Martin then turns to the post-war period, characterised by Bretton Woods, which really only determined the value of currencies internationally, and is essentially separate from the question of inflation within each national economy, though the two cannot be divorced. That was particularly true for the US, whose Dollar acted as global reserve currency, and whose value was administratively set under Bretton Woods at $35 to an ounce of gold. That meant that the US could continue to effectively print Dollars whilst, externally, these Dollars were valued against other currencies at a fixed rate, enabling the US to import the commodities it required at lower Dollar prices than otherwise would have been the case.
As with previous periods where money tokens were devalued, the manifestation of that came in the form of a rise in the market price of gold over its administrative price. Even by the 1970's, when the US ended Dollar convertibility, when France demanded gold in exchange for Dollars at the administrative price, the market price of gold was at around $300, and rose to $800 by 1980. Martin's account, here, is strange. He says,
“Why had steady peace-time inflation re-emerged, centuries after the old "Price Revolution"? The speed and intricacy of the circuits of capital was far outstripping the capacity of gold (heavy, difficult to move physically, restricted in quantity) to facilitate it, even with more elaborate provision for tokens to be used instead of physical gold most of the time. Money was becoming "fiat money", money valid because firms and households were confident that the government or central bank would make it a ticket for an approximate quantum of labour-time on the world-market.”
Currencies had become “fiat currencies” long before Bretton Woods, let alone the collapse of Bretton Woods. Incidentally, Martin's use of the term “fiat money”, rather than “fiat currency”, again emphasises that, like Hume and Ricardo, he does not understand the difference between money and currency, and simply equates the two.
As soon as money takes the form of tokens of value, be they precious metal coins, base metal coins, or paper notes, it relies upon those accepting these tokens trusting that they represent a given quantum of universal labour, whether that be directly linked to a quantity of some money commodity such as gold, or not. The basis for them doing so is that such tokens have the backing of the state. And, as Marx describes, in A Contribution To The Critique of Political Economy, the state soon assumes control of issuing such tokens, and they become fiat currency. That is true whether these tokens are exchangeable for gold or not, because, as Marx describes, the state, then, also determines how much gold, each token is exchangeable for!
That was obvious with, for example, gold coins, as Marx describes.
“When the decline of the metal content has affected a sufficient number of sovereigns to cause a permanent rise of the market-price of gold over its mint-price, the coins will retain the same names of account but these will henceforth stand for a smaller quantity of gold. In other words, the standard of money will be changed, and henceforth gold will be minted in accordance with this new standard. Thus, in consequence of its idealisation as a medium of circulation, gold in its turn will have changed the legally established relation in which it functioned as the standard of price. A similar revolution would be repeated after a certain period of time; gold both as the standard of price and the medium of circulation in this way being subject to continuous changes, so that a change in the one aspect would cause a change in the other and vice versa. This accounts for the phenomenon mentioned earlier, namely that, as the history of all modern nations shows, the same monetary titles continued to stand for a steadily diminishing metal content.”
And, if that isn't a description of systematised and deliberate inflation by the state I don't know what is.
3 comments:
Hi
if you have time, could you reply to some of Lord Keynes' posts against Marx's labor theory of value, his theory of the falling rate of profit etc.
http://socialdemocracy21stcentury.blogspot.com/p/eventually-i-will-write-full-series-of.html
Thank you!
Hi,
Lord Keynes posted a comment on my blog some years ago, back in 2009, in response to my post - https://boffyblog.blogspot.com/2009/07/historical-proofs-and-origins-of-value.html. You will find my responses to him there, in the comments section.
As I set out, I found his own posts very disappointing. There is nothing in them other than the same old tropes put forward first against Ricardo by vulgar economists, back in the 19th century, and dealt with by Marx himself in TOSV, Capital and A Contribution To The Critique of Political Economy, Poverty of Philosophy, and Anti-Duhring, or by Bohm-Bawerk, whose critique remains the most intelligent yet, but was itself demolished by Hilferding, and others later.
I started writing a history of the development of value and value theory a couple of years ago, the posts for which you can look up on my blog, here, but which I have not had time to complete due to other commitments, but which still intend to return to perhaps some time this year, and complete.
Hope these posts and comments help.
You might also want to check out this post - https://boffyblog.blogspot.com/2009/02/water-and-diamonds.html - and do a search for my posts on Reclaiming Economics, and on The Austrian School Debunked.
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