Carl Carlton is responsible for some great music, my favourite being the Northern Classic, Competition Ain't Nothing. This is his disco version of the 1967 hit for Robert Knight, of Everlasting Love. I have to say, however, that this version is a bit flaccid compared to that of both Robert Knight, and particularly what I think is the definitive version from Love Affair. Preparation for some serious dancing to a bit of Northern tonight at Soulville.
Friday, 30 September 2022
The Banana Monarchy & Voodoo Economics - Part 2 of 9
The government has announced huge levels of proposed debt and borrowing to cover its proposed cap on energy prices, prices that have soared because of NATO's boycott of Russian oil and gas, encouraged by US imperialism, with the UK again playing second fiddle. That comes on top of the huge debts they already had as a result of the massive borrowing and money printing to cover their income replacement schemes, required due to their imposition of the idiotic lockdowns over 2020, and 2021. But, now, they have compounded that with proposals for even more spending, alongside tax cuts. The arguments used for this are the same that liberals have used in the past to justify tax cuts for the rich, based upon the idiotic ideas of Art Laffer, and the Laffer Curve.
It is, of course, true that there must be some point at which raising taxes further causes tax revenues to fall, just as there is a point where raising prices leads to lower sales revenues, because demand falls by a greater proportion than the proportional rise in price. But, the proponents of Voodoo Economics always talk as though it is always possible to increase tax revenues by cutting taxes. They are never seen arguing the other side of the Laffer Curve argument that tax revenues might rise if taxes were raised. The argument relies on the reduced taxes giving a spur to the supply side of the economy, so that entrepreneurs are stimulated to engage in additional productive activity, so that more sales and profits are produced, more workers are employed earning wages, and all of this results in more people paying more taxes, even though the rate of tax has fallen.
But, there is little or no evidence that this is the case. The main determinant of whether a business engages in additional productive investment is whether there is demand for what it produces or not. A tax incentive that encourages a highly productive worker in a large firm to become an inefficient, self-employed producer, would actually reduce productivity, and economic growth, and a large part of the low productivity and sluggish growth in Britain is down precisely to the fact that it has given incentives to these low productivity, inefficient small capitals over the last 40 years! And, demonstrating that the reactionary, petty-bourgeois ideology of Starmer's Blue Labour has no answers, its proposals for hitting big business with more taxes and limitations, whilst providing further support for small business would simply exacerbate that problem. He's as much a Brexitory as Truss!
This Brexitory line on tax cuts is a variation of the argument, in the 1930's, in which the Miseans argued that lower interest rates would stimulate additional investment and economic activity. As Keynes responded, that is like “pushing on a string”. If I am a firm producing 1,000 units of some commodity, and see no prospect of selling 1,100 units at the current price, there is no point in me producing 1,100 units, because, to sell the additional 100 units, I would have to reduce the price of all the units I sell, by say 10%, and that would reduce, then, also my overall profit on those sales. To say that, I might be encouraged to produce the additional 100 units, by reducing interest rates, so that I could borrow more cheaply to buy the additional capital, is no real incentive. Similarly, reducing the tax I pay on the profits, or my other income, is also no incentive to invest more. I will simply just pocket the additional revenue resulting from the lower tax.
By contrast, if the economy is growing rapidly, and I am a firm seeing the demand for the commodities I produce rising rapidly, I will have a direct incentive to invest in additional capital to meet that demand, because, if I don't, competition means other firms will, and, as they do, they will swallow up an increased market share. If they can increase their share enough, and produce on a larger scale, they will obtain all the benefits of economies of scale, reducing their costs below mine, the end result of which is they undercut me, and continue to increase their share until, eventually, I'm forced out of business. In fact, as Marx demonstrates, firms have to respond to the increased demand in this way, even if their rate of profit falls, as a result of the increased investment and supply, even if they must pay higher rates of interest to cover their borrowing for investment, and even if they face higher taxes on their profits.
What is more, in conditions where firms see no basis for expanding production, cutting taxes, which are then just pocketed by capitalists (either from profits or from dividends/interest) simply leads to increased unproductive consumption. One form of that for capitalists is, of course, the purchase of financial and property assets, which is more likely to be one of the real reasons the Brexitories have made this proposal as they also seek to inflate rapidly deflating asset prices. That is why they have also reduced Stamp Duty on the purchase of houses, as rising interest rates begin to crush land prices, and house prices.
Thursday, 29 September 2022
Chapter 2 B. Theories of the Standard of Money - Part 2 of 10
This process, whereby precious metal coins become debased, as a result of wear and tear, clipping or deliberate debasement by the state, has occurred throughout history, and results in the prices of these metals rising, but also in a rebasing of the currency, and an increase in the quantity of it in circulation – inflation. It is a time honoured means of states paying off their debts, contracted in currency at one value, and paid back with currency of lower value.
“When, because of the resulting difficulties, it was decided to recoin all the money, Lowndes, the Secretary to the Treasury, claimed that the value of an ounce of silver had risen and that in future accordingly 6s. 3d. would have to be struck from an ounce instead of 5s. 2d. as previously. He thus in effect asserted that, because the value of an ounce of silver had risen, the value of its aliquot parts had fallen. But his false theory was merely designed to make a correct practical measure more palatable. The government debts had been contracted in light shillings, were they to be repaid in coins of standard weight? Instead of saying pay back 4 ounces of silver for every 5 ounces you received nominally but which contained in fact only 4 ounces of silver, he said, on the contrary, pay back nominally 5 ounces but reduce their metal content to 4 ounces and call the amount you hitherto called 4/5 of a shilling a shilling. Lowndes’s action, therefore, was in reality based on the metal content, whereas in theory he stuck to the name of account.” (p 77)
The bourgeoisie, however, who were, by this time, asserting their growing economic and social power, objected to this deception. It was they, after all, who were the state's creditors, and who were being repaid in funny money. As with many other such issues, at this time, their ideological champion was John Locke. In the confrontation between Locke and Lowndes, it was Locke who won the day.
“John Locke won the day and money borrowed in guineas containing 10 to 14 shillings was repaid in guineas of 20 shillings. Sir James Steuart gives the following ironical summary of this operation:
"...the state gained considerably upon the score of taxes, as well as the creditors upon their capitals and interest; and the nation, which was the principal loser, was pleased, because their standard” (the standard of their own value) “was not debased.”
Steuart believed that in the course of further development of commerce the nation would become wiser. But he was wrong. Some 120 years later the same quid pro quo was repeated.” (p 77-8)
After WWII, as part of the Bretton Woods Agreement, the price of gold was fixed at $35 an ounce. All other currencies exchange rates were then fixed against the Dollar. If a country found itself in difficulties, because it was importing more than it was exporting, it was expected to correct this by slowing its economy, thereby, slowing its imports. By raising taxes on consumption, it could divert some of its output to exports, and by raising its interest rates it would both slow its domestic consumption and draw in foreign capital, thereby bolstering its balance of payments. It could also apply to the IMF for loans to cover deficits in the short-term, and these loans came with strings requiring the country to get its finances in order.
In severe cases of imbalance, a country could devalue its currency, as Britain did in 1967. Such action makes imports more expensive, deterring them, and exports cheaper, thereby encouraging them, though this does not appear to be the case initially as a result of the so called J Curve. But, such action was frowned upon, and government's undertook them only reluctantly, as it was seen as a failure of economic management, and also provoked hostility from other countries, some of whom would retaliate with their own devaluations, or other trade measures. How far devaluation itself is a means of resolving such imbalances is another discussion.
Superficially Labour
To paraphrase Rupa Huq, Starmer's reactionary, nationalist/monarchist party may be barely, superficially Labour, but that is all.
If you strained your eyes, you could sometimes see a sign using the word Labour, hiding behind all of the Union Jacks and other symbols of the British imperialism that was responsible for the enslavement, rape and murder of millions of people, across the globe for several centuries, and the pillaging of the wealth of entire continents, during that same period, but it is a label that is a purely meaningless token, devalued of any connection to its origin, much as with the devalued Pound Sterling, which has no real connection to the Pound of Sterling Silver that was the origin of its name.
If you had listened to the Labour conference, you would not even have seen those purely superficial labels linking back to a party that was once a Labour Party, and its origins within the trades union movement. In neither place would you, of course, have seen or heard the word "Socialism", long since banished from the superficial vessel that now bears the label Labour.
Listening in, you would have heard the voices of comfortably off, upper-middle-class people, educated in all the right places, alongside the other boys and girls of the ruling class whose interests they serve, and share. Without even the guidance of the superficial labels to give you a hint that this was a Labour conference, you would be convinced that it was the conference of a party of middle class careerists, serving the interests of middle-class careerists.
And, what would strengthen your belief in that is that, whilst the voices of its representatives were those of a privileged elite, sanctimonious and self-serving, and whilst, even the singing of the vile, racist and blood-thirsty national anthem, has been undertaken by other conservative parties in the past, for those parties that came naturally, whereas, for this party, it is grossly exaggerated, and false, like a suitor meeting potential in-laws, who has to fawn and grovel to seek their approval.
For the Tories, over the years, obsequiousness in relation to the Monarchy came naturally, as they understood it for what it was, a figurehead on the ship of the capitalist state, a figurehead that symbolised the old feudal regime out of which the capitalist class had emerged, and come to conquer, the Monarch having been captured, and secured to be utilised for its own purposes. It was the means by which the capitalist class had both incorporated the old ruling classes into its own regime, and which, having secured itself in power, also sought to emulate, with its own grandiloquence, pomp, flummery, and extravagance, as it also married into those old ruling families. It was the final symbol of its conquest and secure knowledge of its position.
But, those Tories, at least in the twentieth century, were, as representatives of that ruling class, themselves conservative social-democrats. They understood the dominant role of the ruling class as a class of money-lending capitalists, owners of fictitious-capital, land and property, and whose interests, therefore, depended upon the success of large-scale, socialised capital. In that, they were no different from the rump left behind in the Liberal Party, or the main representative of conservative social-democracy, the Labour Party that had emerged from it. These two main, catch-all, social-democratic parties differed only in degree. The Tories were still based upon the petty-bourgeoisie and landed property, but they had no control over what the party in parliament actually did. For much of the time, they didn't get a vote on the Party Leader, or party policy. That was left to Tory MP's, who were themselves effectively foisted upon them by Tory HQ.
The Tory Party, as a catch-all party, was a spectrum running from the reactionary right (reactionary in its scientific sense of wanting to turn the clock back, and so representing the interests of the petty-bourgeoisie or small producers), to conservative social-democrats who wanted to defend the status quo at all costs, and so including fascists (fascism is a movement based on the petty-bourgeois, as foot soldiers, but which, in order to gain and retain power, must represent the interests of the ruling class, and, thereby, of large-scale socialised capital), but mostly comprised of bourgeois democrats.
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| Peterloo - the rebellion of the bourgeoisie and petty-bourgeoisie, with the nascent working-class in tow. |
Labour, as such a catch-all party, was from the beginning a Popular Front. Ideologically, it simply copied and pasted the social-democratic ideas developed in the 19th century by the Liberal Party that itself emerged as a catch-all combining workers and industrial capitalists in their joint struggle against the old landed aristocracy, and its allies amongst the commercial and financial bourgeoisie. As the party became bottom heavy, once workers gained the vote, and trades unions came to have both money and members that could be mobilised, centrifugal forces, necessarily sloughed off the openly bourgeois element, separating out the bulk into the newly formed Labour Party.
It was, then, always a similar spectrum, just starting from a different point. Its right most point being the conservative social-democrats, barely distinguishable from their equivalents in the Tory Party, particularly during the period of Buttskellism . Studying politics, in the late 1970's, one of the bits of data that stuck in my mind was that 90% of all legislation in the pipeline, at the time of an election, was carried into law by the opposing party after it won the election.
The spectrum continued through to the progressive social-democrats, who still saw capitalism as eternal, and only to be mollified, but who drew the rational conclusion that, even this mollification, and the supposed unity of interest between capital and labour, was only possible if workers also had a say in production, via some form of industrial democracy. They were the rational expression of Taylorism/Fordism, of the most rational and democratic development of capital, as it existed as large-scale socialised capital.
And, beyond them were reformist socialists, much of the kind as the earlier SPD, or French and Italian Socialist Parties etc. That is those that actually wanted to go beyond capitalism to Socialism, but who wanted to get there by gradualist means, as society evolved towards it. And, beyond them were centrists like the ILP of the 1930's, vacillating between reformism and revolutionary socialism, with always only a small element beyond them that was itself comprised of revolutionary socialists.
The historic origin of the Labour Party within the Liberal Party, and the continued characterisation of its ideology as bourgeois, meant that attempts to reunite them was always inevitable. The Fabians never wanted to create the Labour Party to begin with, but to continue to operate via the Liberals. Some of the trades unions objected to the involvement of "socialist" elements, from the beginning, and they insisted that any commitment to anything like Socialism was excluded from its constitution. The SDP set the course, illustrating that tendency. Blair's vision was always to try to reunite with the Liberals, alongside ditching the link to the unions, and further neutering any influence of the party membership, much as was the case inside the Tory Party. The same ideology is reflected, today, by people like Paul Mason, who advocate this further liquidationism, and subordination to bourgeois ideas in search of unity with the Liberals.
But, even that is still recognisable as a Labour Party with a link to its past. It is a bourgeois ideology, but it is still a social-democratic, bourgeois ideology. It goes no further than a belief that capitalism is inevitable, but it at least bases itself on the reality of a capitalism dominated by large-scale, socialised capital, its need for a large social-democratic state, and indeed, an ever larger state, such as represented by the EU, and beyond it, global para state bodies. Starmer's, reactionary, nationalist/monarchist party has broken the link with that tradition and that social-democratic ideology. Like the Tories, it has become reactionary in the true sense of the term, seeking not even to preserve the status quo, but to actually turn the clock backwards.
The closest thing I can compare them to is the Russian Octobrists. They can't even be compared to the Russian Kadets, because they, at least, were representatives of large-scale capital, and its rational development in Russia. Starmer's Blue Labour, like the Brexitories is noted for its attacks on large-scale socialised capital, with proposals for windfall taxes on it, other taxes on it and the more developed forms of capital so as to subsidise reactionary and inefficient small capital, the dying business model of the high street, and so on. In all that, they are more like the reactionaries of the Narodniks of the 1890's, other than they came out of a populist movement against Tsarism, whereas Starmer now worships at the feet of monarchy, tugs his forelock, bows and scrapes in servile manner like Uriah Heep incarnate, and whereas most of the Narodniks considered themselves some form of socialist, Starmer seeks to position his Blue Labour Party as far away from any contamination by such ideas as possible.
Had you been listening to the conference on radio, that is what you would have heard, a right-wing, reactionary party, sycophantly prostrating itself at the feet of a corrupted and degenerate monarchy that should have been consigned to the dustbin of history 300 years ago, singing along cheerfully to a racist, blood-thirsty national anthem, whose words are even xenophobic and oppressive towards the non-English nations contained within the Union, let alone to other nations, or to the other ethnicities from many of those nations that are now British "citizens", or more correctly, given the continuation of that Monarchical regime, and as stated on their passport, British subjects of the Crown.
Much like the reactionary polices of the Narodniks that sought to turn the clock back to the ideal of a society of individual small producers, one of the main factors that has both held back economic development, and also fostered reactionary ideas over the last 40 years, what you would also have heard is utopian ideas of state funded and developed programmes, such as in respect of Green Energy. Alongside it, you would have heard very little detailed policies and solutions for the problems of British workers for the here and now. For such careerist politicians, the solutions always amount to pain today, and jam tomorrow, except tomorrow never comes.
Starmer's reactionary nationalist/monarchist party has simply shifted further to the Right, chasing after a rapidly rightward moving Brexitory Party, and that is always the way with such catch-all parties, or Popular Fronts. In order to secure votes, or seats in parliament, it always becomes necessary to make the tent bigger, by subordinating yourself to more right-wing ideas and forces, in order to draw them in. The trouble with lesser-evilism is that there is always a greater evil to the ones you have already reconciled yourself to allying with. Eventually, you become the evil you originally set out to confront.
Starmer can hardly criticise the Tories effectively, because all along he has been simply a cheap knock-off of them, a shoddy counterfeit, in search of populist support from reactionary elements in society. He has tried to separate out his support for the policies pursued, from the consequences of them. If we take the current high levels of inflation, they are the consequence of decades of central banks printing excess money tokens, to inflate asset prices, as well as the policies of governments in promoting that asset price inflation at the cost of the real economy. It may have begun in Britain, in earnest, under Thatcher, but it was continued and intensified under Blair and Brown, particularly after 2008.
And, the most recent manifestation of it was under lockdowns, and indeed made necessary by those idiotic blanket lockdowns. But, who was it that criticised the Brexitories for not locking down sooner, for longer, and on an even wider scale? It was Starmer. Who fully supported the payment of replacement incomes, and huge borrowing and money printing to cover it? It was Starmer. Who was it that fully supported US imperialism and its insane boycotts of Russian oil and gas that has pushed up European gas prices by 1,000%? It was Starmer. Who is it that has gone from being a proponent of a second referendum, under Corbyn, to being a bigger Brexitory than Boris Johnson, and so causing all of the damage and increased costs from it? It is Starmer!
And, so, if you listened to the conference, rather than seeing any of the labels, or knowing what you were listening to, you would have believed you were listening to the conference of a party of comfortably off, elitist, reactionary nationalist/monarchists. But, something would not have rung quite true from it. It would have that ring of a fake, as though somewhere within it there was a crack or some other kind of flaw. If you then took a look at it, and if you did not see the labels, hidden behind all of the jingoistic paraphernalia, your impression would be confirmed.
In 2008, the fantasist, Mikhail Saakashvilli, in Georgia, would appear on TV, and behind him there would be a plethora of EU and NATO flags. If you didn't know, you would think that this was a man and a country at the heart of the EU, and stalwart member of NATO. In fact, Georgia was neither. Saakashvilli wanted to become a member of both - he is now doing the same thing in Ukraine - and more importantly, as he began a genocidal attack on ethnic Russians in South Ossetia, which inevitably provoked a Russian response, he sought, their backing, much as Ukraine is doing now. Georgia was not a member of the EU or NATO, nor likely to be one, any time soon, and so, to make up for the reality, Saakashvilli simply exaggerated the superficial appearance, by drowning everything in the associated regalia.
Starmer's reactionary nationalist/monarchist party is doing the same. It competes with the Brexitories as to who can have the largest, and most number of Union flags on display, glorying in the blood and misery that this butcher's apron actually represents as a symbol of British colonialism over centuries. It does so, because the careerist politicians of Starmer's Blue Labour have disconnected themselves even from the social-democracy of a Blair, let alone a Wilson, Attlee, or a MacDonald.
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| Grandson of the modern John Bull, Former Labour Minister, Oswald Mosely also sought cheap votes by wrapping himself in the flag, and moving ever rightwards, ever more nationalistic and xenophobic. His programme was supported by Nye Bevan. |
In search of cheap votes from wherever they can get them, they have become petty-bourgeois Little Englanders, trying to gain some of the reflected imperial glory of Britain's bloody and shameful past. Hence the gimmick of singing the racist, xenophobic, blood curdling, English National Anthem, along with all of the profusion of Union Flags, and other flummery. In its excess, it simply demonstrates its falsity. The only thing missing was for Starmer to turn up on stage wearing a Union Flag suit, and top hat, with a British Bulldog at his side, much in the vein of John Bull. He of course, was a satirical character, whereas, the trajectory of Starmer's politics is more like that of the more modern John Bull's grandson, Oswald Moseley, or his admirers in the BNP, or its more acceptable form of UKIP and its inheritors.
Wednesday, 28 September 2022
Who Sabotaged The Nordstream Pipelines?
Yesterday, it was reported that the two Nordstream pipelines running from Russia into Germany, beneath the Baltic Sea, had been sabotaged, by three explosions. Of course, western media, immediately pointed the finger at Russia, claiming that it was done to signal a threat from Putin that he could cut off gas supplies to the EU. Is that possible? Of course, it is. You can put nothing past the vile, right-wing capitalist regime of Putin. Is it likely, however? No.
The biggest sabotage of Nordstream has come, of course, from the fact that Nordstream2, which would have brought billions more Roubles of revenue into Russia, was prevented from being opened by Germany, under tremendous pressure from US imperialism, via NATO, as the US sought to cut off oil and gas revenues going to Russia. So, as currently no gas is going from Russia to Europe via this route, there is nothing to be gained by Russia from blowing up its own pipeline, leading to it losing millions of Roubles worth of its own gas, and which will cost Russia money to repair the pipeline!
That argument is rather like the argument that was being put a few weeks or so ago, in relation to the Zaporizhzhia Nuclear Power Plant. When Russian troops first occupied the plant, as part of overrunning the surrounding areas, it was said that they intended to use it to deny Ukraine of power from the plant, and to tie it in to Russian energy supplies. Quite likely. Russian troops occupied the plant to that effect. Then the plant began to be shelled. Ukraine claimed, and western media dutifully reported that the shelling, which threatened a nuclear incident at the plant, which could have affected large parts of Europe, was being undertaken by Russia!
Why would you do that? Why would you a) shell your own troops, and b) why would you shell a nuclear plant already under your control, and which you sought to tie into your own energy supplies? There may be some bizarre reason for doing that, but none has been suggested, and Occam's Razor suggests its far more likely that the shelling came from Ukrainian forces that had lost the plant and surrounding area, and who were shelling the enemy Russian troops in the plant, as well as trying to prevent Russia securing energy from the plant, and even to actually cause a nuclear accident that could then be blamed on Russia. Since, IAEA officials have been permanently stationed in the plant, its notable that the shelling seems to have stopped.
But, as well as not opening Nordstream2, and so denying Europe of much needed energy supplies, it is again the EU, and its member states, again under severe pressure from US imperialism, that has voluntary cut off its gas supplies from Russia, via Nordstream1, as it has implemented a series of boycotts and sanctions on Russian oil and gas. So, again, why would Russia sabotage its own pipeline, when its already the EU that is sabotaging its own energy supplies by those sanctions? The argument is that Russia is sending a message to Europe that it could cut off those supplies. Does that make sense? Absolutely not!
Firstly, if the EU is already cutting off its own energy supplies, and, thereby, pushing up global energy prices - gas prices into Europe have risen by 1,000% - there is no need for Russia to threaten to do what the EU is already doing to itself! If Russia cuts off those supplies, by sabotage, it denies itself of the revenues that would come from those supplies. Given the nature of the Russian economy as dependent upon the sale of energy and primary products - the reason that NATO has targeted those things for its sanctions - why on Earth would it do that? On the contrary, the NATO sanctions have not only been ineffective in respect of energy, they have been counterproductive.
The effect has been to massively increase global energy prices. The main beneficiaries of that has been Russia, the US, and OPEC. Russia was able to sell its oil and gas to China, India, Phillipines, Indonesia and others at these much higher prices, even able to offer discounts, in order to undercut US and OPEC prices, which brought in huge amounts of additional revenues. So much was that the case that these additional revenues boosted the value of the Rouble against the Dollar to a level higher than it was before NATO began implementing the sanctions on it in 2021.
The effect of that was that Russian GDP, which had been forecast to drop by 12%, is now forecast to drop by only around 2%, with a 1% drop next year, which will be a much better performance than is likely in the EU and Britain, which are crucifying their economies, and their people on the cross of US imperialism's war against Russia and China.
In fact, with all of these revenues from much higher energy prices, Russia has been able to strengthen its ties to China, the workshop of the world, also under threat from US imperialism, which has been trying to undermine Chinese commodities in, particularly, high value areas, such as technology. Chine can supply all of Russia's needs for manufactured products in exchange for oil and gas, and China has been buying more Russian oil, refining it, and then selling it into the EU at these much higher prices.
In addition, as western capital has left Russia, as part of the sanctions, the largess flowing into Russia from higher energy prices has meant that Russian capitals have been able to simply take over the physical assets of those companies in Russia. For example, when McDonalds left, all of their restaurants and equipment have simply been taken over by a Russian company, meaning that the profits from that now again flow into Russian rather than US coffers.
Once again, this illustrates that economic sanctions never work to hit the people they are supposed to be directed at. The capitalists always utilise them to their own ends, whilst those adversely affected are workers, who lose their jobs, and see prices rise and so on. The NATO sanctions against Russia have been particularly idiotic, because they have not only been ineffective in preventing Russia selling energy supplies that are in demand across the globe, but have actually massively increased the price of that energy to the great benefit of Russia. US imperialism does not mind, because it has also benefited massively from higher energy prices, because it is itself not only self sufficient in oil and gas, but also exports huge amounts of both. It is the EU that has been damaged by it, and that is also to the US benefit, because it is the EU which is the largest single market in the world, and the main competitor of US imperialism.
But, if Russia wanted to cut off gas supplies to Europe, via Nordstream1, why would it do that by blowing up its own pipeline. It has no need. Not only is it the case that the EU is engaged in a masochistic, flagellation of its own economy, by voluntarily boycotting Russian oil and gas, so as to demonstrate its prostration at the feet of US imperialism, but Russia has also shown that it can use the energy weapon far more easily simply by turning off the supply!! It has already done that to several countries whose contracts ran out, and who refused to pay for their gas in Roubles. That payment in Roubles was required, because again NATO exclusion of Russia from the SWIFT international payments system, made payment in Dollars impossible.
Rather than blowing up its own pipelines, and the gas supplies within them, Russia has a far more powerful weapon in simply threatening to turn off or on the taps, whenever it chooses. In fact, given its dependence on revenues, being able to continue supplies is to its obvious benefit. Applying the standard detective motto in finding culprits of "who benefits", or alternatively "follow the money", you would have to say the finger does not point at Moscow.
So, who does benefit? In the last few weeks, EU governments have come under increasing pressure from their workers, as a result of the soaring prices of energy caused by NATO's boycott of Russian oil and gas. Demonstrations have taken place in several countries, linking those high prices directly to those boycotts. In many cases, those demonstrations have been coordinated by fascist and far right groups, some connected to the right-wing regime of Putin in Russia. That again, shows the idiocy of those on the Left that have formed Popular Fronts, not only with their own bourgeoisie, but also with NATO imperialism, and who have been prepared to see the interests of workers pulverised, simply to assuage the interest of that imperialism. It has been a huge recruiting sergeant for the far right, as the elections in Sweden and Italy have demonstrated.
The EU undoubtedly undertook the boycotts of Russian energy, because, much like the Iraq War, they bought into the propaganda put out by NATO that Putin would be forced to quickly capitulate. They must have thought that the need to make their people freeze to death over the Winter, and to see their businesses closed down once more, this time possibly permanently, would never arise, as a defeated Russia would be forced to supply energy to them at historically low prices. They have fallen victim to their own hubris, or more precisely they are the victims of NATO/US hubris, whilst the US itself can sit back in the warm glow of its own oil, gas, and coal supplies over Winter.
So, being able to deflect blame to Russia, by claiming it blew up the pipelines would certainly be in the interests of the EU, and particularly some of its states in Northern Europe, who will be most affected, and who have the easiest access to the Baltic. Rather than being blamed for their own boycotts of Russian energy, for the high prices, and lack of supply, they can try to blame it on Russia, which has been the media narrative all along. You never hear any media pundit talking about the high energy prices resulting from NATO sanctions, it is always framed as high energy prices resulting from the Ukraine War. The same is true of high food prices, resulting from NATO's sanctions, on Russian grain and other exports.
But, in the end, does the EU really want to have to destroy its economy, and face increasing revolts from its workers? It may currently be fascists, red-browners, and other Putin fans organising protests in Prague and elsewhere, but its not fascists organising the mass of strikes against high levels of inflation, and rising energy prices across the globe. Sooner or later, those two things must necessarily converge, and if socialists have any concert of strategy beyond the practical politics of following their nose, and simply putting a plus where there immediate opponents place a minus, they will realise that its necessary for socialists, and the labour movement to get ahead of that, and not simply prostrate itself in the interests of popular frontist alliances with US imperialism, of the kind proposed by Paul Mason, for example.
If things, sharpen as workers continue to mobilise, and to strike against the high cost of living, in conditions of continued tight labour markets, that favour workers, and so, protect themselves against those rising prices, the EU will want to be able to change course itself, to be able to restore its necessary cheap energy supplies from Russia, once it recognises that all the talk about a Russian collapse were just propaganda.
If Putin falls, which is unlikely, the likelihood is he will be replaced by something worse, and more hard line. (A lesson all those opportunists who clamoured for Boris Johnson to go should have learned). That would probably be also someone more subordinated to China. For all the talk of Xi and Modi, and Erdogan applying diplomatic pressure on Putin, it's in their interests that Russia not be defeated by the US, and they have shown they are themselves no slouches when it comes to being prepared to use violent means to achieve their ends, against their own populations as well as others.
So, its possible, but also unlikely, that the EU, or one of its member states, is responsible for the sabotage. The country that gains most is the US. It could be argued that Ukraine might benefit, and its corrupt regime seems capable of all sorts of irrational behaviour. But, its unlikely, given that it is just a puppet of NATO imperialism that it would undertake such an action without getting the approval of the US first. A case could be made for the UK having a motive, particularly with the new Brexitory government in serious trouble, and seeking to undermine the EU, with its own economic war against them, and the UK is also the puppet of US imperialism, when it comes to political and military manoeuvres. But, the UK is also being crucified on that cross of the US economic war against Russia and China.
The Brexitories had made great play about a global Britain being able to find new markets to replace those it had, but threw away, in Europe, by turning its gaze to China, India and so on. Now US imperialism is seeking to prevent its NATO allies from forming large scale trading arrangements with China, at the same time that Brexit Britain has also been given the cold shoulder for any trade deal with the US itself. The Banana Monarchy of Britain, may well need to look to some salvation from high energy prices caused by NATO's sanctions on Russia, and so have no reason to engage in such sabotage.
It is the US that has most to gain. As it sees those demonstrations against EU and UK governments, who are bearing the brunt of NATO imperialism's war against Russia in Ukraine, and sees the possibility of the EU cracking in the face of revolts from its working-class, and the election of far right governments in Sweden and Italy. The US would have a clear motive, opportunity and means of sabotaging the Nordstream pipelines, so as to say to EU governments, if you change course, we can cut off your energy supply anyway!
It doesn't take a Poirot to follow the logic, and the clues.
Bank of England Intervenes As Britain Starts To Go Bust
The Bank of England has intervened in the Gilt Market to buy longer dated UK bonds, as it warned of a risk of a "Gilt Crash", due to speculators selling UK bonds, and implementing calls. A "call" is an option to sell at a given price, and is utilised when speculators think that the future price of an asset is going to be lower than it is now. It is the oppposite of a "put". It is an indication that global markets have lost faith in Truss's Brexitory government and the British Brexit Banana Monarchy.
The Bank in its statement said,
"As the governor said in his statement on Monday, the Bank is monitoring developments in financial markets very closely in light of the significant repricing of UK and global financial assets. This repricing has become more significant in the past day – and it is particularly affecting long-dated UK government debt. Were dysfunction in this market to continue or worsen, there would be a material risk to UK financial stability. This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy. In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.
To achieve this, the Bank will carry out temporary purchases of long-dated UK government bonds from 28 September. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury.
On 28 September, the Bank of England’s financial policy committee noted the risks to UK financial stability from dysfunction in the gilt market. It recommended that action be taken, and welcomed the Bank’s plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace. These purchases will be strictly time limited. They are intended to tackle a specific problem in the long-dated government bond market.
Auctions will take place from today until 14 October. The purchases will be unwound in a smooth and orderly fashion once risks to market functioning are judged to have subsided. The monetary policy committee has been informed of these temporary and targeted financial stability operations."
Commentators on Bloomberg noted that the policy of the Bank of England now is neither QE nor QT, but QC, Quantitative Confusion. We are more or less exactly 30 years on from the previous Black Wednesday in September 1992, when John Major's Tory government was in the process of crippling the UK economy, and despite massive intervention by the Bank of England, to buy Sterling, and huge rises in Bank Base Rate, the Pound was forced out of the European Exchange Rate mechanism. That exit ended the run on the Pound, and enabled Base Rate to be reduced, but no such option exists today. The Pound will continue to crater, and interest rates to rise, because it is the insane Voodoo Economic policies of the Brexitories that is the reason for the crisis.
As Bloomberg's Tom Keene put it, it is Truss's government that is the centre of this crisis. As I put it some days ago, Truss has set out her agenda to bankrupt Britain, and the markets have responded accordingly. The logical response to that condition is a General Election. The Brexitories could ditch Truss, just days into her Prime Ministership, but that unlikely, unless they bring back Boris by popular acclaim. The bank's intervention will only stoke further panic, and increased selling of UK Gilts, and Sterling, and will be an expensive failure just as it was in 1992. Global speculators will make a mint, just as George Soros did in 1992, when he made a $1 billion capital gain in a single day.
But, what actually would a General Election do, either? Firstly, Starmer is unlikely to win an outright majority, and despite his protestations will be held captive by the SNP and Liberals. Both the SNP and Liberals are likely to increase their seats at Labour's expense, due to the reactionary, English nationalist and jingoist nature of Blue Labour. The Liberals will certainly advance against the Tories. So, its hard to see how Starmer's English Nationalist/Monarchist Party will make an easy alliance with these more progressive parties. And, for the same reason its hard to see how such a reactionary English nationalist Party under Starmer offers much to satisfy global markets, let alone British workers.
Indeed, the only places he has come up with anything approaching a concrete proposal rathe than just criticising the Tories for not being jingoistic enough, it is to burden the economy with even more debt and taxes, with vague proposals on Green energy that will soak up resources for years before returning any value back into the economy. A fundamental factor at the heart of the failed policies of the Brexitories is Brexit itself, but Starmer has adopted the mantra of Boris Johnson, as an ardent Brexiter, and the ridiculous claims of having cake and eating it, with his nonsensical claim that he would "make Brexit work". The trouble is, no matter how hard you polish a turd, you will not change the fact its a turd.
So, prepare for a General Election amid economic chaos in the next week or so, just don't expect it to resolve anything.
Tuesday, 27 September 2022
Italy - Popular Frontism Leads To Disaster Again - Part 1 of 5
The Italian elections have delivered a huge win for the far right. Whether you define the Brothers of Italy as fascist or not (they are the descendants of the party of Mussolini), the fact remains that they are a far right, nationalist party, that has won a majority as a result of a coalition with other far right parties, such as the Northern League, and others such as Berlusconi's Forza Italia.
The basis of the win for the far right is the popular frontism of the majority of Leftist parties in the preceding years. It blows out of the water, the advocacy of such Popular Frontism, as the way to fight fascism, promoted by rapidly rightward moving pundits, such as Paul Mason, and of other former Trotskyists that have collapsed into, at best, centrism, and more frequently simple liberalism. All experience of the Popular Front, as set out by Trotsky, in relation to China in the 1920's, and Spain, Brazil and elsewhere in the 1930's, is of disaster, and the facilitation of the victory of fascism.
As Trotsky noted, in the 1930's,
"Fascism is a form of despair in the petit-bourgeois masses, who carry away with them over the precipice a part of the proletariat as well. Despair as is known, takes hold when all roads of salvation are cut off. The triple bankruptcy of democracy, Social Democracy and the Comintern was the prerequisite for fascism. All three have tied their fate to the fate of imperialism. All three bring nothing to the masses but despair and by this assure the triumph of fascism."
Of course, also, the 1980's and 90's was a period of deindustrialisation in many already developed economies, as a new international division of labour was established, with mature manufactured commodities, now being produced in newly industrialising economies, where the use of large amounts of fixed capital, required only cheap, unskilled labour to mind the machines, or to assemble components endlessly on an assembly line. China was the classic example, and the result was that, in these economies, the living standards of hundreds of millions of labourers increased substantially, during that period, as they went from being more or less subsistence peasants to being industrial wage labourers. But, as this manufacturing moved to China and elsewhere, to the benefit of workers there, so, too, it meant that labour in developed economies became even more bifurcated, as I had predicted would be the case, back in the early 1980's, as this process unfolded.
In developed economies in North America, and in Europe, jobs increasingly fell into two categories a) very high skilled, high value service industry jobs, and b) low skilled, low value service industry jobs, as service industry itself accounted for 80% of employment, and new value and surplus value produced. Looked at from the perspective of the world working class, the creation of hundreds of millions of new wage labourers, which made the working-class the largest class on the planet, by the early 2000's, and the raising out of the idiocy of rural life, was a great step forward. From the perspective of the workers in the developed economies, who saw jobs disappear, and an increasing divide within their own societies, not so much.
But, during all that time, workers in these developed economies were constrained. There was unemployment caused by the labour-saving technologies introduced in the late 70's and early 80's, and by the fact that its continued effect was to increase gross output faster than employment ensuring a continued relative surplus population. And, as one commodity after another became mature, so its large-scale production could more profitably be undertaken in China, or, later, in Eastern Europe. It ensured a growth of resentment, but growing impotence to channel it. As Trotsky put it, in the 1920's, warning those catastrophists who relish the thought of crises,
“In all capitalist countries the working-class movement after the war reached its peak and then ended, as we have seen, in a more or less pronounced failure and retreat, and in disunity within the working class itself. With such political and psychological premises, a prolonged crisis, although it would doubtless act to heighten the embitterment of the working masses (especially the unemployed and semi-employed), would nevertheless simultaneously tend to weaken their activity because this activity is intimately bound up with the workers’ consciousness of their irreplaceable role in production.”
On TV the other day, Blue Labour's Rachel Reeves, refused to give support to workers forced into striking for pay rises to compensate for rampant inflation. She claimed that the best answer for those workers was a Labour government. But, if she wants a Labour government, I suggest she does actually start supporting workers on strike, now, and getting down to their picket lines, because, otherwise why would any of those workers bother to vote Labour anyway? Fobbing them off with something that may or may not happen in two years time, when an election is called, does nothing to deal with their immediate problem of rampant inflation caused by money printing that Labour itself supported, and by NATO's boycott of Russian energy supplies, which has caused global energy prices to soar, which again Labour has championed!
But, in 2008, when UK tanker drivers struck for a 14% pay rise, to compensate for rising inflation, and the falls in their wages over previous years, Labour's then Chancellor, Alistair Darling pleaded with workers not to demand wage rises in line with inflation. The media, basing itself on the conditions of the previous 20 years, said the tanker drivers demand was ludicrous, and unattainable, but within 48 hours, the employers had capitulated. Similar strikes and pay rises were won by workers in Germany and elsewhere. But, of course, 2008 was the year when the global financial happened too. It was caused by rising interest rates, themselves reflecting the fact that global economic growth had risen, causing the demand for capital to rise, and with workers now demanding pay rises to cover rising prices, the supply of capital from realised profits was beginning to be squeezed.
So, just as workers began to translate that “embitterment”, Trotsky describes, into industrial action, it was cut short. After 2010, governments introduced austerity to slow economic growth, to prevent the demand for capital rising, which would cause interest rates to rise, and asset prices to fall. They printed even greater quantities of money tokens to buy up worthless paper assets, so as to inflate their prices, and simultaneously drain money from the real economy. So, even as workers saw the real economy deliberately slowed, they also saw conservative social-democratic governments inflate already massively inflated asset prices, even further, to the benefit of the rich. And, now, for millions of workers, the most visible manifestation of that became that any prospect even of being able to buy a house, despite artificially reduced mortgage rates, and other bribes, became impossible. And, as they were forced into privately rented accommodation, so they saw those rents rise relentlessly too.
Monday, 26 September 2022
The Banana Monarchy & Voodoo Economics - Part 1 of 9
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| Kamikwazi Kwarteng Puts UK Economy Into Suicidal Dive |
For months, traders in foreign exchange markets have been talking about the UK economy as, now, resembling that of an emerging economy, certainly in respect of the Pound. In the immediate aftermath of the Brexit vote, in 2016, the Pound dropped precipitously, from $1.45 to around $1.20. That showed the idiocy of all the talk of “taking back control”, as the international capital markets showed just who really does have control over a much weakened and isolated British economy. In the following years, as the prospect of actual Brexit receded into the distance, as Theresa May was unable to reach a deal she could get through parliament, and as it became clear that any deal would be one in which Britain remained subordinated to EU single market and customs rules, the Pound steadily recovered.
When Boris Johnson was led to capitulate to the EU, in his oven ready Brexit Deal, most visibly expressed in the Northern Ireland Protocol, the Pound recovered, almost to where it was in 2016, at over $1.40. But, as the Brexitories looked for populist support, by trying to renege on the deal they had just signed, the Pound again began to sag, reaching $1.32 by the end of December 2021. It has continued to fall since then, as Boris Johnson's government fell apart, and the prospect of an even more Brexitory government under Liz Truss came into view.
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| Kamikwazi Kwarteng Puts £ Into Death Dive |
The UK 2 Year Gilt rose 50 basis point to around 4.50%, the first time its been above 4% since 2010. That represented a rise of around 12.5%. But, all UK Gilts rose, by at least 25 basis points. In conditions reminiscent of the last time the Tories wrecked the economy in 1992, and there was a Sterling crisis, government ministers refused to comment on the moves, leaving markets to look for the Bank of England to intervene, with probably a full 100 basis point rise in Bank Rate, to defend the £, only days after it last its interest rates! This is the usual economic incompetence we expect from the Tories, but the Brexitories have raised it to new heights.
In a period of high and rising inflation, a collapsing Pound is the last thing the Brexitories want. It emphasises the point that “taking back control”, or “national self-determination”, promoted by liberals, in the age of imperialism, is a fantasy, as control rests with one bloc of imperialists or another, as Lenin and Trotsky described, more than a century ago. In Britain's case, stranded in mid-Atlantic, it means the invidious position of being subordinated to EU imperialism economically, as it depends on the EU for trade, whilst, also, being politically, militarily and strategically subordinated to US imperialism, whose stooge it has been for the last 80 years.
But, with Britain's economy highly dependent on imported, Dollar denominated commodities, such as energy, materials and food, the collapsing Pound causes even more imported inflation. The Brexitories were pleading with the Bank of England not to raise its interest rates, and threatening its independence, but, as the Pound collapsed, in the days after Truss kissed the Queen's ring, before she shuffled off her mortal coil, the Brexitories have been forced to insist that the Bank's independence is safe, or face being put in a similar position as Erdogan, in Turkey, where he has insisted the Turkish Central Bank cut rates, despite huge levels of inflation, and so where the financial markets have punished the Turkish Lira, sending Turkish inflation to even higher levels.
Sunday, 25 September 2022
Chapter 2.B. Theories of The Standard of Money - Part 1 of 10
Chapter 2 B. Theories of the Standard of Money
“The fact that commodities are only nominally converted in the form of prices into gold and hence gold is only nominally transformed into money led to the doctrine of the nominal standard of money. Because only imaginary gold or silver, i.e., gold and silver merely as money of account, is used in the determination of prices, it was asserted that the terms pound, shilling, pence, thaler, franc, etc., denote ideal particles of value but not weights of gold or silver or any form of materialised labour. If, for example, the value of an ounce of silver were to rise, it would contain more of these particles and would therefore have to be divided or coined into a greater number of shillings.” (p 76)
This is a specific form of commodity fetishism, seeing the value as something intrinsic to the money commodity. In addition, it sees the unit of account as something separate from the money commodity, which is its basis, and so attempts to maintain a constant unit of account. If the name Pound is originally a reference to one pound weight of sterling silver, which acts as unit of account, the value of all other commodities being measured by it, then, the basis of this exchange relation is the value of silver, relative to these other commodities, and that means the universal labour, represented by a pound weight of silver, as against the universal labour represented by the other commodities.
The value of silver changes according to the amount of universal labour it represents, i.e. the amount of labour required for its production. If the value of silver doubles, that is because the amount of labour required for its production has doubled. Consequently, if the value of all other commodities remains constant, then the prices would halve. But, according to this theory, it is not the value of silver that determines the value of the Pound, but the Pound which determines the price of silver. In other words, if the Pound represents a quantity of particles of value, then the pound weight of silver now contains more of these, hence, its higher value. This is something like the attempts of neoclassical economics to identify utils as particles of utility, to support a theory of cardinal utility.
The attempt was to keep the value of the Pound, etc. constant, and whilst, the prices of all other commodities, measured in Pounds, would remain constant, by reducing the amount of silver actually contained in £1, the price of silver, itself, in Pounds, would double. Marx gives an historical example of this. At the time of accession of William III, the mint-price of an ounce of silver, was 5s. 2d. (£0.26), a 62nd of an ounce was called a penny, with 12 pennies comprising a shilling, and 20 shillings £1. Six ounces of silver were coined into 31 shillings. However, the market price of silver rose to 6s. 3d. (£0.31). So, to buy an ounce of un-minted silver, this higher price had to be paid. The market price of an ounce of silver was higher than its mint price. How was this possible? The riddle seemed harder to fathom given that the mint continued to produce shillings at full weight.
“The solution of this riddle was quite simple. Four million of the £5,600,000 of silver money in circulation at that time were worn out or clipped. A trial showed that £57,200 in silver coins, whose weight ought to have been 220,000 ounces, weighed only 141,000 ounces. The mint continued to coin silver pieces according to the same standard, but the lighter shillings which were actually in circulation represented smaller fractions of an ounce than their name denoted. A larger quantity of these reduced shillings had consequently to be paid for an ounce of uncoined silver on the market.” (p 77)
Saturday, 24 September 2022
The Standard of Prices
The standard of prices is the unit of money which forms the basis of determining the price of all other commodities, i.e. their exchange-value against money. Initially, this unit is a given quantity of the money commodity, and specifically, when precious metals become the money commodity, it is a given weight of the particular metal. The names given to the standards of prices, are originally derived from these weights of metal. For example the Pound Sterling, derived its name from a pound weight of Sterling Silver. Each state has its own standard of prices, forming the currency within that state, and these standards/currency units apply only within that state.
All exchange values are based upon the value of a quantity of one commodity, expressed as a quantity of some other commodity, for example, the exchange-value of a metre of linen, may be a litre of wine, meaning the value of each of these given quantities of the stated commodities is equal. Another way of expressing this is to say that the wine price of a metre of linen, is 1 litre. The commodity which expresses the price of the other is the equivalent form of value of the other. The money commodity, which acts to express the price of all other commodities, is the universal equivalent form of value.
To act as such a universal equivalent, some specific quantity of the money commodity needs to be settled on, as the unit in which these prices are expressed. For example, a pound of Sterling Silver, established the £, as the standard of prices, and the prices of all other commodities can then be expressed in £'s, or fractions of a £. The £ was divided into 20 parts each called Shilling, for example, and each Shilling was divided into 12 Pennies. A similar derivation can be found for the Silver Thaler, and the word Dollar is itself a derivation from Thaler. The standards of price take on the form of coins, such as the silver Thaler.
A given quantity of the money commodity, which then forms the basis of the standard of prices, is able to perform this function, because it is a measure of value of all other commodities. This relation of the money commodity to all other commodities, i.e. its value relative to theirs (exchange-value) does not change, unless its value, or the value of those other commodities changes. A ¼ ounce of gold, is always a ¼ ounce of gold, and so if its value, and the value of, say, wine remains constant, then a ¼ ounce of gold will always equal the same amount of wine. But, that is not true for the standard of prices, because, although its name remains the same, derived from these historic weights of metal, the actual quantity of that metal represented by the coin/standard of prices, is reduced over time.
If £1 originally represented ¼ ounces of gold, over time, that may fall to become only 1/100 ounces of gold. The standard of price retains the same name £, but now represents much less gold, which, in turn, means it represents much less value/social labour-time, which, in turn, means that its relation to all other commodities is changed. Now, a £ represents only 1/25 of the gold/value/social labour-time, it did previously, and so 25 times as many of these £'s are required to represent the same amount of value/social labour-time, meaning that the prices of all other commodities, expressed in these £'s, are increased 25 fold.
Because, money first takes the form of a money commodity, such as gold or silver, and the standard of prices takes the form of a precious metal coin, the true nature of money as universal labour, is obscured. The real nature of money is universal labour, as the actual measure of the value of commodities in order that they can be equated. In other words it is the basis of exchange-value, and money, in the form of a money commodity, such as gold, is, then, this exchange-value made solid, exchange-value incarnate. But, the nature of money materialised in the coin, as standard of price leads to the appearance that it is this coin, this standard of price, that is some objective measure of value, in and of itself, that the standard of price is a fixed quantum of value, against which the value of all other commodities vary, in the same way that, say, a metre stick is a constant measure of length.
But, that is not the case, any more than if a metre stick were to be divided into 3 equal length parts, but each one of them continued to be called a metre, for the purpose of measuring the length of other objects. The standard of prices, is only a name given to a quantity of social labour-time, that is originally materialised in a quantity of some money commodity, for example, a pound of Sterling Silver. If the name of the standard or prices remains, but the actual quantity of the money commodity it represents falls, then this also means that the amount of social labour-time/universal labour it represents also falls. The money commodity itself only acts as a proxy for that universal labour, its transubstantiation into the form of the given commodity.
Consequently, if the quantity of social labour-time represented by the standard of prices declines, then its relation to the value of all other commodities is equally altered. The value of the standard of prices can change for two different reasons. Firstly, the value of the money commodity, such as gold, may change. When new gold fields were discovered, the value of gold fell, for example, so less labour-time was required for the production of gold, and its value, relative to other commodities, fell accordingly. Secondly, the quantity of gold/silver represented by the standard of prices can change, and this usually means that it represents a smaller quantity of gold/silver, and so less social labour-time, so that its value relative to all other commodities falls, and this is manifest in a rise in the price of all other commodities – inflation.
But, the fact that the name of the standard of prices remains constant, and, as measure of the value of other commodities, it is their prices that change, gives the impression that the standard of prices itself remans a fixed quantum of value, and it is only the values of other commodities that change. This was the basis of the dispute between Lowndes and Locke, and a century later between Attwood, and the Birmingham Little Shilling Men, against Peel. It was also the basis of the contradiction established by Bretton Woods, and the fixing of the US Dollar to gold at a price of $35 an ounce, which necessarily blew apart in 1971. That resulted in the Dollar falling immediately against gold, and by 1980, it had fallen to $800 an ounce, meaning that the Dollar had lost 96% of its initial artificially established gold value.
What, the standard of prices really represents is simply a quantity of social labour-time/universal labour, and its manifestation in a quantity of some money commodity/precious metal, is only an historical evolution of it. In practice, with the development of paper money tokens, and fiat currency, as representatives of the standard of prices, the historical role of the money commodity itself disappears, clinging on only a while longer, as world money. As Marx sets out in A Contribution To The Critique of Political Economy, the quantity of the money commodity that represents the value of all other commodities is determined by its own value, for example, if the total value of commodities is 1 million hours of labour, and 1 ounce of gold has a value of 100 hours of labour, money is equal to 10,000 ounces of gold. If each ounce performs 10 transactions a year, then 1,000 ounces of gold are required as currency.
However, if paper notes are introduced to replace each ounce of gold, then any number of these notes can be circulated, but the total value of commodities, the total amount of labour-time they represent does not change. So, if 2,000 such notes are introduced, each claiming to represent 100 hours of labour, it is clear that this cannot be the case, because, in total they would represent 2 million hours of labour. Each note, whatever its face value says, must, in reality, be compressed, so that it actually represents only 50 hours of labour, so that, in total, they represent the same 1 million hours of labour. Because, each note retains the name £1, this appears as a doubling of commodity prices. So, unlike precious metal coins, whose value is determined by the value of precious metal they represent, the value of paper notes is determined solely by the quantity of them put into circulation.
In a way, this reflects the actual relation more clearly, because, each note, worthless as a piece of paper, in itself, can now be seen to derive its value, not from the amount of gold it purportedly represents (which itself was only a proxy for universal labour) but directly from the amount of social labour-time it represents. If total social labour-time embodied in commodities is 1 million hours, and 1,000 £1 notes are put into circulation, each performing ten transactions, then its clear that each note represents 100 hours of social labour-time, and if 2,000 such notes are put in circulation, each note represents only 50 hours of social labour-time. Each note, worthless in itself, continues to perform the function of money, in reducing all labour to universal labour, via competition, because, as fiat currency, backed by the state, it appears to have value, amounting to this claim on a given amount of social labour-time, and the sellers of commodities, must validate the labour expended, in the production of their commodities, by persuading buyers to give up their money tokens in exchange for them.
First we have value alienated from use value, in the form of exchange-value, then this exchange-value is substantiated in the form of a money commodity, as exchange-value incarnate, whose use value is only to represent exchange-value, and finally, as the money commodity takes the form of currency, and this currency takes the form of worthless tokens, this represents its reification.
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