The Absurd Contradiction of Bimetallism: Gold & Silver

Gold-Silver-Coins

Nevertheless, price depends upon the actual money commodity. Apart from all the little things that may cause disturbances, the tailor can set the price of the coat at 10 grams of gold, if there is that amount of socially necessary labour embodied in such a quantity of gold as in the coat. If the tailor expresses the value of his coat, not in gold, but in silver or copper, the price expression will be different.

When two different commodities function as a measure of value, (i.e. gold and silver), all commodities will then possess two different price expressions (gold price and silver price). Every change in the value-relation of gold to silver causes price disturbances. Having more than one measure of value is an absurdity, a contradiction of the function of money as the measure of value. Whenever an effort has been made to legally make two commodities a measures of value, it has always been only one which has in fact functioned as the measure of value.

In 1903, in several countries gold and silver were the official co-existing measures of value. However, life has always shown this to be absurd. Like every other commodity, gold and silver are subject to constant fluctuations in value. If both are made legally the same value by law, and if you can make a payment in either metal, then payments would be made in the metal whose value was falling. The other would be sold according to the price of it somewhere else abroad. People will just buy commodities with the metal that has less value and then just sell off the other metal for more in another market where the price for it is high. In countries at the time where there was a double currency, (so-called Bimetallism,) only one of the commodities actually serves as a measure of value, and that is the one whose value is falling. The other whose value is rising will measure commodity prices by its own value, not the commodity itself. If gold’s price is rising, the value of the gold will serve as price, not the value of the commodity. If gold is really valuable it will be worth more than the commodity it will be exchanged for. If the coat is worth 10 grams and the price of gold doubles, the buyer won’t give all 10 gram for the coat, they’ll demand they only pay 5. The greater the discrepancy between the value of gold and silver there is, the more obvious the absurdity of Bimetallism becomes.

If your gold was worth more than your silver why would you exchange with your gold, if in exchange it is worth the same as silver? If the price for a commodity is 10 grams of gold or silver, why would you give say $2 worth of gold when you can give $1 worth of silver if they were considered the same? You wouldn’t, you would hoard the gold and trade with silver. This in turn would cause the price of gold to increase because everyone would be seeking it more than it would be if it were equal to silver, and they would be hoarding it.

For the sake of simplicity in Capital, Marx always assumes gold to be the only money commodity. As a matter of fact, gold tended to become the money commodity standard in all capitalist countries. This is something that is completely overlooked, and often outright lied about in Libertarian literature on Marxist economics. They frequently say that Marx wasn’t taking the gold standard into account, when he in fact was basing all money on gold.

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