One finds a number of occasions in the history of the debasement of currency by English and French governments when the rise in prices was not proportionate to the debasement of the silver coins. The reason was simply that the increase in the volume of currency was not proportional to its debasement; in other words, if the exchange-value of commodities was in future to be evaluated in terms of the lower standard of value and to be realised in coins corresponding to this lower standard, then an inadequate number of coins with lower metal content had been issued. This is the solution of the difficulty which was not resolved by the controversy between Locke and Lowndes. The rate at which a token of value – whether it consists of paper or bogus gold and silver is quite irrelevant – can take the place of definite quantities of gold and silver calculated according to the mint-price depends on the number of tokens in circulation and by no means on the material of which they are made. The difficulty in grasping this relation is due to the fact that the two functions of money – as a standard of value and a medium of circulation – are governed not only by conflicting laws, but by laws which appear to be at variance with the antithetical features of the two functions. As regards its function as a standard of value, when money serves solely as money of account and gold merely as nominal gold, it is the physical material used which is the crucial factor. [ . . . ] [W]hen it functions as a medium of circulation, when money is not just imaginary but must be present as a real thing side by side with other commodities, its material is irrelevant and its quantity becomes the crucial factor. Although whether it is a pound of gold, of silver or of copper is decisive for the standard measure, mere number makes the coin an adequate embodiment of any of these standard measures, quite irrespective of its own material. But it is at variance with common sense that in the case of purely imaginary money everything should depend on the physical substance, whereas in the case of the corporeal coin everything should depend on a numerical relation that is nominal.
This paradox has an explanation, which resolves everything such that it stops feeling unnatural and in fact feels neatly inevitable in retrospect. I’ll post it as soon as I have a paycheck to “tell the time by” again.
Until then, I’m curious whether anyone* can give the answer.
*who hasn’t already heard it from me on a Discord call—this isn’t very many people and I expect none of them are commenters here
Crossposting a riddle from Twitter:
Karl Marx writes in 1859 on currency debasement and inflation:
This paradox has an explanation, which resolves everything such that it stops feeling unnatural and in fact feels neatly inevitable in retrospect. I’ll post it as soon as I have a paycheck to “tell the time by” again.
Until then, I’m curious whether anyone* can give the answer.
*who hasn’t already heard it from me on a Discord call—this isn’t very many people and I expect none of them are commenters here