anwar shaikh, karl marx (lecture 9 – 10/26)

the exchange of money and commodities is complex, Shaikh is suggesting, even when derived simply from the circulation of commodities.

credit in the circuit of revenue (not necessarily profit-oriented, casual; from parents, etc.) is different from credit in the circuit of capital (from banks, etc., and charge of interest, etc.) Each form of credit relates to the circuit C-M-C (revenue), and M-C-M' (capital), respectively.

the motivations in each are different, the dynamics are different. the former is like a circle. the latter however, is better thought of as an expanding spiral.

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difference between a money commoditiy and a token is that the 'value' of the latter is linked to the issuer of the token. every degree of hierarchy has an element of faith (people flee to higher levels of respectability at times of crisis, of course). gold has the property that it's not backed by any issuer.

there's a shared expectation that it will be the ultimate form of 'backing in the last instance', valid even when national/world economies are under threat. it's still a form of 'faith', of course – its value relates entirely to social-historical relations (if you crash on an island, gold will do you no good). similary, the unique property of gold, note, has nothing to do with the labor-time invested in its production/procurement, but is solely a social construction. its value as a referent/measure is social.

Marx's initial objection to the Quantity Theory of Money has to do with this notion of being 'fixed'. for neoclassicals and for its initial promulgators, the supply is something fixed by the State/etc. for Marxists, Shaikh is suggesting, the situation is much more flexible. here bringing up the example of elevated level of reserves, today; due to the lack of a pull (profitability) in the economy at-large. Money flows in and out of circulation as the need for it varies, more-or-less. [he brings this out in Volume I, assuming a fixed velocity and the use of gold]

interesting case of British and Japanese colonial powers having to resort to brutal methods to destroy local currencies

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how can money be endogeneous?

I take my real money (gold) to a bank (originallly a goldsmith), and I'd like you to store my gold. give me a piece of paper, and I can pay people via you, etc. originally just deposits.

but, historically, these money-vaults became attached to a different sort of economic activity—namely, lending. this is the origin of the modern bank, of course.

in practice, banks have to figure out how often customers come, statistically. they need lots of customers who take out small numbers, etc.

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discussion (with graphs) on what prices look like over the long run, for the US and UK. you have had inflation and deflation beween 1790-1940. inflation is a very recent historical phenomenon.

the price of gold is maintained until about 1930, when Britain goes off the gold standard. in 1970, it shoots up.

if you look at the price level till 2008, then, you see something very new after 1940. prices never come down – this is the era that we call the era of inflation (concomitant to the end of the gold standard)

what's new about this era? not gov't deficits – 'when my book is done you can take a look'

notice, though, when you express the price in gold (instead of expressing it in terms of the currency), the pattern of prices that prevailed prior to 1940 returns. the long wave is back. price levels don't explode, as they do on the other graph.

when we ask about moneys/commodities, we have to ask what's the referent by which we're measuring price.

Kondratieff falls out of favor, after the price explosion seems to obviate the argument about long waves. Shaikh suggesting that when you measure in terms of gold, though, you see that the long wave is back.

one question, of course, is why is there this steady up and down in gold – you see people retreat to gold before a crisis [question, then, is what explains crisis—can't get into it now, of course]