By the 19th century, paper currency was already well developed. Banks had produced paper notes, the US colonists had developed paper currency, under the guidance of Ben Franklin, during the revolutionary war. Much of this development was accompanied by financial panics and crises. The provincial banks printed notes way in excess of their ability to redeem them, leading to successive bank runs and collapses. John Law's bank was a classic example, followed by the Credit Mobiliere.
The analysis of this paper currency and its laws were then read back on to the laws relating to precious metal money and currency. But, as Marx has described, the laws relating to the former are the opposite of those relating to the latter. On the basis that an increased supply of paper money results in an inflation of prices, it was concluded that, also, an increased supply of gold money results in an inflation of prices, irrespective of the relative value of gold itself.
But, the contradiction involved in that is obvious. An increased supply of paper money tokens results in inflation, because the paper is worthless. Each token represents on a proportionate amount of social labour-time, and so the greater quantity of such tokens, the smaller proportion of social labour-time it represents. As Marx says, the value of each token is determined not by its material content, but only by the quantity of notes in circulation.
The tokens remain in circulation, because, they have no use value outside circulation. They can't be taken out of circulation to be eaten, used for clothing or jewellery and so on. For that to apply to gold would require that it too could not be taken out of circulation, that it had no use value other than as currency, a conclusion that Ricardo is forced into. But, then, whilst its true that, as with paper money tokens, the result would be an inflation of the money prices of commodities, that would also be true of the market price of gold, which would rise above its mint price. The owners of full weight coins would then melt them down, and sell them as gold, whose value would be higher than the value of the coin.
Set out in this way, the fallacy of Ricardo's theory is obvious, but Ricardo fails to see it, Marx says, because, instead, he frames it in a wider practical context of international trade.
“The printing presses in Threadneedle Street which issue paper notes played the same role for Ricardo as the American mines played for Hume; and in one passage Ricardo explicitly equates these two causes.” (p 169-70)
For Ricardo, money is merely a token of value, and it is developed simply as a means of facilitating exchange. It only exists for this purpose, which is why he sees it remaining in circulation whether it is comprised of gold or paper. Marx sets out Ricardo's argument step by step. He determines the value of gold as a commodity, as with any other commodity, by the labour-time required for its production. If an ounce of gold is equal to 100 hours of labour, and all other commodities are equal to 1 million hours of labour, then the money equivalent of these commodities is 10,000 ounces of gold. So far, all very well.
As money, an ounce of gold whose value is known to be 100 hours of labour, becomes the indirect measure of the value of of all other commodities, and, as standard of price, determines the price of each commodity. As set out earlier, the actual amount of money in circulation, as currency, is modified by its velocity of circulation, so that, if an ounce of gold circulates ten times in a year, only 1,000 ounces are then required as currency. On this basis, these coins, as simply value tokens, can be replaced by paper notes provided they are put in circulation only on the same basis, i.e. 1,000 notes, each representing an ounce of gold. On this basis, Ricardo argues the benefit of a paper currency, because it removes the need to produce gold for this purpose, or to obtain it from gold producing countries. He says,
““a currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent.”” (p 171)
But, on this basis, for Ricardo, gold money is not a valueless symbol, as it was for Hume, but has value, determined by the labour required for its production. Its own value, then, relative to the aggregate value of all commodities to be circulated must objectively determine the quantity required as currency. However, Ricardo then applies the laws relating to paper currency to this gold currency. The value of the paper currency is determined by the quantity of it in circulation. Because Ricardo wants to equate paper currency with gold currency, he is then forced to argue that the value of the gold currency is also determined by the quantity of it in circulation, so that the value of a one ounce of gold coin now differs from the value of 1 ounces of gold bullion.
No comments:
Post a Comment