In the last 30 years, the same methods have been used to massively inflate asset prices, whilst the proponents of MMT think its possible to create new value simply by printing additional money tokens, thereby echoing the ideas of John Law.
Marx gives an account of British economic history that strongly resembles the history of the US after WWII, which resulted in the removal of Dollar convertibility.
“The period when the Bank of England suspended cash payments was hardly more prolific of war bulletins than of monetary theories. The depreciation of bank-notes and the rise of the market-price of gold above its mint-price caused some defenders of the Bank to revive the doctrine of the ideal measure of money. Lord Castlereagh found the classically confused expression for this confused notion when he declared that the standard of money is “a sense of value in reference to currency as compared with commodities.” A few years after the Treaty of Paris when the situation permitted the resumption of cash payments, the problem which Lowndes had broached during the reign of William III arose again in practically the same form. A huge national debt and a mass of private debts, fixed obligations, etc., which had accumulated in the course of over 20 years, were incurred in depreciated bank-notes. Should they be repaid in bank-notes £4,672 10s. of which represented, not in name, but in fact, 100 lbs. of 22-carat gold? Thomas Attwood, a Birmingham banker, acted like a resurrected Lowndes. He advocated that as many shillings should be returned to the creditors as they had nominally lent, but whereas according to the old monetary standard, say, 1/78 of an ounce of gold was known as a shilling, now perhaps 1/90 of an ounce should be called a shilling. Attwood’s supporters are known as the Birmingham school of “little shilling men".” (p 81-2)
The reality was that the notes issued were devalued, no longer representing the same amount of gold/universal labour that they were nominally exchangeable for. Put another way, as money tokens, they were issued in excess, so that each note represented a smaller quantity of gold/social labour-time, a fact that was manifest in an inflation of commodity prices, including a rise in the price of gold above its mint price/ This is exactly the situation that confronted Lowndes, and which confronted Nixon in 1971.
In his argument against Peel, Attwood sets this out, and also brings it back to the fundamental factor of value, and its determination by labour. Marx quotes his argument from “The Currency Question”, The Grimm Letters, 1844.
“What is to be understood by the present standard of value? Is £3 17s. 10 1/2d. an ounce of gold, or is it only of the value of an ounce of gold? If £3 17s. 10 1/2d. be an ounce of gold, why not call things by their proper names, and, dropping the terms pounds, shillings and pence, say ounces, penny-weights and grains?... If we adopt the terms ounces, pennyweights and grains of gold, as our monetary system, we should pursue a direct system of barter.... But if gold be estimated as of the value of £3 17s. 10 1/2d. per ounce ... how is this ... that much difficulty has been experienced at different periods to check gold from rising to £5 4s. per ounce, and we now notice that gold is quoted at £3 17s. 9d. per ounce?... The expression pound has reference to value, but not a fixed standard value.... The term pound is the ideal unit.... Labour is the parent of cost and gives the relative value to gold or iron. Whatever denomination of words are used to express the daily or weekly labour of a man, such words express the cost of the commodity produced.”” (p 82)
As Marx says, the value of commodities is determined by abstract labour-time. The exchange-values of commodities by the proportional relations between them based on these values. An ounce of gold, with a value of X hours of labour is then a proxy for X hours of social labour, and if this ounce of gold is given the name £, then this £ is also a proxy for X hours of social labour-time. But, its not the name £ that gives it this value, and ability to act as proxy. Insofar as it contains 1 ounce of gold, it is the value of gold which enables that, and insofar as it is a money token, representing gold, it is only the fact that the quantity put into circulation is equal to the actual gold it represents that enables it. In the absence of any link to gold, it is the fact that it is only issued in proportion to the labour-time it represents. This relation is what led to the ideas of Gray, previously alluded to.
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