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)
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