A problem, in that respect, exists, as Marx describes, where these money tokens are redeemable at their face value. If someone just cuts up lots of leather strips to use as currency, representing cows, and does so in excess of the cows they have to back them up, then, when the owner of the strips comes to redeem them, at some future point, the debtor will not have the cows to honour the debt. Not only does that undermine the trust required in that form of currency, certainly in respect of that particular debtor, but it means that the creditor will seek to redeem the debt – which means, in reality, their claim on a given amount of social-labour-time – in some other way. They will lay claim to other assets of the debtor, including, as has been seen in the past, not only seizure of their land, property and so on, but also, of their children and wives, and of the labour of the debtor themselves, who is, thereby, drawn into serfdom and debt slavery.
The state, at least as regards its own citizens, is not put in that position, if it debases the currency. Instead, it tends to lead to the citizens revolting, and overthrowing the state. But, the same does apply in respect to the relations between states. When Egypt failed to pay the debts it had incurred to foreign lenders in relation to the construction of the Suez Canal, it was occupied by Britain. The consequence of that is, also, that there is inflation. The value of commodities may not change, including the money commodity, say, gold, but all prices rise, because the standard of prices has itself been devalued, it represents a smaller quantity of social-labour-time than it did previously. More of it must, now, be handed over to buy any given quantity of commodities. Take money itself out of the equation, and look at what is going on, and this becomes obvious, as Marx sets out in A Contribution To The Critique of Political Economy.
Suppose I produce linen, and you produce wine. To produce a metre of linen requires 10 hours of average social labour time, as does a litre of wine. What we actually exchange, when I sell you my metre of linen, and, in return, you sell me your litre of wine, is this 10 hours of labour. It is this equivalence of value that makes the exchange possible, and determines the ratio in which linen and wine exchange, the exchange-value of each measured by the other. Another way of saying this is that the wine price of a metre of linen is 1 litre. But, if you bottle your wine in containers that continue to be labelled as “1 litre”, whilst, in fact, only containing half a litre of wine, and so representing only 5 hours of labour-time, it is no good you asking me to give you a metre of linen in exchange. (Similarly, if I have already sold you the metre of linen, at a price of 1 litre, it is no good you trying to pass off a half litre, simply labelled as 1 litre, as full payment.)
I am interested in the quantity of wine in the bottle, the quantity of labour-time it represents, not the label you put on it! For those that object to the labour theory of value, and favour a bourgeois theory of subjective value, the same principle applies, as witnessed by the fact that consumers are not long fooled by “shrinkflation”. Replace “labour-time”, with “social-cost of production”, and the same principle applies. The exchange relation between commodities is determined by their social-cost of production, and, if, that is disturbed, for example, by an imbalance of supply and demand, the result is that excess profits are made in the production of one of these commodities, whose price rises above its social cost of production. Those excess profits cause additional capital to be diverted to that production, supply rises, its price falls, and the relation is restored.
If you short change me by a less obvious amount, you might get away with it for a while, but it will not take long for the deception to be found out. Instead of the wine price of linen being 1 litre, it will become 2 litres.
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