There was no development of Ricardo's monetary theory after the crises of 1825 and 1836, but those crises prompted a practical application of it, in the false belief that their cause resided in the currency.
“The theoretical assumption which actually serves the school of economic weather experts as their point of departure is the dogma that Ricardo had discovered the laws governing purely metallic currency. It was thus left to them to subsume the circulation of credit money or bank-notes under these laws.” (p 182)
The problem with the Keynesian view, and, indeed, with all bourgeois theories, is that it does not distinguish between different phases of the long-wave cycle, and so the varying consequences of different measures, according to the different material conditions arising within these phases. In particular, it treats all factors of production as interchangeable, and labour as being just another inert factor of production. All bourgeois theory provides a description of the economy, at each point in time, like a still photograph, and, thereby, fails to be able to distinguish between cause and effect. It describes, but does not explain, and confuses correlation with causation.
“The most common and conspicuous phenomenon accompanying commercial crises is a sudden fall in the general level of commodity-prices occurring after a prolonged general rise of prices. A general fall of commodity-prices may be expressed as a rise in the value of money relative to all other commodities, and, on the other hand, a general rise of prices may be defined as a fall in the relative value of money. Either of these statements describes the phenomenon but does not explain it.” (p 182-3)
Inflation, a general rise in prices, means the value of money falls, relative to the value of commodities, and, conversely, deflation, a general fall in prices, means the value of money rises, relative to the value of commodities. This is tautologically true, Marx says, but, like all tautologies, it does not take us forward, in terms of an explanation. What we need to know is if it is the value of commodities, in general, that has risen/fallen, of the value of money/standard of prices itself that has risen/fallen, or both in varying directions and proportions. In addition, we need to know the cause of those changes in value.
With metallic money, the discovery of new mines may result in a lower value of the money commodity, or it may be that, in terms of the standard of prices, say £1, the quantity of metal represented by it, is reduced. For non-convertible paper money tokens, their value is determined solely by the quantity of them thrown into circulation, so that the value of each token falls the more of them produced, relative to the aggregate social labour-time they represent. As standard of prices, it is devalued, and so prices rise.
With commodities, their values fall over time, because of rising social productivity, driven by The Law of Value, but, at any one time, the values of some commodities may rise, because of crop failures, supply chain disruptions, and so on. Moreover, even if values do not, market prices may rise, simply because demand rises faster than supply can be increased to meet it. Conversely, as Marx sets out in Theories of Surplus Value, Chapter 17, at any one time, the demand for money may be greater than the demand for commodities. A general overproduction of commodities arises, and so, then, market prices fall, in order to clear the market.
“Ricardo's monetary theory proved to be singularly apposite since it gave to a tautology the semblance of a causal relation. What is the cause of the general fall in commodity-prices which occurs periodically? It is the periodically occurring rise in the relative value of money. What on the other hand is the cause of the recurrent general rise in commodity-prices It is the recurrent fall in the relative value of money. It would be just as correct to say that the recurrent rise and fall of prices is brought about by their recurrent rise and fall. The proposition advanced presupposes that the intrinsic value of money, i.e., its value as determined by the production costs of the precious metals, remains unchanged. If the tautology is meant to be more than a tautology, then it is based on a misapprehension of the most elementary notions.” (p 183)
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