Basic remarks about money and force, currency and gold Ruthless Criticism | Money – the “real community” | Chapter 1 | Chapter 2 | Supplement 1 | Supplement 2 | Supplement 3

Supplement 3:
Basic remarks about money and force, currency and gold[12]

“I doubt that merely because there is no longer a gold standard, gold backing or gold core currency, the so-called real money-commodity has abdicated. It may be true that the states by virtue of their power set a random money material into the world with forced exchange. But how should a valueless piece of paper or coin with euro, dollar or yen printed on it, created by itself, represent the produced heap of value or commodities, serve as its measure of value, means of circulation, payment and valorization? This assumes a measure of value which faces the commodity world as an independently-existing, absolute commodity which by virtue of having the same political-economic substance constitutes the real universal equivalent, without the so-called economic agents having any concept of it. No state power in the world, even with its sovereign force, can substitute or annul the inherent capitalistic necessity or the economic basis for its compulsory money tokens being nothing but representations of the real, independently-existing form of value. Even if the direct connection of state money tokens to the real money-commodity no longer seems to exist: it’s logical-economic basis is not scotched with it!

On the other hand: don’t you realize that capitalist states, for all their alleged liberation from the gold commodity, maintain their gold treasuries? What possibly for? Perhaps this could at least be a clue that the incarnation of abstract wealth didn’t retire long ago – even if the way that the real money material and paper/coin money is coupled is different than during the capitalism of the 18th-19th centuries, just more indirectly. Here is a further clue for the political-economic necessity of the money-commodity: it happens to be the case that in the modern capitalism of the 20th century, even after the elimination of any connection to gold, gold bars moved back and forth in cases of interstate balance of debt payments. What possibly for? Obviously, because in cases of emergency the states can’t rely on the mutual crediting of national moneys, something you boldly assert substitutes for the real money-commodity. The creditor state simply does not accept the guarantee claimed by the debtor state that its national money represents real capitalist wealth, and demands real money from the debtor state.

This first raised my doubts about your equation of credit money with national currency.

And now as to your ‘derivation’ of modern money, that this would come into existence by credit operations between the state bank and the commercial banks. The difference between money as such and its use as credit can be just as little blurred: The banknote must surely exist by itself as a valid means of circulation and payment and as a representative of the real money-commodity before it can be created by means of a whole credit system. What you have written about the national budget seems like a barely disentanglable back and forth between the central bank and the private banks, so that the average Joe trying to follow you goes grey, doesn’t learn anything he didn’t know before, and comes down to the simple fact that – instead of the state simply running its printing press so that the inflation of its beautiful national money is as certain as amen in church – the modern bourgeois sovereign relies on the procedure, which in intention is supposed to be useful, that its money material whose existence as universal commodity equivalent, respectively its replacement, must be implied, but which is in any case its alleged process of ruin, in a terribly complex system making bank notes issued against security receipts a binding obligation of the banks and its sphere of business, to make a business out of the credit that comes from passing on the sovereign’s banknotes. It may even make sense that credit money indisputably endowed with the functions of money has some impact in terms of generating real money surpluses and it’s something like a material underpinning of the state money that, taken by itself, has no value-economic substance – only: the difference is not thereby extinguished between money as such and what the state puts in the hands of its favorite citizens in the form of credit as an order to increase wealth!”

The editors’ reply

1. Towards the disagreement about the “immanent necessity in capitalism” for an “independently acting form of value”

Valueless pieces of paper are never able “by themselves” to function as money. You are well aware that “states by virtue of their force set an arbitrary money material into the world by mandating its use in exchange,” but for you this does not fit with the fact that all the functions of money presuppose a “real universal equivalent” in which the same “political-economic substance” inheres as in the world of commodities in general. So let’s examine what this “substance” is all about.

We can probably quickly agree on the keyword “objectified labor”; probably also that the quantity, which in the equation of various goods carried out in buying and selling constitutes the “substantial” identity, is not about the “concrete” labor which is reflected in the special properties of a product and can, in that respect, be found in it as a thing – “in substance” – but that it is “contained” simply undifferentiated in “abstract labor,” “labor in general,” in all elements of the capitalistically manufactured world of commodities. What kind of a “substance” is this “labor in general”? Let's go through the matter, it’s so short, and so fundamental, as you obviously want.

Production of anything in the “market economy” is for the sale. In a “market economy,” the interest taken in a product, its economic content, is not its concrete use, but that it has a concrete use for others who are, however, excluded from it – until their exclusion is lifted by the sale. For the producer, the benefit of his labor, the “market economy” value of his product, is the exclusive power of control over a produced thing for which others have a need. This relationship gives him the power to demand an equivalent for his product; the price achieved quantifies the value, what it can command in other products. The true “market economy” benefit of labor, its “real” product, consists therefore in a quantum of the power of control that exists in the material things produced for the market, and its amount is decided in practice solely by successful sale. Consequently, all the objective wealth which the “market economy” brings forth depends on expended labor in a very specific sense: it functions according to its decisive economic determination as a source of exchange value. Its concrete products bring into the world actually nothing other than what is to be realized in their sale as more or less large quantities of the power of control over social wealth. That’s why it counts only according to its quantity; however, not at all according to the number of really expended labor hours: they count only insofar as the product realizes revenue under the generally prevailing conditions of production and the average necessary quantum for the prevailing social needs; thus, in the end, it really results in the right of access and acquisition assessed in money: a quantum of property. That is precisely what constitutes the value of the labor product in contrast and opposition to its “concrete” use value. Labor, as it is carried out in the “market economy,” is therefore abstract in the service it provides in terms of creating and increasing the private power of control over the labor of others and their products.

But this service – and thereby commodity value itself, on which everything turns in the “market economy” – is a lackluster and crude business if the access power realized by a sale in a monetary proceed is immediately spent again on consumption, hence does not survive as newly created value, as an increase of property. Then the purpose which labor serves as abstract has no continued existence, is not at all enforced as a real determinant basis of labor, and remains a transient determinant form of the material reproduction of the producers – a clear contradiction to the abstraction which characterizes labor in the “market economy,” that is, to its political-economic “substance” and determinant purpose of creating more value: if you’re going to do something, then go all the way; if labor is about property, then this surplus should also come about. The contradiction of an abstract, value-creating labor whose product then vanishes in mere concrete consumption resolves itself in the fact that the labor carried out is separated from its proceeds – including the consumption of those who perform the service to property – in that property as the purpose of the production process confronts labor independently and takes command over social labor in the form of capital. The determinant purpose of abstract labor, which exists in commodity value as almost a material property of products and in money takes the shape of a thing, realizes itself in the subordination of labor to the expansion of a value separate from it; hence, in that it accordingly has control over labor: through it as property acting as capital; for its growth; as a production factor which operates as long as possible under the given and constantly further developed conditions of competition, whose own price, on the other hand, corresponds to as low as possible a quantum of the commodity value produced in this time. Maximizing the difference between these two sums is the decisive purpose of all production in the “market economy” which earns it the name capitalism, and is the “substantial” basis and real economic content of the abstraction which labor is subordinated to when it creates exchange value. Property inscribes in the labor product that its real economic benefit does not lie in its ordinary material use value, but in excluding it from others who need it, and therefore creates the power to control the labor of others. The service to property is realized in the surplus of value produced compared to that expended for the “labor factor.” Vice versa, the determinant purpose of labor in capitalism appears to people in the commodity character of their products as a material relation between exchanged objects: as an “objective law” of its economy. This absurdity – that a social relation, namely the private command power over socially necessary labor practiced in generating “surplus value,” exists objectively in the value of a commodity – moved Marx to speak of exchange value as a “fetish.”

Are we still in agreement up to this point? Then the difference of opinion may start with the question what this strange social relationship is based on. It does not fall from the sky. Certainly not from the world of commodities – vice versa, its political-economic determinations are the basis for the aforementioned all-ruling achievement of the “abstraction.” It does not derive immediately from a consciously foregathered arrangement by the economic subjects – that would be a planned economy, the opposite of a reified power of control. It is much too solid for a mere collective deception – the deception that the goods of this world would have exchange value by themselves and labor products “per se” represent a quantum of the power of control which for its part arises, vice versa, from the material social life process which takes place through the sale and purchase of privately owned products. On the other hand, how this – not so-called by chance – political-economic condition for all work and consumption comes about is not difficult to ascertain: a relation of production which condemns the masses of the society to being used as “labor factors” for the purpose of maximum “value creation,” and whose determinant purpose objectifies all products with an exchange value as a condition for their use, is based in all cases on force. And indeed on a type of force which does not act selectively, but incontrovertibly and comprehensively rules the society as a universal condition of existence. One does not need to look far for this in capitalistic societies: the bourgeois state, with its legal protection of the free person, by which it thus permits the sale of one’s own physical being as a “labor factor,” as well as of property, by which it assigns an excluding private right of control to every article of need, decrees to its society the basic “abstraction” which then in objectified form determines its production process.

To avoid misunderstanding: bourgeois constitutional legislators quite certainly don’t have a clue about “abstract labor.” Nor does the government of a capitalist nation act – except in exceptional cases that prove the rule – as an authority which would assign exchange values to labor products; that would, again, be the exact opposite of the “market economy’s” so ingeniously dominant “law” that only successful sale determines the acquired quantum of value; the state power would thereby overrule what it just forces on its society. [13] However, they also don't need to know anything about value and its realization in order to subject their whole show to the “law” of value. For starters, it is completely sufficient that they canonize person and property: the product of socially performed labor is thereby “defined” in practice, as in exchange, as having to prove a quantified right of control and “the whole capitalist shit” takes its course; according to its immanent objective laws. Then, precisely in this way, private owners are authorized to dispose over productive labor independently, however they want to, according to their capitalistic mode of calculation; and this authorization, “objectified” in the value of commodities and its universal “expression,” money, is required as an elementary condition of all social activities. In this first and constitutive form of appearance, that is, in the form of a property represented in value, the state itself treats the relations of force with which it subordinates the society as a circumstance which it finds, and the capitalistic consequences as an economic objective law that it has to respect like a “law” of nature – this is the form in which it makes value, the effect of its force, into an absolute. On its basis and thanks to continuous state support, the by no means nature-given principle of “abstract” labor brings to the fore and impels the whole system of exploitation, without anything first having to be devised by the state: It is protected, elaborated, preserved, and further refined by the state. The achievement that constitutes the entire system of bourgeois state power is that its monopoly on violence, thus the law, institutes the rule of property over use values and the labor that creates them, and vice versa, the subordination of human labor power to property, its degradation into the available-for-purchase “production factor labor.”

In short: The “political-economic substance,” which you know is “objectified” in money, is nothing other than abstract labor: the subsumption of the material life-process of society under the relations of force which dominate capitalist society. The state is the originator of this “abstraction” established and backed up by force. It certainly does not merely establish it and back away from it like a state of affairs originating by itself, but constantly applies its force so that these “immanent necessities” count in its society, so that they take possession of the social life process up to its ultimate consequences and that no one gets in the way of this.

Now a digression on Marx's systematic presentation of commodities and money in the first volume of Capital, which probably occupies your thoughts. His derivation is one big settling of accounts with the bourgeois community: its peculiar economic “logic” of commodity value is the logic of a perverse social relation, namely one that brings harm rather than benefits in matters of production for the working population; an insane relation that presents itself in labor products as its economic “autonomous laws.” Commodity value, that sacred cow of the “market economy,” is to representational definition nothing other than a distorted reflection of a relation of force, namely the subordination of labor under the purpose of private control – over products and over labor itself. And to the extent that labor creates value, it is not something worthy of praise, but servitude: compulsory labor for property, which uses it to inflate itself, the more labor expended, the better. Marx specifically wrote about this in section 4 of the first chapter so that no doubt would remain about the combination of vulgarity and violence in these social relations which condemn humanity to serve value. But it didn’t help: even painstaking students of his opus have interpreted it differently; and the misinterpretation has a broad tradition. His determinations of commodity value are traditionally misunderstood as if exchange value comprises the most honorable thing in the world, human labor, approximately counted in hours, as a somehow really existent object and “substantial” determinant basis of all serious exchange ratios – not even that is understood in the way that it is meant: that the ruling reduction of labor that occurs in exchange value to the wear and tear of labor power is a mockery of the long achieved productive power of labor which humanity could long ago have used to make itself really comfortable. Even readers who have figured out that it does not speak for, but against the ruling relations of production if all production takes place under measures that appear as immanent objective laws of economic objects like to draw the terribly wrong conclusion that these measures would really be automatic economic principles; not the coercive laws of a complete social relationship of servitude, but rather value-free “iron” objective connections that would in fact precede the capitalist relations of production with their “necessities” – accordingly cheaply, these “constraints” would then also often be regarded as a kind of after-the-fact scheme or even abuse of the “law of value”; a whole world movement that once dominated half the globe’s politics for decades even extended this fallacy – for reasons that are not pertinent here – so that a drastic worker-friendly renovation of the relations of class society would merely involve not following said “laws” unconsciously, but recognizing them and intentionally “applying” them; pretty much the way a flight engineer is well advised to heed the laws of air flow. The really not difficult conclusion that an uncomprehended, comprehensive relationship of force lies behind the adherence of the “market economy’s” autonomous laws in things and its emancipation and reification of all connections between social labors, and that the beloved commodity producers certainly do not enter this relation of force to one another out of blindness, but on the basis of conditions of survival set for them by a ruling universal force – this conclusion has been drawn by exceedingly few. Instead, even the sequence between the first and second chapters of volume I of Capital is understood as if there were in the first place really a “logic” of commodity production existing by itself, the “law of value” a valid regulator of social labor, and as if humans in their character as calculating legal subjects really only come afterwards, in order to carry commodities to the market according to their “logic” – where Marx just wants to demonstrate that humans behave under the regime of the bourgeois rule of law and its system of property as if they find the private power of property not in the compulsory laws of their state power, but in commodities as their “autonomous laws,” and as if it was not their submission under the social purpose of increasing property which then perversely faces them in the immanent objective laws of commodity exchange and degrades them into “commodity guardians.” In the end, then, ironically, Marx’s criticism of political economy is so incorrectly interpreted as if force and domination and subordination could “still” not at all be spoken of as long as “only” the economics of commodity value is at issue, but “only” at the “level of politics,” which – as a “superstructure” – begins where exchange value is finished with its “logic.” As though “commodity fetishism” was a nice pet one would get by with fine if there weren’t any capitalists! This way of reading Marx is fatal. Because – regardless of all the political consequences all this also inevitably presents – in this way, precisely the mystification which Marx wanted to reveal, denounce and theoretically eliminate as the false reflection of a perverse social relation of production remains in force: Ultimately, “value” inexplicably crouches as an independent objective power on the spot where “the whole capitalist shit” quite banally dissipates into the force that determines the “social relation between men themselves which assumes here, for them, the fantastic form of a relation between things.” [14]

But back to the letter to the editor: What follows from all this for your riddle, how on earth can pieces of paper and an independently existing form of value fit together? Well, this way: If you are sure – wherever from – that “no state power in the world” “can” “replace or cancel” “the capitalism inherent necessity” of money in the sense of an “absolute commodity,” then we would like to remind you that all bourgeois states “with their ever so sovereign force” first and foremost create the “immanent necessity to capitalism” of making money, the dependence of the entire society’s survival on abstract wealth and its expansion, and waste a lot of effort maintaining this “necessity” and extending it over the entire globe. They thus quite definitely “cancel” nothing essential for capitalism when they nowadays “answer” in practice the question of a really substantial “value-containing” money that suits their decree quite well as a fully adequate “money fetish.”

On the contrary, in this way the state power very consistently and appropriately builds on the services with which it has always ensured a valid money, that is, since there have been comprehensive capitalistically producing national economies at all. If it declares gold or a similar mining product – regardless of the nuisance of constructively carrying on its coming into existence [15] – the mandatory universal equivalent, then it degrades the commodity character of the selected precious metal pieces, the exchange value they have as products of “abstract” labor, to a mere precondition: therefore, they henceforth stand for the abstraction itself – no longer for their own, but for commodity value as such. It lays down the use value of gold or silver in the determination to designate universally valid exchange value – which then adheres to the metal as its new economic quality. It makes the precious metal with its units of weight into the symbol of an objective embodiment of the price form of all commodities. This is already a remarkable and moreover indispensably “political,” state regulatory “intervention” into the capitalist economy: by law, thus making it universally binding, gold or silver is attributed the pure political-economic use value of being the objective embodiment of the price form; the metallic stuff becomes money. A fundamental act of state bindingly imbues an innocent – or rather: due to a handed-down practice, already no longer innocent at all – mining product with the social significance of representing per se direct and universally effective private access power to “living” and “dead” labor. The thereby carried out authorization of an object is – to stress this once again – an absurdity: of course, gold does not have any power in “substance,” but the society is firmly stuck with having to cope with its livelihood by acquiring such stuff. But this determination, the legal coercion of all legal subjects, is executed by the modern constitutional state in all seriousness in the form that it elevates quantities of the weights of an element near the top of the periodic table to the “rank” of quantities of a directly valid power of private ownership and control. On the one hand, the state couldn’t manage this without drawing on the practically presupposed exchange value of the gold commodity from the money circulation of precapitalist society; in the end, it certainly does not want to prescribe to its society any determinations of value, but to provide a universal measure for the property assessed in exchange transactions in practice. By doing this, it at the same time separates – on the other hand – the exchange value that a piece of gold from now on mandatorily indicates from the exchange value it may have had as a mere commodity, from which, by fixing with its mint stamp the intended value of the metal piece, it thereby elevates to the rank of a symbol, and so makes recognizable – if one then wants to notice this – what actually constitutes the money quality of the precious material: it is its decree which confronts the members of society from now on as the “power of money” in gold.

This decree can emanicipate itself much further from the material which it legally designates as the universal equivalent: the modern bourgeois state power realized this quite early on; that is, with its decision – also following the business practices it came across – to ascribe to paper money symbols the power to fulfill the functions of money; more or less all the functions that arise in everyday business. It also quickly understood and immediately accepted this and legally sanctioned and made use of the fact that money can be substituted in all kinds of ways by promises, but – still – not without all existing money, the “substance” of the thing, namely the immediately effective private power of control, having to suffer for it. And as if the modern sovereigns had understood what they had already been doing all along; as if they wanted to alert their subjects stipulated to money-making that money really only depends on the universally binding thinglike existence of its decree over social labor and on any quantitative measure recognized for it by the market economy – and ultimately no longer at all on the exchange value which the material used as universal equivalent might once have originally had; in truth, admittedly, “learned” from the achievements of its finance capitalists, they segued over to today's achievement of liberating gold and silver from serving as money material and also substituted them in their functions of being value with definitive and fully valid written symbols. Since then, the state produced money-commodity denotes and represents the quantified private power of property to a T, as well or as poorly as it when it was removed from mines or panned from rivers – in any case, it does not lack the political-economic “substance” which it depends on in capitalism.

By the way, we also find it completely appropriate in a moral sense that the bourgeois state is nowadays no longer content with producing money symbols which formally promise access to a real money that is differentiated from it, but that by arbitrarily endowing slips of paper with a definitive national “money material” – your expression! – it de facto confesses that nothing more objective is behind the first and last political-economic categories and system-immanent necessities of capitalism than the force with which it imposes the law of value on its society. Because it’s like this: it’s one of the worst jokes in world history that in capitalism, which develops the productive forces on a gigantic scale, all wealth still has its reason and hence its measure in work being as hard and long as possible and the workers being fobbed off with the equivalent of the results of as low as possible a fraction of their labor time. Its viability lies in the omnipresence of the sovereign monopoly on violence which rules its society -- for the benefit of those who have work done; to the detriment of those who must work. The coercive law which is here fixed on humanity has a material form: money is the real existing equation between wealth and having work done. The question as to which stuff the state power uses to fix this equation is ultimately irrelevant for the relation that it fixes with it – “the law of value.” That it nowadays has decided not to let its dictat be represented in the political-economic distinction of a special metal, in the real social amount of expended labor involved, but in a proprietary paper note, adds the appropriate world-historical travesty to the aforementioned bad ironic joke of world history: “Look, nothing but my force was behind the highly valued ‘substance’ around which the whole capitalist world turns!”

2. Towards the disagreement about the economic nature of state credit money

Banknotes were originally credit tokens that were capable of circulating: marketable, fractional, non-interest bearing promises of payment which the issuing bank let circulate in connection with its stored part of the money of the society, actually depending on the expected success of its credit business, as means of payment that were redeemable at any time in money. Such “private” banknotes no longer exist in the modern capitalist state. [16] Instead, there is central bank money: notes which are printed like classic bank-note promises of payment with a unit of measurement, an indication of quantity, and the good name of the issuing (central) bank. However, central bank notes do not function only in place of or in addition to real money, as a medium of circulation subject to risk and reserve evaluations, but is the money of the society by virtue of the law itself. Even where tradition or a link to a fractional part of a – fictive – horde of gold in the issuing bank’s treasury embellishes the piece of printed material, the modern state bank note is no longer a mere money token; it is itself the full, final representative, definitive “incarnation” of “abstract” wealth, the independently existing universal equivalent. Whatever circulates alongside it in money tokens and promises of payment, in paper form or electronically, refers to these notes, denoting or promising payment in central bank money; this does not denote or promise any third thing – except its legal guarantee that it can be used to buy everything, that everybody must accept it as payment, etc. It is the standard of price and the really existing power of control over social wealth; and it is that as well or as poorly as the precious metal denominated in units of weight in earlier times; in any case, it is just as binding.

Because central bank notes are money by virtue of state directive, one can spend them as means of purchase or keep them as a horde, give them away as credit or pay off a loan with them; and the financial industry can use them to do what it always does with the society’s money: centralize it in its own hands, manage it for the owners of money and the income earners – right down to the wage earner with his checking account – and, most importantly, on the basis of its control over it, grant lines of credit to borrowers, send promises of payment into the world, thus create credit and heat up competition and capital accumulation overall in its investment site. Regarding this political-economic central issue: the main advantage of modern central bank money over the antediluvian money-commodity is the ability to create credit beyond the limits of the money earned by the public and deposited in savings banks: credit institutions exist, even if under all sorts of restrictive conditions, as a source of money that is inexhaustible in principle, without having to carry out the social expense and spend money on procuring a solid money-commodity. The banks can borrow what they need in “liquidity” from the central bank at interest in order to expand their credit business. For its part, the central bank – within the scope of the legally prescribed conditions for lending and at interest – gives away as much money as the banking industry demands for its credit business. Its authority to create money – from the standpoint of the old money commodity, one would have to say: like a gold mine or an automatically working silver mine – costs next to nothing to ensure the security of the nation’s financial business. That is, it guarantees the credit industry’s liquidity, in principle without limit, and in this way sets its potential really free. And this is exactly what the state intends. Vice versa, all the money circulating in the society comes into circulation by way of a lending transaction between the central bank and the commercial banks: It functions as a means of credit when it begins its career as definitive means of circulation and payment, simply as money – from the standpoint of finance capital, that’s the good news.

The bad news is: it invariably circulates money which has not been created by labor and earned in “the market.” Actually, a significant amount of this exists and circulates, since the modern state has discovered the convenience and advantage to itself of financing its budget with debts and in this way creating capitalistically unproductive credit which the central bank refinances with fresh money according to all kinds of restrictive regulations, hence ultimately according to its fiscal needs and political-economic discretion. The state power and finance capital are indifferent to the fact that this is in striking contradiction to the political-economic concept of money – expressed in the principle: here is a mass of incarnations of abstract labor which has not at all been done, fruits of capitalist exploitation which has not at all taken place; these supreme authorities of the substance of capitalist value don’t know anything about value anyway. However, they register the effects of this contradiction, and this matters to them: Where, and to what extent, more money circulates than is justified by a successful turnover of capital, capitalist sellers appropriate it in their competition for the society’s buying power by the most obvious means of generally increasing prices. This has the effect that the money buys less and less on average. On the one hand, it is and remains the definitive objectification of exchange value – and at the same time, on the other hand, is always decreasing; the euro of today is, as everybody knows, no longer what it was yesterday, and the Deutsche Mark at the end of its history was also worth only a fraction of its initial value. So as a result of their achievement of setting themselves free to create credit with central bank money and heat up capital accumulation in the national investment site, modern capitalist states are confronted with the effect that they must pay for their miraculous capitalistic money expansion with a quite continual money depreciation.

What follows from this and why and for whom this is bad, we won't go into in this reply. The arrangements a modern state system takes to keep the devaluation of its currency, known as inflation, under control is something you should kindly explain to your “average Joe.” In any case, the truth is that the state does not palm off its commercial banks with mere money tokens, but serves them with a univerally binding security for their creation of credit. That is why this “terribly complicated” process by which the state bank issues bank notes is not just much ado about nothing, but serves the purpose of anchoring into the system of state money creation the necessity of justifying this creation by its successful use as capitalistically productive means of credit; and even where it is pumped into state debts that are guaranteed to be unproductive – a venture whose contradictoriness does not vex its organizers. They take up the matter pragmatically, facing the inevitable consequence that this will damage the national means of circulation in its character as a money-commodity through the service it performs for the state as a means of credit, and try to reduce the damage by struggling with the money “supply” of their banking sector, like in their budget policies, to stimulate the social “value creation” so that the growth rate of the national economy outweighs the devaluation rate of the national money. The devaluation applies by no means to mere “value-economically substanceless” money tokens, but the social money assets as a whole.

Put another way: the politically-economically enlightened modern state provides with its national currency for a money-commodity which is value by virtue of the law and stands as a measure of all exchange values and at the same time, as the standard applied to itself, loses value over time. The reason for this paradox lies in the double nature of this money, which is indicated by the keyword “credit money” and hinted at towards the end of your letter. First of all, credit money denotes the ability to pay which the banking industry creates by letting monetary claims, invoices to be settled in the future, circulate as currently usable securities – a whole “financial industry” is busy with this, making debts into the basis for new debts, transforming anticipated loan payments into currently available ability to pay, all the more to handle the national debt whose service requires ever new additional debts as real capital assets, etc. Already here, existing money is not used for credit purposes, as you consider self-evident from the point of view of common sense, but vice versa: credit is transformed into means of payment. On the one hand, the state “bank of banks” follows exactly this pattern: it makes money which has not realized any commodity value available to the commercial banks, but issues it against the securitized anticipation that the business world will increase its capital with the borrowed ability to pay, thus creates the new property whose power of disposal is already anticipated in the commercially assigned credit refinanced by the central bank. In this respect, it comes into the world as a means of credit. On the other hand, the legal means of payment of the central bank does not only anticipate the ownership power of disposal objectified in money, but it is the – and indeed sole – valid money material of the society; with it, the state founds the “substantial” basis for the credit business which it so freely initiates; and this power is retained by the state’s paper money even when the state goes into debt, thus it creates security portfolios at the same time it finances its capitalistically unproductive consumption and guarantees a monetary wealth which does not at all exist. The logically following depreciation is the practical proof for how chimerical state credit money is: as credit money, a means of payment which does not represent commodity value created, but anticipates future value; as legal money, the definitive disposal power over labor and labor products; and as a means of financing so used by the state that the contradiction between these two determinations asserts itself in the coming apart of money’s “nature” and its durability: simply as the paradox of depreciation.

3. On the question “what are capitalist states keeping their gold reserves for?”

They wonder themselves by now. But one thing after another.

Until a few years ago, capitalist states still found it rather important to keep gold bullion in their central banks. In addition to their foreign exchange reserves – and in dwindling proportion – gold served them as a reserve currency: as a backing for their foreign business dealings. In contrast to the national paper money, which they themselves had at first introduced merely – in the sense of your image – as a money token, as a place-holder for the “real” money-commodity, and as definitive means of payment whose validity is based on nothing but its legislated power, hence ends at the state’s borders, gold was given the honor of having been picked by all the major states as the universal incarnation of “abstract” wealth, and consequently enjoyed recognition as a supranationally binding world money, even without them having had to first agree with each other in principle. Because they all held gold as the sacred substance of value, its ownership automatically guaranteed international ability to pay and creditworthiness – at least, as long as the national treasury did not really have to be used as a fund for due payments. If transfer of gold bullion came due, then it spoke poorly for the position of the nation in international business.

In the meantime [17], the currencies of most and especially the few world-economically important nations are convertible, and not only in the formal sense that they may be exchanged, but with all the political-economic consequences. By virtue of international agreement – whose originator and guarantor is in Washington – they are all world money. Their state creators and guardians take responsibility for the national product’s worldwide recognition as incarnation of capitalistic wealth and concede foreign currencies the same status – or accented vice versa: they concede the use of their national money-commodity as an international means of payment and use those of other nations as variants of the wealth on whose national accumulation they are keen. We will leave aside here what follows from all this, in particular for the fate which a national money – and the various specimens of this type! – undergoes as a combination of credit symbol and money-commodity. This seems to us especially important for your question: since this relation of recogition is enforced, the validity of national money – which in the practice of the world economy is of course only true for half a dozen to a dozen currencies – no longer stops at the national borders. Also internationally, the U.S. dollar, euro, Swiss franc, etc. no longer figure as mere money tokens, as proxies for a – only imaginary anyway – quantity of precious metal, but as emergency cases of real world money. With mutual recognition of their currencies as formally similar variants of their own definitive means of payment and circulation, the world’s economic powers expose the products of their own independent central banks – but as do all the others – to a constant comparative test of solidity by, namely, the capitalist money traders whom they all authorize. And most of the currencies have only withstood this test poorly. The gold currency reserves that existed in countries with increasingly “weak” currencies were sacrificed in the attempt to certify and improve the world money quality of their national means of payment under the new conditions and squandered to the more successful foreign countries. In the meantime, nations with such currencies can’t do anything on their own for their currency’s recognition and evaluation – except: by hook or by crook, promote exports, reduce imports and unproductive consumption, make the country and people attractive for capital imports in a race of immiseration, and seek loans from the sovereigns with “good” money or from the various international financial agencies maintained by them. At any rate, a nod from the IMF is far more important for the business capacity of most nations on the globe than a little precious metal as a currency reserve. The latter has migrated to the treasury cellars of the central banks which issue the world money that is really used. And their state owners have for years been asking themselves in all seriousness why they really should still keep this gold horde. No responsible government may so easily rule out that it might need this stuff again someday as an insurance policy for international obligations. On the other hand, it is clear to everyone that neither the world economy in general nor its economic power in particular would survive the downfall which they don’t want to completely rule out. That’s why they rule it out then after all, even the majority moves away from recognizing gold as the money-commodity – that’s called the “demonetization of gold” – and rather consider how they could make the metal treasure, which they indeed still dispose over as before, into money, without glutting the market and ruining the price of gold.


[12] A letter – shortened – and editorial reply – shortened and reworked – from GegenStandpunkt 3-01.

[13] The parties of Real Socialism in their day did precisely that in their sphere of power, hence actually abolished capitalism and replaced it with a new mode of production – unfortunately not with communism.

[14] Karl Marx, Capital, Volume 1, p. 165.

[15] These customs descend from the relations of force which were already in existence – abundantly, by the way – before the historic appearance of the bourgeois state power; also because powerful leaders and authorities had already enforced a property system to some degree, enough at least to get trade in motion and to charter merchants and bankers to their business. No, this was not yet capitalism, in the sense that the “value form” remained rather “underdeveloped”; whatever total social business system was established did not come close to the achievement of the bourgeois state in so fundamentally carrying out exchange value as the ruling social condition of existence that it can reveal what it entails -- namely, a comprehensive relation of production. For this, it needs the enforcement of the bourgeois state power’s monopoly on violence, the totalitarian authority of the legal system of property, the monopolization of command over social labor by empowered private property owners, and an exclusive national soveriegnty over its currency. Only then could the authority bring itself to overcome the awkward construct of a money-commodity whose exchange value represents exchange value as such and by means of its pure metallic content offers a rough minimum guarantee for a portion of the private power of appropriation. Indeed, the more perfectly the state has then laid down for its whole society moneymaking as its sole means of livelihood, the more it has dared to emancipate itself in the question of the money-commodity – and in the end emancipated its decree over the sole validity and universal bindingness of the capitalistic means of access denominated by it from the traditional money-commodity with its – long virtual anyway – own exchange value.

[16] The state power had originally withdrawn the right to issue notes capable of circulation from the private banks in order to put an end to a rampant jumble of circulating promises of payment of varying security which had led to correspondingly varying evaluations by the business world, and to prevent the danger posed to the general ability to pay by the devaluation of the notes of bankrupt banks.

[17] By the way, the most important starting point for this advance includes, of all things, the robustly asserted demand of then French President De Gaulle to “cash in” the U.S. dollars he saw flooding the world, under the terms of the formally guaranteed gold parity of the U.S. currency with real gold. America rejected the declaration of distrust contained in this demand against the superior world power, with which it had pressed on the capitalist nations respect for its currency as unrivaled universal means of business, and connected the repeal of its until then fictionally maintained guarantee of exchange with the introduction of a new system of freely tradable national currencies.