| This question <550|645-5> overall <555|557> Hans: <555|558>. |
| Question 334: Do you purchase something with money or with the value of money? |
| [556] Hans: Where does the magic of money come from? This question had a long and inconclusive discussion. In this discussion, several lines of argument competed with each other, without resolution. |
| One line of argument said: money is a little piece of paper. This paper, by itself, can impossibly buy anything. Therefore it must be the value of money which gives it the power to buy. |
| Others said: money nowadays has no value; therefore it cannot be the value of money that buys things, it must be the money itself. |
| Again others said: At Marx's time, money was gold, i.e., it had value. But money is not the only thing with value; many other things have value too. But you clearly cannot take 20 yards of linen to the store to buy things with. Having value in your hands is not enough to buy things with. Therefore it cannot be the value of money, it must be the money itself that buys things. |
| To me, these last two arguments are more convincing than the first. I see two things wrong with the first argument: |
| (1) money is not just a valueless piece of paper. A big apparatus, consisting of the banking system, the Treasury, legislation, etc., is behind these pieces of paper. |
| (2) One can say this paper money has “value” in the following sense: people value or appreciate it because it can buy everything. But this appreciation cannot be the reason for its ability to buy everything. That would be circular. You cannot answer the question “Why do people appreciate money” with “because it can buy everything”, and at he same time answer the question “why can money buy everything” with: “because people appreciate it.” |
| My answer to the question is therefore: it must be some other quality of money, not its labor content, that gives it its buying power. Which quality? Its quality as measure of value, which allows all commodities to express their values in this money. |
| Marx did not think that any stable measure of value could exist that was not a value itself. But he hasn't witnessed modern, post-gold-standard money, whose value has been kept constant quite successfully for many years by monetary policy. |
| Money itself is passive. The energy which money seems to have comes from the commodities. The commodities have labor in them, which needs to be validated by attracting money. This money needs to be a stable point of reference. Monetary policy does that; Historiclly, the Fed has been the first agency which systematically collected data about industrial production etc., so that they knew the correct amount of money to print, to keep the value of money stable. |
| I should add that this, of course, does not come from Marx. These are my own ideas how Marx's theory should be extended to today's situation. |
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