Gold standard and central banks

[GracchusBabeuf]

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[Revy]

When talking about money, I think Marx had only the gold standard in mind. How can that be reconciled with the fact that the value of money is no more set by the gold standard, but by central banks? I can understand that it is because of the costs of production involved in producing gold that gold has a high value. But now that money is regulated by central banks and not by gold, how can the cost of production or labor account for the value of money and thus the price. Or am I missing something here?

Are you sure? I haven't heard of Marx endorsing the gold standard.

What I do know is that the gold standard was one of the factors that led to the Great Depression, or at least made it worse for the countries that used it, which included the U.S.

[Demogorgon]

The Gold standard was really all that existed in Marx's day. The change to fiat money means that Marxists have to alter our theories of money to compensate. However the problem you refer to isn't a problem at all. Money is a form of exchange and its value is entirely that which you can exchange it for. So when a product costs x amount of dollars it is because in principle it is equal in value to another product valued at the same amount of dollars.

Any transaction you make is not for money but for what you can buy with the money. In simple economic terms, money has no value of its own* so it is only a way of valuing goods in relation to other goods.

*When you get into more complicated economics, money does have value of its own, because changing the amount of money in the economy will not simply alter prices to reflect this but will actually change the amount of goods produced. This is because of price stickiness and the way suppliers respond to demand.

[Kassad]

The problem with the gold standard is that it does not have proper means of adjusting to the current amount of goods and services in society. A soft currency has the means of properly expanding with the amount of goods and services. As we know, incredibly regulation must be implemented to maintain the currency without causing massive inflation of the currency. It's very amusing and ironic, actually. The libertarian right argues for a gold standard because of inflation, but it was their deregulatory schemes that allowed the corporate and private power to continue unchecked in the first place.

On the topic of banks, all banks should be regulated by the workers themselves, as should all corporate power, trade and commodity regulation. The more that government and bureaucracy are allowed to control, the more the bourgeois elitists in society gain control. Banks, as all other commerce and industrial development, can be used for the people, but they must be properly maintained. Capitalism does not do that.

[Demogorgon]

What do you think mainly changes in Marx's analysis of capitalism when the gold standard is replaced by central bank regulated money?
Money becomes a lot more flexible with the abolition of the Gold Standard and there is greater possibility of adapting its use to achieve different ends and even change the nature of it. So for one we have to cast our criticism of the monetary system more widely and also be open to the possibility that there may be a different kind of monetary system more acceptable to us.

Also in terms of the here and now we have to adapt our analysis of the economy to include the effects of deliberate large changes to the money supply. That wasn't something that happened in Marx's day, but it is common now.