It was Berkeley who gave the concept of the nominal standard of money a theoretical twist, Marx says. He quotes Berkeley,
“"Whether the terms Crown, Livre, Pound Sterling, etc., are not to be considered as Exponents or Denominations of such Proportions?” (i.e., proportions of abstract value as such). “And whether Gold, Silver, and Paper are not Tickets or Counters for Reckoning, Recording and Transferring thereof?” (of the proportion of value). “Whether Power to command the Industry” (social labour) “of others be not real Wealth? And whether Money be not in Truth, Tickets or Tokens for conveying and recording such Power, and whether it be of great consequence what Materials the Tickets are made of?”” (p 79)
This contains various elements of confusion. It confuses the measure of value with standard of price, as well as confusing unit of account with currency. It goes to the heart of the confusion of money with money tokens. As regards the first of these, gold may be the measure of value, and subsequently, a given weight of gold be established as the standard of price, for example, the Pound, but, as described, there is no reason why this £ must remain of constant value, and as a result of debasement, will necessarily diverge from its original relation to the measure of value. An ounce of gold is always an ounce of gold, and so, as measure of value, remains the same. It will always represent half as much value as 2 ounces of gold, however much the value of gold itself changes. If the value of gold remains unchanged, then 1 ounce of gold represents the same measure of value of commodities, today, as it did yesterday.
But, that is not true of the standard of price. A Pound that yesterday contained 1 ounce of gold represents twice as much value as a Pound today that contains ½ ounce of gold, and the manifestation of that comes from the fact that commodities that yesterday had a price of £1 today have a price of £2 – inflation.
On the second point, an ounce of gold, as unit of account, does not need to be physically present, but, as currency, the ounce of gold, or a token that actually represents it, must be.
“Because tokens can be substituted for precious metals in the sphere of circulation, Berkeley concludes that these tokens in their turn represent nothing, i.e., the abstract concept of value.” (p 79)
What value these tokens represent, and what determines it, as against what determines the value of gold, is dealt with later, and, again, is central to understanding the difference between money and money tokens, and so to understanding inflation.
The theory of a nominal standard of money was fully elaborated by Steuart, Marx says. For Steuart, there need be no relation between this standard and any single commodity, such as gold. The standard is just a unit of measure, capable of being multiplied up, without limit, or divided into proportional parts, for example, a £ into shillings and pennies. This is no different, he says, than other units of measure, such as degrees. So, instead of having 360 degrees in a circle, we might decide there are only 180, with each degree being equal to twice what it is currently. In that case, a right-angle would comprise 45 not 90 degrees. That is true, but, as Marx says, this right-angle would still be objectively determined by its proportional relation to the circle. In other words, it is a quarter of a circle whether that be represented as 45 degrees (180) or 90 degrees (360).
This is important when considering money tokens as against precious metal coins. In so far as money tokens represent a quantity of previous metal, they perform this function only so long as the quantity of them put into circulation is equal to the value of the precious metal currency they represent. The precious metal only performs the function of money because it is itself a proxy for universal labour, i.e. it represents the equivalent form of value of the commodities to be circulated. The total value of commodities/total social labour-time performs the same function as the objectively limiting factor of the circle. If it is, say, 1 million hours, and an ounce of gold has a value of 100 hours, then 10,000 ounces of gold is this equivalent form. If an ounce of gold is given the name £1, then the total of prices is £10,000.
But, a £ might be equal to 2 ounces of gold, in which case, the total of prices would fall to £5,000, or alternatively ½ ounce of gold, in which case the total of prices would be £20,000. Similarly, in a fiat currency system, any nominal relation to gold disappears. It does not, however, change this objective limitation of the total amount of social labour-time represented by commodities. It would still be the case, in the above example, that a £ that purports to represent 100 hours of social labour-time, would represent 1/10,000 of total social labour-time, and a claim on that as its equivalent. If, however, 20,000 such notes are in circulation, it is clear that they cannot all have a claim on 1/10,000 of total social production, because that would mean a claim on double the value of available commodities. Each note, whilst retaining the nominal value of £1, would actually be halved in value, representing a claim on 1/20,000 of total social output, and that would be manifest in a doubling of nominal prices.
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