 REF e will say now about chapters 2 and 3 Metroupbeat of Capital on the question of money, which is often today is the most mystified, the most fetishised part of the economy. The first thing that strikes me about these two chapters is how Marx deals with money. He deals with it in a very historical, social dynamic way. He doesn't see it are something imposed on society by bankers, by something that flows directly from the development off society mae'n ei ddweudio i sicrhau mewn cyfweld gyda'i ac mae'n gwneud i'n arweinyddio planeol i'r newid i'r bytdoch, mae'n gwneud i'n arweinyddio diwethaf o'r cyfar na bobl sy'n gweithio bytdoch chi wedi'i gweithio obuedd sy'n gweithio chi bod yn ymdill i'r gwahol a dda i'r gwahol i'r syniad i'r gyfweld sy'n gwneud i'r maethai cioch ar y maith i'r afael cyfweld cymorth nhw i ddech chi a dyfodod ymdrychwch i ni'n dod I不錯 for that, cause you can really see that in chapters 2-3 of Capital. So in this historical development, Mark Traces it and he says as the forces of economic production develop, you begin to see, well as forces of economic production develop, commodity exchange itself develops more and more things are being produced far more than individuals need to consume just for themselves. And so they start to trade them and commodity exchange then develops. The more that commodity exchange develops, the more necessary it becomes to have one particular commodity which can measure the value of all other commodities, a universal equivalent or a universal measure of value, as Marx calls it. Building on some of the stuff that James was just talking about, within commodity exchange you begin to see the separation of use values and exchange values. For a commodity producer, for a capitalist, say a capitalist produces 100 tables, those 100 tables, apart from possibly one, so at least 99 of those tables are not useful to that capitalist, he might want to keep one for himself. But the rest of them are not useful, they have no use value to him. They only really, for him, have an exchange value, that is their use value, if you like. So you begin as commodity exchange develops, you see the separation between use value and exchange value, and that reaches its highest point with money, because you can have as much money as you want, you can have as many gold coins as you want, but they are not actually useful to you in any way, you can't eat them, they can't keep you warm or anything else, they're useful only in that they can be exchanged. Now you see here then, as well as being a universal equivalent, a universal means of exchange, you see the other kind of side of money, the other important function of money that Marks deals with, which is that it is a means of exchange. On the one hand it's a store of value, a universal measure of all the value in all the other commodities, and on the other side it's a means of exchange, it's a means of exchanging all the other commodities with each other, it's obviously a much more efficient way of exchange than, for example, barter, where you would have to find the person who had the exact thing that you want, and you have the exact thing that they want, and you can swap it. As long as you've got a universal equivalent, that functions very well as a means of exchange. And when you understand this, when you understand the two sides of money, the two roles, the two functions that it plays, you can see why ultimately people settled on precious, society settled on precious metals as the commodity within which, or against which, all other commodities are measured. Mark says in chapter two, he says it was kind of accidental what functioned as the universal equivalent at first, and actually very early on it was slaves, it was the human form actually that was used as a universal equivalent. This particular thing is worth this number of slaves, and various societies throughout history, throughout prehistory have used different things, shells, cattle, beads, like all sorts of things, but ultimately all societies have tended towards using precious metals, in particular obviously gold. We can understand this if we understand those two functions of money, because on the one hand, and this is the most important aspect of precious metals, they concentrate a lot of value in a small amount of physical material. Going back to what James was talking about just now about the definition of value of a socially necessary human labour time, human labour power required to produce it, to produce gold takes a lot of effort, basically. It takes a lot of effort to find where it is in the ground to dig it up, to do whatever process they have to do to get it out of the earth and into a kind of bar or coin format. It takes a lot of socially necessary human labour power to go into that, and that means that a lot of value is concentrated in a relatively small amount of stuff, which is not the case with other things. But on top of that, not only does it concentrate a lot of value in a small amount of physical material, and therefore is a good universal equivalent, it's also a good means of exchange because of its physical properties. It's durable, it's inert, it won't react with the air or water or something and disintegrate, and it's easily divisible. You can divide it down into coins or you can melt it all together and build it up into bigger blocks. All of these things make it very useful, its physical properties make it very good means of exchange, basically a way of trading other commodities with each other. So these two things together explain why money has always tended or societies have always tended to using precious metals as money, as the universal equivalent, as the thing by which you measure all other values. Now, as commodity exchange develops, and this is going back to what the first point I made about Mark's dealing with the question of money in a historical dynamic social way, he goes on to say that as commodity exchange develops, you begin to see the demand for the means of exchange outstrip the supply of the universal equivalent. More transactions are taking place than can be covered by the amount of gold or whatever precious metal we're talking about, but we'll say Mark's talks about gold in the book, so I'm going to talk about gold, than can be covered by the amount of gold that there is in society. And this can be a problem for the development of the economy because obviously it's transactions, it's commodity exchange that causes more and more to be produced and that's what causes the economy to develop. But if that's being held back by the physical supply of gold or the ability to move it or whatever else, then the development of the economy has a bit of a problem and so Mark's points out that there's a kind of pressure, there's a tendency towards a divorce of these two functions of money, the universal equivalent on the one hand and the means of exchange on the other to allow for more transactions and so what you see Mark says is the use of tokens to represent the value that is contained within the universal equivalent within the commodity that's being within the gold, tokens to represent that value which become the means of exchange instead. And that's what you see now with your with your £10 note in your pocket says I promise to pay the bearer on demand £10. It's a token, it's a representation of £10, it's not actually £10, that piece of paper while it does have some value, some human labour time has gone into producing that, it's not nearly as much as the £10 that it actually represents, it's just a token to facilitate more rapid and easier exchange of commodities. And of course going beyond paper, Mark's actually talks about potentially he says we could just use paper tokens for these sorts of things, he says that in capital and of course today we see electronic signals used for that like just bank transfers are just tokens like they don't actually represent, they don't have any value themselves. Now obviously when you get to this kind of situation, are you going to give me notes? Yeah okay yeah all right sorry I just got self-conscious. Yeah when you when you get to this kind of stage where you're using tokens instead of the actual commodity like gold, you don't actually need that gold in your possession to be able to to affect transactions and actually as a society there is no limit then theoretically or you would think there's no limit to how much money you could shovel into the system because you don't actually need the gold, you need something far less costly to produce such as a bit of paper or some electronic signals. You could actually just funnel as much money into the system as you wanted but of course we should remember here going right going back to the beginning of what I was saying like money is a measure of value it's not completely arbitrary how much money there is in society, how much money there is in society is linked to the concrete to the real economy, it's linked on the one hand to the value of all the commodities in circulation and on the other hand to the the speed with which those commodities are circulated. If there's more transactions you need more money and if there's fewer transactions you need less money and if there's more commodities you need more money to represent those commodities and if there's fewer commodities less money but the money is actually linked to that so it's not entirely arbitrary and that means you can't just funnel endless amounts of paper tokens to represent more money than there actually is because that money has to be linked more or less to the real economy. And this actually by the way I didn't explain what bitcoin is because I don't really have time to so if you're not familiar with I'm sorry but I'm just going to reference it again. Bitcoin sort of overlooks this actually it's an interesting feature of bitcoin that they have set and essentially arbitrary the developers of bitcoin set an arbitrary number of bitcoins that will be produced ever in in in all of history which will be reached in I actually can't remember the date it's like 2022 and and and once they're all produced that's it there's no more it's an entirely arbitrary amount of coinage that's going into the into the system which again is not how it's not how money works basically it's not how how commodity exchange requires money to work and the reason of course for this is is as I sort of mentioned earlier when I referenced bitcoin it's not it's not linked to the economy you can't actually buy that much stuff with bitcoin it doesn't have it's not it doesn't really function as it certainly doesn't function as a universal equivalent it barely functions as an equivalent for anything actually at the moment and so it's not really linked to a real economy and so they just set this arbitrary amount of coins that we're going to say it's nothing to this kind of backwards to how real money actually developed in its kind of historical and social context. Although money of course is actually fixed to the economy the development of commodity exchange and more and more transactions taking place in this sort of thing puts a certain pressure to relax the rigidity with which it is tied to the real economy and and so you saw in the kind of early in the pre-world war one days in britain for example that that currency that money was pegged to the value of gold it there was a they called it a gold standard and the value of gold determined the value of money directly it was a direct link to to a real physical thing that was produced in the economy and that worked quite well because gold obviously there was for most of history there's been a fairly stable amount of gold circulating and so if the amount of gold in society is more or less the same or increasing very slowly whatever then you're not going to see a vast change in the actual value of money and then you won't see lots of change in price in this sort of thing so it helps helps a lot to have a kind of gold standard to keep money about the same value all the time but as commodity exchange develops and more and more transactions are taking place there is this pressure to kind of relax the strictness with which money is anchored to a real commodity like gold and actually in the 1890s in the US you had this movement called the populist movement and they were one of their main planks was bimetalism they said what we want is currency that is tied that money that is tied peg not just to gold but also to silver in a ratio of one to 15 or something like that so it's peg to two different things which would represent a certain relaxation of the of the commodity to which of the value of money if you like the commodity to which it's pinned and actually interesting enough as a brief side note the story of the wizard of Oz is actually it references this debate this argument that was going on in the United States at that time the yellow brick road well Dorothy slippers not in the film but in the original book were made of silver and and the silver slippers will carry you along the yellow brick road to home it was the interplay of silver and gold that was what the book one of the points the book was actually about and it's a reflection of this argument that's going on time although in chapter three of capital there's an interesting footnote where Marx actually takes on this question of bimetalism directly and says it doesn't work because at the end of the day the the gold and silver are themselves commodities and therefore their value can fluctuate and if one fluctuates more than the other if the value of silver changes because there's some development in the smelting in the method of smelting silver or whatever which brings down the socially necessary labour time that goes into the production of silver then the value of silver changes but the value of gold doesn't change but if you've pegged if you pegged to both commodities at a ratio of one to fifteen then everything the currency is going to is is is not going to work properly basically Marx takes this on in capital but but then in particularly you saw in britain for example britain came off the gold standard it decoupled its currency from gold during the first world war because that was the time of a lot of quite they needed to print a lot of money they needed a lot more money in circular need to be not not more flexible to pay for the war and they had they were forced the capitalist was forced to relax the rules in relation to to to money but then once things have calmed down a bit once there was a little bit more stability they felt able after the second world war to reintroduce a peg it was not quite as strict as the gold standard but you had the brettan woods agreement which was basically an agreement set up by the united states to peg all the currencies in the world or a lot of currencies in the world to the US dollar which and because the US controlled two thirds or something of the world's gold at that time in fort nox they their their currency was in effect as good as gold it was slightly more relaxed when directly pegged to gold it was pegged to the dollar but nevertheless they did and they were able to do that because it was a time of more stability it was the post war boom there was a more stable global economic situation and so they could tighten up again the the money the link between money and the real economy because the real economy was actually doing quite well but of course that all changed when the brettan woods agreement collapsed in the 1970s and that was a product of capitalist crisis once the real economy started going badly they had to decouple the currencies from the real economy to try and just keep the currencies trying to try and do their best to keep the currencies afloat and and since then you've had currencies floating against each other because currencies if they don't if they have a fixed exchange rate if the pound is always fixed to gold or to the dollar or something else then you can't the the british capitalist cannot devalue their currencies in a period of crisis they need to devalue they need to make the pound less valuable so that then commodities that you're exporting commodities that the british capitalist are exporting are cheaper because they're denominated in pounds so people have to pay less effectively in their home currency because the pound is cheaper so if you're converting dollars to pounds and pounds are really pounds are worth nothing then it's much cheaper to buy british exports so in a period of crisis it's very important for the capitalist class in each individual country to be able to to devalue or change the value of their currency and so you get this enormous pressure every time there's crisis you get this pressure to loosen the link between between between the currency between money and and the real economy and of course you've seen that in particular today as well one thing that could not have been done with the breton woods agreement or with the gold standard is the policy of quantitative easing which has been pursued by by the european central bank by the federal reserve in the united states and that is effectively a policy everyone always describes it and this is correct this is the correct way to do it it's effectively printing money the central bank uses its own money or money that it sort of creates to buy bonds that banks sell to basically pay money to banks and then and then it the purpose being to inject more money into the economy is effectively then just injecting this money out of nowhere into the economy and and that's not the that's not the sort of thing that you can do if your currency is pegged to something pegged to gold or something like this in a very rigid way now that was a very that was an extremely potted history of like the development of the link between like money and and the real economy but the point is that there is a development that's the crucial point here that there is a development in this direction there's pressure towards loosening the link between money and and and the economy which is nevertheless still there has to be anchored there in some way but there's loosening this loosening has to take place in order to smooth over the effects of capitalist crime every time capitalism goes into crisis there's more and more pressure to do this so that the bosses that the capitalist can keep their profits turning over through all sorts of financial wizardry default credit swaps and and all this kind of thing but nevertheless keep the keep the overall the top line profit figures healthy and this is an answer there are people today who point they point to a lot of the problems the financialization of the economy and and quantitative easing and they say this this is causing problems because you're effectively injecting lots of money into the system it's it is causing inflation no doubt about that but it's not that money is not filtering down into the real economy that money is staying with the banks who spec who use it to speculate on on stocks and shares basically or development in in countries like india and this sort of thing they speculate on those things and and the it causes bubbles basically speculative bubbles which is why bitcoin is so valuable it's it's a bitcoin's price is so high rather it's not actually very valuable it's because it's a speculative bubble and they point to a certain economist point to all these things and they say this is a big problem and therefore what we need is to return to the gold standard because if we had the gold standard you wouldn't be able to do these things it would tighten monetary policy it would rein in all of this stuff that's going on with money and and it would stop all these kind of problems now that is a completely in my opinion utopian a historical view of the development of money it doesn't understand how capitalism has developed to this point this isn't an aberration the financialization of the economy and and and money dominating in the way that it does it's not an aberration it's not a mistake of capitalist development it's the inevitable process of capitalist development it's the inevitable end it's the inevitable endpoint of a capitalist system which inevitably goes into crisis now another point about this this general development the use of tokens to to represent as as money basically is that you begin to you begin to see from from a very early stage money being you're not money basically being a promise to pay you're not actually paying for something when when you hand over a 10 pound that you're promising to pay when you make a bank transfer when you look at your bank account and you see that you've got how much money you've got in there you don't actually have that you don't have it sitting on the table in front of you that is a promise that is the bank promising to pay you that money you don't actually have that in front of you and and when you get to this sort of situation you basically see what what marx talks about he says it's a this kind of disconnect between buying and selling and uh and that allows this this promising to pay allows for the develop that's the basis for credit and that's the basis for hoarding and therefore speculation and lending and this sort of stuff and this uh this ultimately is what allows capitalism and this was dealt with very briefly in the last sessions but it's what allows capitalism to develop beyond its limits beyond the limits of what the the capitalist market really actually would allow because you can lend people money you can keep promising yeah i will i will pay for that i will pay for that uh no problem about that and uh and it allows then more commodities to be produced more transactions to take place all in the basis of promises to pay which are embodied in these tokens but not actual payment not actual transfer of the real universal equivalent um and of course then when capitalism does eventually go into crisis when the crisis of of overproduction which will be dealt with later but when capitalist crisis rears its head um everybody suddenly tries to call back all their debts everybody basically you're stretching an elastic band further and further and further with this credit these promises to pay but obviously you can only stretch so far and at certain point it snaps back and everybody suddenly calls in all their debts and tries to recoup all the money that they have been or tries to get back all the money that they've been promised and of course inevitably lots of people can't pay this is actually what that was mentioned earlier the centre page of the socialist appeal or about the financial crash 10 years ago that's basically what happened then and the centre pages deal with this point that that it didn't cause the crisis the some of the bourgeois economists say that it was a lack of credit a drying up of credit that caused the crisis and that was a symptom of the crisis and it made the crisis a lot worse it exacerbated the crisis a lot but didn't actually cause it in the first place capitalism goes into crisis for other reasons which we'll be dealt with later on but but credit and this um basically the functioning of money in capital in in this period of capitalism made that crisis a lot worse than than it might otherwise have been but that again is not an aberration it's not it's not capitalism gone wrong it's the inevitable endpoint of the development of of capitalism and its use of money and so on now um finally then the main point that I think we can take out of chapters two and three is that that money is a product of commodity exchange that's a society developed system of commodity exchange um money was was the outcome of that map marx uses the phrase that commodity exchange sweats money from every poor it's not the other way around it's not like a monetary system was just imposed um and and so for that reason again to come back to bitcoin you can see I've got a B in my bonnet about this um that uh the enthusiasts of bitcoin or the developers of it they correctly identify some of the problems with uh with with kind of money in capitalism today um but they attribute those to bad policy by central banks over centralisation of uh of the monetary supply and monetary control and so on and and what they say is that if you distribute the means of the production of money amongst lots of different people then you'll solve that problem don't rely on central banks rely on just this whole uh this big network of people who are producing uh bitcoins um but uh but in reality if we understand that money is a product of commodity exchange then how you produce money is not the key question the key question is the question of exchanges the question of who is producing the commodities and who owns the means of production of commodities who owns the means of production in society that's the point money is a product of commodity exchange which Marx argues that it is then uh then it's not a matter of of distributing the means of production of money and leaving everything else in private hands it's a matter instead of of of taking the means of production of wealth as a whole into public ownership socialising that and then you get around the problem of over centralisation the hands of people who are only interested in making profit at the expense of everybody else and of course then that holds this point about money being a product of commodity exchange also raised the point about what money would look like under socialism if we do have a system where we're no longer producing for exchange to make a profit we no longer have commodity exchange but where everyone is is producing and consuming from this kind of collective pool of of of commodity or of of things that that we need to live then uh then you would see money at least first of all at least fundamentally change its function uh and uh and actually you begin to see you would see you would see it's kind of the token side of money being used but it would be tokens giving you entitlement to goods from a collective pool of of what's being produced rather than uh as as a measure of the labour time contained in each in each commodity and uh and actually in my opinion ultimately and Trotsky says this he says money would never be abolished socialists and communists they wouldn't abolish money you don't need to abolish money what you need to do is basically abolish commodity exchange by socialising the means of production and when you do that gradually money will begin to wither away and that really then uh is the future money will be will effectively be a a story that we tell our grandchildren