A debate has arisen, recently, on Youtube, between Gary Stevenson and Richard Murphy, stemming from Gary's video, a while ago, setting out his argument that the government needs (and indeed will be forced) to raise taxes, or run out of money. Richard Murphy disagrees, claiming that governments can never run out of money, because they can simply “print” more of it. Both are wrong, but Richard is more wrong than Gary. Neither of them actually understand what money is, though Gary seems to have a better grasp of it than Richard who, like his 18th and 19th century predecessors, analysed by Marx, not only does not understand what money is, but also, does not understand what money raised to a higher power – capital – is.
Richard understands money only as currency, and so believes that, because any amount of currency/money tokens can be printed by a government, governments can create any amount of money they require, and so cannot run out. Its like confusing a cow with a picture of a cow, used as its proxy, and so believing that you can create more cows by simply photocopying endless pictures of the same cow. One of the first money-commodities was, indeed, cattle. And rather than having to have actual cattle present when the value of various commodities was evaluated, or to act as an intermediary in the exchange of commodities, leather strips were used as a representation, instead. These leather strips, were not, themselves, money, but merely money tokens that circulated as currency. The strips were accepted as a representation of a quantity of cattle – which, in turn, as money-commodity, is only a proxy for a given amount of social-labour-time – because there was trust that the leather strip would be honoured, accordingly.
Ever since states had responsibility for producing currency/money tokens they have attempted that sleight of hand by debasing the currency, and trying to pass it off as good coin. It works for a short time, until the debased currency circulates sufficiently in the economy that its real value, as against its nominal or face value, is, thereby, established, but, always, then, is revealed as the illusion it is.
In A Contribution To The Critique of Political Economy, Marx describes this difference between the value of currency/standard of prices, and the value of the money it is supposed to represent, i.e. its nominal or face value.
“As a result of an historical process, which, as we shall explain later, was determined by the nature of metallic currency, the names of particular weights were retained for constantly changing and diminishing weights of precious metals functioning as the standard of price. Thus the English pound sterling denotes less than one-third of its original weight, the pound Scots before the Union only 1/36, the French livre 1/74, the Spanish maravedi less than 1/1,000 and the Portuguese rei an even smaller proportion. Historical development thus led to a separation of the money names of certain weights of metals from the common names of these weights.”
So, yes, of course, in the era of precious metal coins, a state could mint sovereigns and so on that claimed to represent a given amount of money, i.e. amount of value/social labour-time, embodied in a quantity of a money commodity, such as gold, whilst, in fact, only containing a fraction of that amount (or even none at all), but, if they did that so as to simply throw into circulation more of these coins then the consequence is that these coins become devalued, as against the actual money/value/social-labour-time they claim to represent. That, of course, was why states did it in the first place. They bought goods and services with the devalued coins, passing them off as full value, the reality of which is not manifest until sufficient of these coins, then, circulate in the economy. One problem, as Marx discusses, is when those devalued coins are, then, used by citizens to pay their taxes and so on, as resulted in the debates between Locke and Lowndes, and, in the 19th century, with Thomas Attwood and the Birmingham “Little Shilling Men”.
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