DOCSLIB.ORG

Non-Commodity Money in Marxian Political Economy Joseph Thomas Rebello University of Massachusetts Amherst, [email protected]

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Non-Commodity Money in Marxian Political Economy Joseph Thomas Rebello University of Massachusetts Amherst, Jrebello@Econs.Umass.Edu University of Massachusetts Amherst ScholarWorks@UMass Amherst Open Access Dissertations 9-2012 Money, Reality, and Value: Non-Commodity Money in Marxian Political Economy Joseph Thomas Rebello University of Massachusetts Amherst, [email protected] Follow this and additional works at: https://scholarworks.umass.edu/open_access_dissertations Part of the Economics Commons Recommended Citation Rebello, Joseph Thomas, "Money, Reality, and Value: Non-Commodity Money in Marxian Political Economy" (2012). Open Access Dissertations. 660. https://scholarworks.umass.edu/open_access_dissertations/660 This Open Access Dissertation is brought to you for free and open access by ScholarWorks@UMass Amherst. It has been accepted for inclusion in Open Access Dissertations by an authorized administrator of ScholarWorks@UMass Amherst. For more information, please contact [email protected]. MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY A Dissertation Presented by JOSEPH T. REBELLO Submitted to the Graduate School of the University of Massachusetts Amherst in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY September 2012 Economics c Copyright by Joseph T. Rebello 2012 All Rights Reserved MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY A Dissertation Presented by JOSEPH T. REBELLO Approved as to style and content by: Stephen A. Resnick, Chair Richard D. Wolff, Member Agustin Lao-Montes, Member Michael Ash, Department Chair Economics ACKNOWLEDGMENTS In many of the pages that follow I argue that a particular type of essentialism has hindered monetary thought. It is difficult not to consider the anti-essentialist overdeterminist orientation of this dissertation when attempting to acknowledge the essential individuals I am indebted too. If I wanted to be especially clever, in a pre- dictable fashion, I might even meditate on the relationship between intellectual and monetary debts. Don't worry. I won't. As for overdetermination, thinking about intellectual indebtedness is one of those cases where it not only makes philosophical, but also practical, sense. I have yet to encounter a person or idea that hasn't influ- enced me. I can imagine some teachers who might be horrified with what I have done with their inspiration, but such is the nature of the dialectic. There are, of course, some hegemonic figures that I want to mention. First, and foremost, is Julie Graham. To those who knew her, there is really nothing I need to say. To those that didn't, I doubt my ability to explain. The academy can be a cruel and bitter place, yet Julie was a constant force of truly joyful intellectual surplus. There is a set of wonderful transformative ideas that can withstand serious intellectual challenge, but also invite superficial attacks and dismissals from defenders of archaic orthodoxies and the hyper-masculine gladiators of ideology. I must confess to worrying too much about one might say about me. I'm not sure if Julie had similar worries, but if she did they did not constrain her. I wish I could say that I was more successful in living up to her example. Agustin Lao-Montes was generous in joining this eclectic dissertation project late. I was incredibly lucky to find a scholar with such diverse expertise, who likely knows most of the varied literatures I engage with better than myself. iv If Richard Wolff and Stephen Resnick can share an office for decades, they can share a paragraph here. This dissertation would be impossible without their work. There is little chance I would have had these ideas. There is an even smaller chance I could have linked these ideas together. There is no chance I would have received so much support in exploring them. This applies to everything in this dissertation, but particularly so with my emphasis on Marxian theory. On numerous occasions I wanted to take a detour around the problems I saw in the Marxian theory of money, focusing on the history of monetary thought elsewhere. That hesitancy was intellec- tual cowardice, and I owe them both greatly for encouraging me not to give in to it. Of course, their influence extends well beyond this dissertation. I first read their work as an undergraduate struggling tremendously with a series of false oppositions (Marxism or Poststructuralism; Rationalism or Empiricism; Social Theory or Eco- nomics) they helped me reconcile or leave behind. They are also, in almost comically different fashions, talented and devoted teachers I always keep in mind when working on my pedagogy. I am also indebted to their many students and collaborators for providing the epistemic conditions of existence for this dissertation. I never imagined becoming an economist after my first course in the subject. I owe Richard McIntyre of the University of Rhode Island for presenting a much better example of what economics could be. More generally I want to thank the faculty in Political Science, Economics, and the Honors Program. I went to the University of Rhode Island due to the accident of being born a Rhode Islander, but in retrospect I'm incredibly grateful I didn't end up anywhere else. The other students of URI's Honors Program made an indelible mark on my thinking. Sometimes given dirty looks by our classmates within our majors for general nerdiness, the Honors Program computer lab was a refuge of interdisciplinary fun, despite that broken window covered with cardboard. I trust the program's fancier new location has not crowded out the intrinsically motivated intellectual community I once enjoyed. v My partner, Ozlem¨ G¨onerhas lovingly dealt with me through intellectual and emotional lows. She has helped me persevere despite my self-undermining tendencies, and when the world seemed just way too absurd she was my \nation of two," in the words of Kurt Vonnegut. Before Ozlem¨ relieved the world's burden of dealing with me, I had numerous housemates throughout graduate school. The Economics Graduate Student Orga- nization at UMass provided a cooperative environment almost inconceivable in the academy. During my first years of graduate school, the participants in the Subjects of Economy project and Julie Graham's research seminars provided me with the perfect combination of challenge and encouragement. I'm fittingly putting the final touches on these acknowledgments at the Haymarket Cafe in Northampton, Massachusetts. There is significant labor turnover in the food industry, and I don't recognize everyone here now, but for many years this was my office away from office. I'm very grateful to those who have worked here over the last decade. Similarly, I must thank the workers at the PVTA and Earthfoods for essential bus transportation and lunch, respectively. All of the staff in the Economics department assisted me greatly. Tony Guglielmi and Judy Dietel were both wonderful people and extraordinary characters. They are missed tremendously. I feel less like an academic than an emotional Grammy or Oscar winner now. There many names I'd like to name. So many, indeed, that I can't name them. Be assured that if you could imagine possibly being one of those names, you most definitely are. Finally, my parents, Joseph and Sandra, worked unimaginably hard to provide me with opportunity and happiness. They were patient when I made seemingly bizarre decisions with the options they had given to. When I was very young I thought I'd play in the NBA and buy them a big house. In that sense, I'm sad to only be able to offer a big dissertation, but I do trust they are happy for me nonetheless. vi ABSTRACT MONEY, REALITY, AND VALUE: NON-COMMODITY MONEY IN MARXIAN POLITICAL ECONOMY SEPTEMBER 2012 JOSEPH T. REBELLO B.A., UNIVERSITY OF RHODE ISLAND Ph.D., UNIVERSITY OF MASSACHUSETTS AMHERST Directed by: Professor Stephen A. Resnick My dissertation offers an advancement of the Marxian theory of money, motivated by a methodological critique of monetary theory in general. As such, my dissertation is located within the philosophy and methodology of economics and the history of monetary thought, in addition to Marxian political economy. This intermingling of fields reflects both my research interests and my argument with respect to the current state of scholarship on Marx and money. Despite increasing acceptance of the compatibility of non-commodity money and Marxian political economy, a dualist social ontology has stunted attempts to theorize the relationship between money, value, and class. I base my development of a Marxian theory of money in a rejection of this dualism. In other words, I contribute a theoretical analysis of the relationship between money, value, and class informed by a critique of these dualist notions of economic reality. Accepting criticism, leveled by Keynesians among others, of the tendency to reduce money to the status of a mere veil, I further argue that the ontological privileging of a vii real economy over its monetary moments is prevalent across time and paradigms. This dichotomy between real economy and less-real money, which I call the realist dualism, is thus more general than the classical dichotomy. As such, even fervent opponents of the classical dichotomy may reproduce their own ontological dualism between the real and merely monetary. After outlining the basic features and theoretical consequences of the realist dualism, I present examples of how this philosophical tendency shapes monetary theory and debate, both ancient and modern. Within the Marxian tradition, dependence on such a dualism has impeded at- tempts to theorize money in its relation to both (1) the economy in general and (2) its own manifold forms and functions. The distinction between real and less-real on a macroeconomic scale is repeated within the conceptualization of money itself, privileg- ing real commodity money over symbolic and imaginary forms. I provide an alterna- tive to this tendency, based on an overdeterminist understanding of the relationships between so-called imaginary, symbolic, and real/material aspects of money.
Load more

Recommended publications
  • Why Is There Finance? Insights from Marx's Monetary Theory Abstract
    Why is there finance? Insights from Marx's monetary theory John Weeks Emeritus Professor of Economics Research on Money and Finance Group School of Oriental and African Studies University of London Abstract Not withstanding his great influence on progressive thought and practice in other areas, Marx's monetary theory has had relatively little impact. In the countless books in the Marxian tradition on economic crises finance and money have minor roles. The lack of influence of Marx's theory of money is largely explained by a belief that his views were either wrong or an anachronism because of their emphasis on commodity money. However, commodity money is an essential element in the labor theory of value. When placed in the context of the circulation of capital, commodity money is a powerful tool to explain the role of money itself and the nature of financial capital. Introduction Not withstanding his great influence on progressive thought and practice in other areas, Marx's monetary theory has had relatively little impact. In the countless books in the Marxian tradition on economic crises finance and money have minor roles compared to discussions of profitability, underconsumption and "disproportionality". 1 In part this results from a preoccupation with the debate over whether there is a tendency for profit rates to fall, over what time period and under what conditions. Deeper than this is a suspicion among Marxists that money and finance involve superficial and derivative phenomena that in themselves are of limited theoretical power. Closely related to the tendency to dismiss money and finance as of little importance in themselves is a suspicion, conviction for some, that Marx's treatment of the 1 Exceptions are Lapavitsas (1991, 2003), Lapavitsas and Itoh (1999) and Toporowski (2000, 2005), with the latter author from a broader political economy interest not limited to Marx.
    [Show full text]
  • The Compatibility of Marxian and Keynesian Economics: a Critical Assessment of Two Interpretations of Marx
    NSER 5(1)—Articles The Compatibility of Marxian and Keynesian Economics: A Critical Assessment of Two Interpretations of Marx By Christian Schoder* This paper contrasts two converse interpretations of Marx which are assessed regarding their compatibility with Keynesian concepts of effective demand, independent investment and endogenous money. On the one hand, the orthodox interpretation abstracts from money and assumes the validity of Say's law. Effective demand does not play a role. It is drawn from Marx's treatment of the general law of capitalist accumulation and the law of the tendency for the rate of profit to fall. On the other hand, the monetary interpretation highly regards of demand, investment and money. Money is the trigger of a general glut as it allows for the separation of purchase and sale as a means of circulation. As a means of payment, money implies its endogenous creation through lending. It is laid out in Marx's treatment of the reproduction and circulation of the aggregate social capital, his analysis of money and credit and his rejection of Say's law. * New School for Social Research. 6 East 16 Street, New York, NY 10003 (e-mail: [email protected]). 17 The Compatibility of Marxian and Keynesian Economics 1. Introduction Various methodological, epistemological and theoretical discrepancies among the variety of schools of thought offer pluralism, but impede the emergence of a common research program (cf. Harvey and Garnett 2008). Hence, there have been several endeavors aimed at integrating Marxian and Keynesian approaches by trying to find shared principles and overcome disparities.i This paper seeks to contribute to this integration process of Marxian and Keynesian ideas.
    [Show full text]
  • A Model of Bimetallism
    Federal Reserve Bank of Minneapolis Research Department A Model of Bimetallism François R. Velde and Warren E. Weber Working Paper 588 August 1998 ABSTRACT Bimetallism has been the subject of considerable debate: Was it a viable monetary system? Was it a de- sirable system? In our model, the (exogenous and stochastic) amount of each metal can be split between monetary uses to satisfy a cash-in-advance constraint, and nonmonetary uses in which the stock of un- coined metal yields utility. The ratio of the monies in the cash-in-advance constraint is endogenous. Bi- metallism is feasible: we find a continuum of steady states (in the certainty case) indexed by the constant exchange rate of the monies; we also prove existence for a range of fixed exchange rates in the stochastic version. Bimetallism does not appear desirable on a welfare basis: among steady states, we prove that welfare under monometallism is higher than under any bimetallic equilibrium. We compute welfare and the variance of the price level under a variety of regimes (bimetallism, monometallism with and without trade money) and find that bimetallism can significantly stabilize the price level, depending on the covari- ance between the shocks to the supplies of metals. Keywords: bimetallism, monometallism, double standard, commodity money *Velde, Federal Reserve Bank of Chicago; Weber, Federal Reserve Bank of Minneapolis and University of Minne- sota. We thank without implicating Marc Flandreau, Ed Green, Angela Redish, and Tom Sargent. The views ex- pressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago, the Fed- eral Reserve Bank of Minneapolis, or the Federal Reserve System.
    [Show full text]
  • The On-Going Price of Perceiving Money As a Veil
    International Journal of Economics and Finance; Vol. 9, No. 12; 2017 ISSN 1916-971XE-ISSN 1916-9728 Published by Canadian Center of Science and Education The On-Going Price of Perceiving Money as a Veil Emir Phillips1 1 JD/MBA MSFS, ChFC CLU is a candidate in the DBA Program at the Grenoble École de Management, Grenoble, France Correspondence: Emir Phillips, JD/MBA MSFS, ChFC CLU is a candidate in the DBA Program at the Grenoble École de Management, 1937 22nd St #1, Santa Monica, CA 90404, Grenoble, France. Tel: 310-930-6360. E-mail: [email protected] Received: September 20, 2017 Accepted: November 15, 2017 Online Published: November 20, 2017 doi:10.5539/ijef.v9n12p215 URL: https://doi.org/10.5539/ijef.v9n12p215 Abstract Until macroeconomic theory rebuffs the nature of finance, which is leverage (debt claims and credit instruments above current GDP output), shadow-banking will continue to lure capital into the financial sector, lower institutional banking interest rates, and de-incentivize commercial lending from the real sector, even at competitive risk-adjusted rates. This institutionalized misallocation of credit undermines the tidy neoclassical ―circular flow‖ apparatus where savings and earnings are allegedly pooled and then recycled through financial intermediaries into dynamic investment. Despite the mathematical complexity of DSGE models, the last financial crisis and its aftermath exposed the models‘ inadequacy for forecasting or even fully capturing economic reality. With no dynamic function for money, incorporating credit into the theoretical mindset of mainstream economics, including both neoliberal and (Post)-Keynesian traditions, has proven as yet unattainable. Holding fast to a (barter-like) Walrasian worldview, wherein the neutrality of money in the long-run, has meant debt does not exist and credit aggregates are not considered due to an a-historical mis-conceptualization of money/credit.
    [Show full text]
  • [ 543 ] V.—The Case for Bimetallism. by Joseph John Murphy. THE
    1891.] [ 543 ] V.—The Case for Bimetallism. By Joseph John Murphy. [Read Tuesday, 14th April, 1891.] THE question which this essay is an attempt to answer, may be thus expressed :—What would be the effect on prices, and on the financial and industrial interests of the world in general, if the leading nations of the world were to agree to make both gold and silver unlimited legal tender at the ratio of value between the two that prevailed during the seventy years which closed with 1873 >— namely, 15-5- ozs. silver as in France, or 16 ozs. as in the United States, equal to one oz. of gold ;—at the same time opening their mints to the unlimited and gratuitous coinage of both metals 1 The statistical data used in the present attempt to answer this question, are taken from the " Final Report of the Royal Com- mission, appointed to enquire into the recent changes in the relative values of the precious metals, 1888." The reply to such a question must of necessity be somewhat in- definite. The laws of political economy are laws of tendency only, though they are mathematical in their certainty, and almost mathe- matical in their nature; yet, as in many branches of physical science, we can predict the general character and the direction of the effects of given causes, but not their magnitude. In a word, their cer- tainty does not ensure precision. Before endeavouring to reply to this question, much preliminary exposition will be required. We do not, however, propose to begin at the very beginning of the theory of money.
    [Show full text]
  • Does Money Illusion Matter?
    Does Money Illusion Matter? An Experimental Approach ERNST FEHR1 and JEAN-ROBERT TYRAN2 First Version: October 1997 This Version: February 1998 Abstract Money illusion means that people behave differently when the same objective situation is represented in nominal or in real terms. To examine the behavioral impact of money illusion we studied the adjustment process of nominal prices after a fully anticipated negative nominal shock in an experimental setting with strategic complementarity. We show that seemingly innocuous differences in payoff presen- tation cause large behavioral differences. In particular, if the payoff information is presented to subjects in nominal terms, price stickiness and real effects are much more pronounced than when payoff information is presented in real terms. The dri- ving force of differences in real outcomes is subjects’ expectation of higher nominal inertia in the nominal payoff condition. Due to strategic complementarity, these expectations induce subjects to adjust rather slowly to the shock. Keywords: Money illusion, nominal inertia, sticky prices, non-neutrality of money JEL: C92, E32, E52. 1. University of Zürich, Institute for Empirical Research in Economics, Blümlisalpstr. 10, CH-8006 Zürich. E-Mail address: [email protected] 2. University of St. Gallen, Department of Economics, Bodanstr. 1, CH-9000 St. Gallen. E-Mail address: [email protected] We are particularly grateful for comments by George Akerlof, Jim Cox, Urs Fischbacher, Simon Gächter, Linda Babcock, and Dick Thaler. In addition, we acknowledge helpful comments by the participants of Seminars at Bonn, Mannheim, the NBER conference on behavioral macroeconomics and the Amsterdam workshop for experimental economics.
    [Show full text]
  • Working Paper No. 222
    Money and Taxes: The Chartalist L. Randall Wray” Working Paper No. 222 January 1998 *Senior Scholar, The Jerome Levy Economics Institute L. Rnndull Wray Introductory Quotes “A requirement that certain taxes should be paid in particular paper money might give that paper a certain value even if it was irredeemable.” (Edwin Cannan, Marginal Summary to page 3 12 of Adam Smith’s The Wealth of Nations, in Smith 1937: 3 12) “[T]he money of a State is not what is of compulsory general acceptance, but what is accepted at the public pay offices...” (Knapp 1924: vii) “Money is the creation of the state; it is not true to say that gold is international currency, for international contracts are never made in terms of gold, but always in terms of some national monetary unit; there is no important distinction between notes and metallic money.... ” Keynes (Keynes 1983: 402) “In an economy where government debt is a major asset on the books of the deposit- issuing banks, the fact that taxes need to be paid gives value to the money of the economy. The virtue of a balanced budget and a surplus insofar as the commodity value (purchasing power) of money is concerned is that the need to pay taxes means that people work and produce in order to get that in which taxes can be paid.” (Minsky 1986: 23 1) *****k*************X*********************~***********~****** Introduction In conventional analysis, money is used to facilitate exchange; its value was long determined by the value of the precious metal it represented, although under a fiat money system, its value is determined by the quantity of commodities it can purchase.
    [Show full text]
  • How Goldsmiths Created Money Page 1 of 2
    Money: Banking, Spending, Saving, and Investing The Creation of Money How Goldsmiths Created Money Page 1 of 2 If you want to understand money, you have got to start with its history, and that means gold. Have you ever wondered why gold is so valuable? I mean, it is a really weak metal that does not have a lot of really practical uses. Maybe it is because it reminded people of the sun, which was worshipped in ancient times, that everyone decided they wanted it. Once everyone wants it, it is capable as serving as a medium of exchange. That is, gold can be used as money, and it is an ideal commodity to serve as a medium of exchange because it’s portable, it’s durable, it’s divisible, and it’s standardizable. Everybody recognizes what they want, it can be broken into little pieces, carried around, it doesn’t rot, and it is a great thing to serve as money. So, before long, gold is circulating in the form of coins. When gold circulates as coins, it is called commodity money, that is, money that has intrinsic value made out of something people want. Now, once gold coins begin to circulate as the medium of exchange, we have got another problem. That problem is security. Imagine that you are in the ancient world, lugging around bags and bags of gold. You are going to be pretty vulnerable to bandits. So what you want to do is make sure that there is a safe place to store your gold because you can store all of your wealth in the form of this valuable commodity, but you do not want it all lying around somewhere that it is easy for somebody else to pick off.
    [Show full text]
  • The Ontology of Money and Other Economic Phenomena. Dan
    Economic Reality: The Ontology of Money and Other Economic Phenomena. Dan Fitzpatrick PhD Thesis Department of Philosophy, Logic and Scientific Method London School of Economics. 1 UMI Number: U198904 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U198904 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 TH f , s*’- ^ h %U.Oi+. <9 Librw<V Brittsn utxwy Oi HouUco. J and Eoonowc Science m >Tiir I Abstract The contemporary academic disciplines of Philosophy and Economics by and large do not concern themselves with questions pertaining to the ontology of economic reality; by economic reality I mean the kinds of economic phenomena that people encounter on a daily basis, the central ones being economic transactions, money, prices, goods and services. Economic phenomena also include other aspects of economic reality such as economic agents, (including corporations, individual producers and consumers), commodity markets, banks, investments, jobs and production. My investigation of the ontology of economic phenomena begins with a critical examination of the accounts of theorists and philosophers from the past, including Plato, Aristotle, Locke, Berkeley, Hume, Marx, Simmel and Menger.
    [Show full text]
  • New Monetarist Economics: Methods∗
    Federal Reserve Bank of Minneapolis Research Department Staff Report 442 April 2010 New Monetarist Economics: Methods∗ Stephen Williamson Washington University in St. Louis and Federal Reserve Banks of Richmond and St. Louis Randall Wright University of Wisconsin — Madison and Federal Reserve Banks of Minneapolis and Philadelphia ABSTRACT This essay articulates the principles and practices of New Monetarism, our label for a recent body of work on money, banking, payments, and asset markets. We first discuss methodological issues distinguishing our approach from others: New Monetarism has something in common with Old Monetarism, but there are also important differences; it has little in common with Keynesianism. We describe the principles of these schools and contrast them with our approach. To show how it works, in practice, we build a benchmark New Monetarist model, and use it to study several issues, including the cost of inflation, liquidity and asset trading. We also develop a new model of banking. ∗We thank many friends and colleagues for useful discussions and comments, including Neil Wallace, Fernando Alvarez, Robert Lucas, Guillaume Rocheteau, and Lucy Liu. We thank the NSF for financial support. Wright also thanks for support the Ray Zemon Chair in Liquid Assets at the Wisconsin Business School. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Banks of Richmond, St. Louis, Philadelphia, and Minneapolis, or the Federal Reserve System. 1Introduction The purpose of this essay is to articulate the principles and practices of a school of thought we call New Monetarist Economics. It is a companion piece to Williamson and Wright (2010), which provides more of a survey of the models used in this literature, and focuses on technical issues to the neglect of methodology or history of thought.
    [Show full text]
  • Characteristics of Money the First Forms of Money Were Very Simple
    Charact eristics Of Money Store of Value Directions: Answer all questions completely? 1) Explain the difference between Representative money and Fiat money. 2) What is Currency? 3) Using the chart, what are the three functions of money? Characteristics of Money The first forms of money were very simple. In other countries, tobacco, wooden coins, and receipts from cotton warehouses were used for money. These early forms of money lacked the flexibility and widespread acceptability of current money. In order for something to be used for money, it must meet the following characteristics: • Durability. Money should be able to stand up under constant use. • Portability. Money needs to be small enough so it can be conveniently carried in clothes, pockets, or purses. • Divisibility. Money must be made in various units. You should be able to make change. By having various units of money, goods of various value can be paid for, and change for larger units of money can be made. Barter, on the other hand, requires goods that are traded to be of equal value. • Uniformity. Every bill and coin of the same value needs to look the same. Money must be uniform in that one $20.00 bill and another $20.00 bill must be able to buy the same thing. • Acceptable. Money needs to be easily recognizable. Everyone knows what a dollar bill, a ten dollar bill, or a quarter looks like. We should also be able to recognize genuine money from counterfeit. • Relative Scarcity. Money needs to be hard to manufacture. If it were possible to manufacture money as easily as any other good, we would be flooded with counterfeit currency.
    [Show full text]
  • Commodity Dependence and International Commodity Prices
    commoDity DEpEndencE anD intErnational 2 commoDity pricEs Since low-income coutries depend mostly on just a few commodities for the bulk share of their export earnings, commodity price fluctuations directly affect the incidence of poverty, as the vast majority of the poor depend on primary commodities for their livelihoods. Photo: Martine Perret/UN Timor-Leste MartinePhoto: Perret/UN Commodity Dependence and International Commodity Prices Introduction The types of commodities exported by a country are another important determinant of a country’s vulnerability to exogenous economic shocks. The majority of developing countries are dependent on primary commodities1 for export revenues and, of the 141 developing countries, 95 depend on primary commodities for at least 50 percent of their export earnings (Brown 2008). However, international commodity prices are notoriously volatile in the short to medium term, sometimes varying by as much as 50 percent in a single year (South Centre 2005). Moreover, price volatility is increasing over time and across a broad range of commodities. “In the past 30 years, there have been as many price shocks across the range of commodities as there were in the preceding 75 years” (Brown 2008). From the perspective of developing countries, especially those whose principal means of foreign exchange earnings come from Over the longer term, dependence the exports of primary commodities, unstable commodity prices on primary commodities heightens create macro-economic instabilities and complicate macro- a country’s vulnerability because economic management. Erratic price movements generate erratic movements in export revenue, cause instability in foreign exchange (non-oil) primary commodity prices reserves and are strongly associated with growth volatility.
    [Show full text]