The LTV and paper money

[Amado]

So, a friend pointed me out something about the labor theory of value: it takes the exact same amount of labor to make a $1 bill as to make a $100 bill. So why does the $100 bill exchange for commodities at higher value? I'm sure the LTV can explain this, but I feel like I hit a brick wall. Anyone can help?

[anticap]

So, a friend pointed me out something about the labor theory of value: it takes the exact same amount of labor to make a $1 bill as to make a $100 bill. So why does the $100 bill exchange for commodities at higher value? I'm sure the LTV can explain this, but I feel like I hit a brick wall. Anyone can help?

Money today is only representative of value. In fact it's more often digits on a screen than paper notes.

[Amado]

But isn't money, particularly paper money, a commodity as well? But how can it exchange with something that doesn't have the same value as it? Here is how my friend laid it out:

1 - Money is a commodity.
2 - X of commodity A = Y of commodity B
3 - A $1 bill takes as much labor to make as a $100 bill.
4 - But a $1 bill doesn't exchange for a $100 bill, nor does it exchange for a third commodity worth $100.

I'm still not sure on how to solve this problem.

[anticap]

It's complicated by the fact that the state enforces the use of essentially worthless notes and coins, which are no longer backed up by a real money commodity (e.g., gold, silver).

[Kléber]

We are talking about "fiat money," not "commodity money." Fiat money is simply a government-guaranteed crystallization of surplus-value. It has exchange value, but very little labor value and no use value (unless you are an idiot who rolls joints out of dollar bills).

The LTV holds true even in extreme cases like a $1,000,000 check that cost less than $1 to make because this piece of paper would be worthless without a stable economy capable of backing it up.

Compare this apparent exception to the LTV to the law of gravity: it holds true for most objects, but there are rare exceptions - like helium balloons - that go up instead of down, apparently (but not really) breaking the rules.

And also, it does cost more to make a new $100 bill than a $1 bill. The more valuable the type of bill, the more that governments are likely to put anti-counterfeit measures like watermarks and security thread on it.

[Sir Comradical]

Tell him/her that money has reflex value, it's not really useful other than as a medium for comparing two commodities.

Here.
http://kapitalism101.wordpress.com/what-the-hell-is-money/