New gold discoveries brought about this reduction in the value of gold/standard of prices, whilst, today, with fiat currency, the same effect is readily achieved by simply increasing the supply of currency disproportionately.
“The value of gold would then be depreciated by one half, or fifty per cent. As the values of all other commodities would then be expressed in twice their former money prices, so also the same with the value of labour. Twelve hours of labour, formerly expressed in six shillings, would now be expressed in twelve shillings. If the working man's wages should remain three shillings, instead of rising to six shillings, the money price of his labour would only be equal to half the value of his labour, and his standard of life would fearfully deteriorate. This would also happen in a greater or lesser degree if his wages should rise, but not proportionately to the fall in the value of gold. In such a case nothing would have been changed, either in the productive powers of labour, or in supply and demand, or in values.
Nothing would have changed except the money names of those values.” (p 77-8)
In other words, there has simply been inflation, as a result of this reduction in the value of the standard of prices. As Marx says, inflation is a monetary phenomenon, not to be confused with the changes in the actual values of commodities.
“To say that in such a case the workman ought not to insist upon a proportionate rise of wages, is to say that he must be content to be paid with names, instead of with things. All past history proves that whenever such a depreciation of money occurs, the capitalists are on the alert to seize this opportunity for defrauding the workman. A very large school of political economists assert that, consequent upon the new discoveries of gold lands, the better working of silver mines, and the cheaper supply of quicksilver, the value of precious metals has again depreciated. This would explain the general and simultaneous attempts on the Continent at a rise of wages.” (p 78)
The huge devaluation of the standard of prices, resulting from the excess liquidity, QE, etc., was hidden during the 1990's, when a huge rise in productivity from the 1970's/80's microchip revolution slashed commodity values, particularly the value of fixed capital, which suffered a huge moral depreciation, and resulted in an equally huge release of capital. That fall in their values should have resulted, also, in a huge drop in the general level of prices, greater than that which occurred, in similar conditions of rising productivity in the 1930's. That drop in prices did not occur in the 1980's, and 90's, because the value of the standard of prices fell even more, as huge amounts of liquidity in both currency and credit flooded the economy.
In 2020, and after, however, whilst output contracted by around 20% due to lockdowns, which should have led to a corresponding reduction in currency supply, governments, instead, further increased currency supply, thereby, hugely depreciating it, and fed it directly into the real economy via transfer payments. As I predicted at the time, based on Marx's monetary theory, and analysis of inflation, as set out in A Contribution To The Critique of Political Economy, the result was an inevitable inflation of commodity prices, once those devalued money tokens surged into circulation, and their real value, in relation to commodities was established.
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