Date: Mon, 15 Dec 2003 13:44:07 +1100
From: Günter Minnerup <g.minnerup-AT-unsw.edu.au>
Subject: Re[4]: BHA: Missing posts


Dear Howard,

on Monday, 15 December 2003, you wrote:

> I can't say much about this, but because the gold standard has been
> abandoned does not automatically mean that the world economy does not still
> function in terms of gold.  There is marxist work being done now on showing
> this.  Unfortunately, I can give you neither substance or reference.  But I
> will try to track down a reference.

Yes, that reference would be useful. As I understand it, the whole problem reduces to something like this:

1. Money is a human artifact and there's no limitations on how much money is printed.
2. To act as the general exchange equivalent, however, there has to be some confidence that it won't lose its value.
3. Hence money needs "backing up" by some relationship to something that's not arbitrarily producible. That's turned out to be gold, though silver also played that part on occasion.
4. The gold standard formalises the relationship, i.e. a government declares that it's currency is "as good as gold" in order to be usable as an international reserve and trading currency with confidence.
5. If it then breaks the promise (i.e. the US printing paper dollars to finance the Vietnam war etc) the formal link with gold is broken (collapse of Bretton Woods).
6. Yet the informal link is still required as the last resort measurement of a currency's value, even if the international currency markets trade in bilateral exchange values. The international monetary system just becomes extremely volatile, with exchangerates fluctuating wildly around real values.
7. In a sense, it's a bit like the price/value problem for all commodities (the old "transformation problem"): there's a qualitative notion of value (the labour theory of value for Marxists) but it's never actually precisely quantifiable in monetary terms. Gold being the (conceptual) equivalent of labour here.

Bit rough and ready this, but do you and Par agree on this? I'm sure Steve doesn't.

Regards,
Günter

-- 
Günter Minnerup
School of History
University of New South Wales
Sydney NSW 2052
Tel. (+61 2) 9385 3668 (work)
Tel. (+61 2) 9398 3646 (home)
mailto:g.minnerup-AT-unsw.edu.au



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