acted as mere
symbols or tokens of the money they represented meant that it became
obvious that other tokens could be used as coins. There were other
reasons for that. Firstly, minting very small amounts of gold to
represent tiny monetary amounts was not practical. Secondly, less
precious metals such as silver and copper had been used earlier. As
trade increases and more money is required in circulation, the more
precious metal pushes out the lesser, for bigger transactions. This
leaves the less precious metal to act as a fraction of the monetary
standard, to be used for smaller payments. Thirdly, it is cheaper to
use other metals as tokens, and there is less reason for clipping of
these coins.
However, because these coins are used for the much larger number of
small transactions, they are subject to greater wear and tear. Their
nominal value has no relation to the physical value which is set by
law as a given fraction of the standard monetary unit e.g. a Penny is
1/240 of a pound, a Shilling is 1/20 of a Pound and so on. The
weight and value of the metal in the coin is again arbitrarily
determined by law, so that it bears no resemblance to the money it
represents. Replacing gold coins with paper money tokens is just an
extension of this process.
However, Marx makes clear that he is speaking here of that stage of
history when this paper money is that issued and backed by the State,
not Credit Money, which is established later.
“But we
may affirm this much, that just as true paper money takes its rise in
the function of money as the circulating medium, so money based upon
credit takes root spontaneously in the function of money as the means
of payment.” (p127)
The laws relating to this paper money are quite straightforward. As
the requirements of circulation can only absorb a certain amount of
gold money, so the paper money tokens put in circulation to represent
it cannot exceed that total either. Where an excess of gold in
circulation is automatically withdrawn (hoarded or melted into
bullion etc.) the same cannot occur with paper money tokens (because
they have no real value of their own as gold does). If more paper
tokens are in circulation than is required (because an excess has
been printed, or because economic activity has declined etc.) then
these money tokens represent a smaller amount of money. Marx refers
in many notes to his earlier analysis of money undertaken in
A Contribution To The Critique of Political Economy.
I have covered much of Marx's analysis of money and the relation
between Gold and Paper Money Tokens, set out in the Contribution, in
a blog I wrote many years ago which I have reproduced as - Marx Gold and Money
“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.
Paper money is a token representing gold or
money. The relation between it and the values of commodities is this,
that the latter are ideally expressed in the same quantities of gold
that are symbolically represented by the paper. Only in so far as
paper money represents gold, which like all other commodities has
value, is it a symbol of value.” (p 128-9)
Paper money tokens can perform this function of currency in place of
money, because all that is occurring is the intercession of money in
the exchange of commodities, C-M-C. But, money has other functions
besides currency. Paper cannot replace gold as universal equivalent
of Value, and, therefore, measure of Value. Even as currency, paper
can only act as a symbol of money with the power of the State behind
it, which restricts its circulation within the realm of the State.
Even then, as we have seen in the Weimar Republic, if the printing of
money tokens exceeds certain limits relative to the gold it
represents, not even the State can enforce its function. As Marx
puts it,
“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.” (p 128)
Section 3 – Money
a)
Hoarding
The circulation of commodities is reflected in the continual currency
of money. But, when the circuit of commodities ceases, when sale is
not followed by purchase then this mobilisation of money ceases. It
stops being coin or currency, and becomes money. From the beginning
of commodity circulation, the desire arises to hold on to money.
Money becomes hoarded, and sellers become hoarders.
The first commodities arise as accidental surpluses, and are
converted into gold and silver, and so arises the view of gold and
silver as themselves expressions of “superfluity or wealth”.
Where production continues to be based on the supply of a restricted
range of wares, this kind of hoarding of gold and silver continues.
Marx refers to that tradition in Asia, and even today, a large
quantity of gold demand comes from India.
As the production of commodities develops and every producer becomes
more dependent, both on selling their own output, and on being able
to buy the output of others, so the production and consumption can
become more separated so that it becomes necessary to be able to buy
without selling. In other words, a certain hoard of money is
required. But, this implies that previously you have sold without
buying. This seems to represent a contradiction when looked at as a
whole.
But, the gold producers have money (gold) not from having previously
sold, but by virtue of producing the money commodity itself. Their
money is in the form of a hoard immediately. When they acquire
commodities in direct exchange it is not on the basis of C-M-C (i.e.
a sale of a commodity to acquire money), but directly of M-C. All
down the line then it becomes possible to acquire money without the
need to immediately make a purchase, resulting in the formation of
hoards. The gold producer sees M-C. But, the seller of C to them
sees C-M. M for them can then become a hoard, which can be used to
make a purchase not immediately, but some time in the future i.e.
M-C, and so on.
The possibility of storing exchange value in this commodity form also
sees the development of the greed for gold.
Everything is convertible into gold, commodity or not, and with its
possession, everything is possible. Everything can be bought and
sold. Money is able to sweep away all distinctions, and in the
possession of individuals, it also, therefore, brings social power.
In pre-capitalist formations, the accumulation of hoards is seen as
equivalent to an increase in Value, and even though, in reality, the
Value of the money varies according to differences of its own value,
or that of other commodities. But, for the hoarder, 200 oz. gold is
still more than 100 oz. and the gold is still “the immediate
incarnation of all human labour.” So, the desire to increase these
hoards is insatiable. Money can buy anything, but to buy more of it
you need more money, a larger hoard.
“In
order that gold may be held as money, and made to form a hoard, it
must be prevented from circulating, or from transforming itself into
a means of enjoyment. The hoarder, therefore, makes a sacrifice of
the lusts of the flesh to his gold fetish. He acts in earnest up to
the Gospel of abstention. On the other hand, he can withdraw from
circulation no more than what he has thrown into it in the shape of
commodities. The more he produces, the more he is able to sell. Hard
work, saving, and avarice are, therefore, his three cardinal virtues,
and to sell much and buy little the sum of his political economy.”
(p 133)
Alongside this form of hoard, as the wealth of society increases, we
see gold and silver hoarded in the form of jewellery and other such
objects. So, the market for them grows separate from their use as
money, and particularly in times of crisis, this also forms a latent
source of supply. At the same time, these hoards also help in the
process of regulating the money supply, because it is always
necessary that there is more gold and silver in the country than is,
at any time, needed for coins, so that more can be minted if
required, and when not required can return to the hoards.
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