If a cow is used as money, it is not being used as a cow. If its being used as a cow, its not being used as money. That is most clearly seen if the cow is slaughtered for its meat, for instance. Fortunately, when we come to indirectly measuring the value of all other commodities, and, thereby, also the relative values of all these commodities one to another – their prices – we do not need the presence of physical cows for that purpose. All we need to know is the value of a cow, in the abstract, an imaginary cow. And, the same is true of any other money commodity, such as gold. In reality, all we are using for the purpose of measurement is a quantity of social-labour time, in corporeal form, be it in the shape of a cow, a quantity of salt, silver or gold. So, not only is it the case that not all the physical gold in an economy is money, but it is, likewise, the case that a country might have no physical gold whatsoever, and yet still use gold as its money-commodity.
If gold is internationally recognised as the money-commodity, a country may, itself, have no physical gold, and yet, knowing the value of an ounce of gold, still enables it to indirectly measure the value of all of the other commodities, produced and exchanged in its realm. It can calculate the equivalent amount of gold that would represent the total value of all of the commodities it produces. That is nothing other than measuring the total amount of social labour-time expended on their production, their total social cost of production. If, such a country, establishes an ounce of gold as its standard of prices, and, let us say, calls this standard £1, it can, thereby, put a price on the total value of its production. But, it need have no gold whatsoever to do do that. It can, instead, simply mint coins made from base metal, as a representative of that ounce of gold. Or it could print paper notes, which have no inherent value themselves, as such a representation of that ounce of gold, just as a leather strip could represent a cow. In reality, all they are representing is a given quantity of social-labour-time.
As Marx notes, in Scotland, prior to the 1845 Bank Act, which replicated the 1844 Bank Act in England, virtually no gold coins circulated in Scotland, and they were represented by paper bank notes. The only condition remains that no more of these coins or bank notes are thrown into circulation than the amount of gold they purport to represent. That, of course, is what MMT, like John Law and others before, seeks to deny, as it confuses these money tokens/currency with money itself.
Of course, as I have set out before, it is not entirely that simple, however. Money is an amount of social labour-time, equal to the value of all other commodities produced and to be exchanged within an economy. It is the equivalent form of that value. But, the amount of value produced and exchanged in an economy is not, itself, a fixed quantum. It is constantly changing. If more useful labour is undertaken, more new value is created, and so the amount of money, the equivalent form of this value increases. Marx details, in Capital III, how the Bank of England, varied the amount of currency in circulation, on that basis, not just year to year, but throughout each year.
But, what determines, in a capitalist economy, whether more labour is undertaken, and so new value created? It is that capital accumulates. This is where Richard, as with Keynes, and as with Malthus, whose under-consumptionist theory underlies their arguments, confuses money with capital. The same was seen with the under-consumptionist arguments of Attwood.
In every mode of production, the amount of new value created, each year, tends to grow, because more labour is employed. For one thing, there tends to be a steady rise in population, and with it a rise in the working-population. But, in addition to this growth in the amount of new value created, there is an even greater increase in the amount of total value of output, for the simple reason that, as productivity rises, a greater proportion of the value of output consists of the value of the raw materials and other means of production, produced in previous years. If previously an hour of labour processed 100 kilos of cotton, and now, that same 1 hour of labour process 1,000 kilos of cotton, the amount of new value created remains 1 hour, but the amount of value of cotton transferred to final output rises 10 fold. This is, ultimately, the basis of Marx's Law of The Tendency For The Rate of Profit To Fall.
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