July 5, 2020 at 7:22 pm #204884
In cap vol 1 Marx writes “all that is necessary in order to abstract a given number of sovereigns from the circulation is to throw the same number of one-pound notes into it, a trick well known to all bankers.” what’s the point if sovereigns cannot be changed into anything else , or am I missing something simple like making notes legal tender the Banks can print as much money as they like .July 5, 2020 at 7:43 pm #204885July 5, 2020 at 8:03 pm #204886
Is the simple answer to this there wasn’t enough gold in the 1850s to carry on minting sovereigns as the economy expands , gold being used for foreign exchange at the time in the form of bullion , read a fair bit about the Bank of England at that time . Although banking hasn’t changed the mint doesn’t use gold coins anymore other than to sell to collectors , the link doesn’t explain the bankers trick , if the gold is only worth its face value then having a pound or a sovereign makes no difference .July 6, 2020 at 9:18 pm #204902
If this quote is taken to mean that Marx thought that bankers were tricksters that’s a misinterpretation.
In that section of Capital he is discussing what determines the amount of currency in circulation when the currency is (as it was in his day in Britain but which of course has long since ceased to be the case) gold coins and paper money convertible on demand into a fixed amount of gold. What he is saying here is that one way to take gold coins out of circulation is to increase the number of convertible notes. This only works because the total amount of currency in circulation is determined by the needs of the economy (number of transactions to be done).
Marx was arguing against a school of economic thought (known as the Currency School) that supported the Quantity Theory of Money according to which the level of prices was determined by the amount of currency issued. If this theory was correct then the “bankers’ trick” would not work. What should happen instead is that the general price level would go up, with the amount of gold coins in circulation staying the same. Marx’s point in this passage is that the fact that issuing more convertible paper notes does not lead to this but to less gold coins circulating shows that the Currency School’s theory was wrong.
There is more on this (and so on the background to this passage) in this article from the December 1983 Socialist Standard:July 6, 2020 at 9:29 pm #204903
What Adam Buick has written it is the accurate and correct answer to this issue. Marx never said that bankers are tricksters. That argument about the bankers is a false argumentation supported by leftist and neonazis which think that the problem of this society are the banks and central banksJuly 6, 2020 at 10:04 pm #204904July 6, 2020 at 10:11 pm #204905
I understand what has been written , but if it makes no difference if sovereigns are put into circulation or notes , then why would Marx make such a statement , surely the bankers have to be saving or gaining by notes being issued rather than gold coins , otherwise there’s no trick .July 7, 2020 at 7:03 am #204910
Not necessarily. The gold (coins) that drop out of circulation don’t become the property of the bankers. If they are deposited in a bank they remain the property of the person who deposited them.
There were also limits to how far a bank could go in issuing bank notes. These were in effect liabilities (in the accounting sense) for the bank with a holder of one of them entitled to exchange it for a gold coin. If a bank issued too many notes it risked finding itself unable to honour them if too many exercised their right to convert them into a gold coin.
In any event, even at the time Marx was writing, commercial banks could no longer do this. The Bank Act of 1844 established a monopoly in the issue of paper money for the Bank of England (some banks were allowed to continue issue notes — a few in Scotland and Northern Ireland still can — but only if they were backed by an equivalent amount of Bank of England notes).
This Act also places a limit on the total face value of paper notes without them being backed by gold that the Bank if England could issue. This was known as the “fiduciary issue”; any notes issued above this limit had to be backed by an equivalent among of gold in the Bank’s vault.
What I hadn’t realised before you mentioned this quote (it’s in chapter 2, section 2b) was the extent to which it is cited on the internet to try to show that Marx thought banks and bankers were tricksters. When Marx used the (German) word for “trick” it wasn’t in the sense of fraud but in the sense of a feat or performance as by a magician or in cricket a bowler doing the hat trick (for those who don’t understand cricket, that’s bowling three batsmen out in three successive balls, which is hardly fraudulent). In the French version, which Marx saw to the press, the word is “truc” which has no connotation of fraud or even self-interest.July 7, 2020 at 5:15 pm #204912
What Adam Buick wrote about Marx capital in French and German edition , it was also covered by Raya dunayeskaya in regard to the French and German edition of Marx capital , even more, she considered that the French is one of the most accurate edition
I have read the edition in Spanish and there is not indication of Marx using the word fraud or trick , as well , in Portuguese and Italian he did not use that expression
It would be similar to the word dictatorship used by Marx which was taken from the Roman political system which meant government, it did not have the connotation of the present time
The government of Venezuela has deposited tons of gold on the Bank of England and the gold is not the property Of the bank , it belongs to Venezuela but the bank is retaining the gold violating the banking laws, they have also done the same things with other countries
Many years ago churches in Europe were used to deposit gold and silvers and they were not part of the banking systemJuly 7, 2020 at 7:23 pm #204913
To me at least what his quote says is , the bankers were using notes to gain more control over the financial sector .July 7, 2020 at 8:01 pm #204914
Banks and bankers are unproductive and they belong to the unproductive sector, the capitalist economy is controlled by the market system, it is not controlled by the banking system
The idea of our time is that banks control the capitalists economy, and it is wrong, it is the opposing way, market controls the banking system, and one sector of the economy is not the capitalist economy as a whole.
It is similar to the idea that a world without dollar would be a better world, money is capital, it is a commodity, and it is a product of economic exploitation, and does not make any difference if it is dollars, euros, yuan, rubles, pesos, etc, etc,
There are thousands of conspiracist theory on the banks and bankers, and most of them were created by the capitalists, or the nazis during 1930, and they are propagated by the leftwingers, they are the best propagators of the ideas of the right-wingersJuly 8, 2020 at 6:17 pm #204931
I didn’t say that the banks control the system and banks as you pointed out flout the rules , they go bust , overlend and like any other business in capitalism will make use of any means that they think will bring in more money , and as you point out react to the market and not control it .July 8, 2020 at 6:33 pm #204932
I did not say that you said that, I am clarifying that there are too many wrong theories about banks, bankers, money, currencies, federal reserve banks and central banks which are being propagated in the internet and discussion forums
They are a smokescreen to hide the real causes of the capitalist crisis which is overproduction, the profits society, and the contradiction between social production and private expropriation.
Every day I see many individuals blaming everything on Soros,( according to them he controls the whole world ) the Rothschild, Israel, the Jews, the Illuminati, the deep state, but never in the capitalist mode of production, and that Karl Marx was an agent of the Rothschild and got paid to write Das Kapital to protect the bankers, and that communism is a creation of the jews, and that fictitious capital is created by the stroke of a pen
Most of these individuals have never read anything about Marx, and Capital and they do not know the mode of operation of the Capitalist system, which is well explained in volume 3 of Das CapitalJuly 8, 2020 at 6:50 pm #204933
You say that you think Marx meant that “the bankers were using notes to gain more control over the financial sector.”
This doesn’t stand up for a number of reasons.
First, the context of the passage itself. Here it is in full:
“Since the quantity of money capable of being absorbed by the circulation is given for a given mean velocity of currency, all that is necessary in order to abstract a given number of sovereigns from the circulation is to throw the same number of one-pound notes into it, a trick well known to all bankers.”
As can be seen from the opening part (omitted from most quotes) Marx starts from the premises (which he had demonstrated in the previous part of the section) that the economy only needs a given amount of money to buy and sell goods and services. Where the currency is composed of gold coins and paper money convertible on demand into a fixed amount of gold, if banks increase paper money then the amount of money needed will not alter. Marx mentions one possible result — that a certain amount of gold coins would drop out of circulation. Another would be the excess notes come back to the bank. Either way the amount of money in circulation remains the same.
Whatever happens, it is difficult to see how the bankers gain more control over the financial sector or that Marx could be saying this. His basic argument is precisely that they can’t control the amount of currency in circulation.
The school of economic thought that he was arguing against (the Currency School), on the other hand, did argue that the banks could influence this and that what issuing more bank would lead to would be a rising price level ( inflation); which was considered something to be avoided and that this could be done by limiting the power of banks to issue notes.
You said you have read up about banking in the middle of the 19th century so you will know that the Currency School won over the government and their theory was behind the Bank Charter Act of 1844 which sought to limit the amount of notes that could be issued (by giving the Bank of England a monopoly on their issue and saying they could only issue a limited amount of paper money not backed by gold).
This certainly gave the Bank of England more control over the currency but Marx pointed our that it wouldn’t work. He was proved right and every time there was a financial crisis the government had to suspend the operation of the Act and issue more paper notes without gold backing than was normally permitted.
Marx criticism of the banking legislation of the time was that it was not some trick to defraud the public, but that it was stupid even from a capitalist point of view.July 8, 2020 at 7:14 pm #204935
The conclusion is that Marx was not a money crank, and Adam Buick has hit the last nail in the coffin of this argument on reply #204933. Bankers will not gain more control of the financial sector, on the contrary, they can not control the amount of currency in circulation. There are many things written by Marx which must be understood and analysed within the context of his time
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