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Well, let's start with commodities. They have value, see, and that value contains both the exchange value (what it's worth in exchange for another commodity) an

Well, let's start with commodities. They have value, see, and that value contains both the exchange value (what it's worth in exchange for another commodity) and the use value (the value it provides as a commodity, like a coat keeping you warm.) But exchange value of commodity to commodity is a pain, so inevitably people tend to turn to a commodity that can be the "money commodity". A universal store of value, in this case gold. Then exchange becomes commodity -> money -> commodity. Gold becomes the interface between commodity exchange. But, over enough time something else happens. Hoarding, luck, and gains in the money form mean someone now has enough spare gold to skip straight to money -> commodity, which then can be sold for more money when prices fluctuate. Now you have two flows: commodity -> money -> commodity and money -> commodity -> more money. The first one uses gold as a means of smoothing the interface between commodity transactions, the second, however, makes increasing the store of gold the goal. But that surplus gold doesn't come from just anywhere. It's not just ethereal excess, it needs to come from either the raw material value or the labor that was used to produce the commodity. While rarely, surplus value comes from making a commodity cheaper, the bulk of the excess gold in a money -> commodity -> money transaction comes from extracting value from labor.

gurjeet 5y ago
Even in a world where the only model is commodity -> gold/money -> commodity, there will be people who will hoard a commodity to sell it when the demand is high. So, hoarding and making profits is a human nature, that just cannot be avoided.
- bendergender 5y ago
  The desire to do that is human, sure, but we can build systems to limit its impact. We could have a negative interest rate, tax wealth rather than income, etc etc. People going to try to hoard, but you can add friction to make that harder.
  - Xorakios 5y ago
    That is popular thinking right now but exactly the opposite of what makes economic sense. Taxing income is counterproductive - an economy should reward, not penalize, the creation of value, whether that is individually or in groups/companies. But taxing wealth is even worse - savings and investment are what generates higher rates of productivity. By far the best thing to tax is consumption. But it will always be unpopular because it just seems unfair since people must consume to survive. But it's the only truly fair tax, since it actually makes taking from the world more expensive, rather than making contributing to the world less valuable/profitable.
- nly 5y ago
  Services are 77% of US GDP, and you cannot "hoard" services.
  - gurjeet 5y ago
    In case you missed it, I was using the example from the parent comment to elucidate the deep-rooted nature of the problem of hoarding.
  - imtringued 5y ago
    You can hoard services coupons aka money. Just think about being the guy on the other side. One guy accumulates 50 years of burger flipping and you are 60 years old and now owe someone 50 years of burger flipping. That money is effectively worthless its value will be reduced by inflation and no the government didn't steal 40 years of burger flipping. The simple act of 40 years of aging did that.
eloff 5y ago
> , the bulk of the excess gold in a money -> commodity -> money transaction comes from extracting value from labor Huh? Thats just speculation, why would gains come from labor? Would losses go to labor? I dont see a connection.
- bendergender 5y ago
  That's a fair question, my comment was getting long in the tooth. So, let's take a commodity like a wool blanket (or some other simple commodity to illustrative purposes). That blanket has more value than the wool that made it, but where did that come from? When the wool becomes a blanket and gains value, it does so because someone put the labor into converting the wool to a blanket. So the generic function here is commodity + labor = higher value commodity. This goes all the way down. The wool comes from someone putting in labor to get it from the sheep. And it continues up, the blankets become part of hotels, bedding, other higher value commodities, etc. More expensive commodities are more expensive because they need more labor to produce. So a commodity is essentially a crystallization of labor value. It represents a complex chain of labor value multiplying other labor value. So back to your question. CMC transactions are about using gold to compare labor value crystalized in commodities. I'm selling my blankets to an iron miner, but I don't need iron ore. But with a universal money commodity like gold I can go buy the commodities I do need. The MCM transaction has you buy my blankets and sell them later for more than you paid me without adding labor. If the value has increased, but no additional labor has been done to it, it's still the same blanket I made. I can also sell my blankets at the higher current price, so what have you done except taken some value from me? Where else does the value come from?
  - imtringued 5y ago
    I'm pretty sure the Marxists got that wrong. Most economic transactions hurt the consumer i.e. the person that spends most of his money on the daily necessities of life and other unavoidable expenses. Capital gains are paid by consumers to owners of capital. I mean the consumer decides how much he is going to spend on a product and thereby sets an upper bound to how profitable a product can be. Your boss uses external financing through debt and stocks must at least compete with the yields on bank accounts. The costs of capital are passed onto product prices as they aren't something that differs from company to company that much.
nly 5y ago
> Well, let's start with commodities. They have value, see, and that value contains both the exchange value and the use value Worth remembering also, that what you call "exchange value" is essentially a derivative of what you call "use value". I can use (eat) a side of beef. I cannot eat 50 sides of beef before it spoils. To get any value at all our of the other 49 sides of beef I have to find a market (49 other people who want to eat beef) and exchange it for something else. If there is no "use value" though, there's no market. Exchange value (prices) will change based on market conditions, but use value only changes with occasional technological innovation (freezers to freeze your beef, new industrial or chemical uses for gold, etc). This is where fiat currencies come in. Fiat currencies like the US$ have a "use value", and that use is legally settling debts (being legal tender[0]), and paying my taxes (which actually are debts). In any case, I think the extreme gold bugs who see fiat currencies all collapsing and gold going to the moon really over-estimate the market demand for gold in any scenario where shit hits the fan that bad. I mean, one way or another, whatever Government is in power is going to want to eat 25-50% of your income in taxes, regardless of what currency you use. [0] Many people also misunderstand what "legal tender" means. The Bank of England has a good explanation of this: https://www.bankofengland.co.uk/knowledgebank/what-is-legal-tender https://www.bankofengland.co.uk/knowledgebank/what-is-legal-...

gurjeet 5y ago

Even in a world where the only model is commodity -> gold/money -> commodity, there will be people who will hoard a commodity to sell it when the demand is high. So, hoarding and making profits is a human nature, that just cannot be avoided.

bendergender 5y ago
The desire to do that is human, sure, but we can build systems to limit its impact. We could have a negative interest rate, tax wealth rather than income, etc etc. People going to try to hoard, but you can add friction to make that harder.
- Xorakios 5y ago
  That is popular thinking right now but exactly the opposite of what makes economic sense. Taxing income is counterproductive - an economy should reward, not penalize, the creation of value, whether that is individually or in groups/companies. But taxing wealth is even worse - savings and investment are what generates higher rates of productivity. By far the best thing to tax is consumption. But it will always be unpopular because it just seems unfair since people must consume to survive. But it's the only truly fair tax, since it actually makes taking from the world more expensive, rather than making contributing to the world less valuable/profitable.
nly 5y ago
Services are 77% of US GDP, and you cannot "hoard" services.
- gurjeet 5y ago
  In case you missed it, I was using the example from the parent comment to elucidate the deep-rooted nature of the problem of hoarding.
- imtringued 5y ago
  You can hoard services coupons aka money. Just think about being the guy on the other side. One guy accumulates 50 years of burger flipping and you are 60 years old and now owe someone 50 years of burger flipping. That money is effectively worthless its value will be reduced by inflation and no the government didn't steal 40 years of burger flipping. The simple act of 40 years of aging did that.

eloff 5y ago

> , the bulk of the excess gold in a money -> commodity -> money transaction comes from extracting value from labor Huh? Thats just speculation, why would gains come from labor? Would losses go to labor? I dont see a connection.

bendergender 5y ago
That's a fair question, my comment was getting long in the tooth. So, let's take a commodity like a wool blanket (or some other simple commodity to illustrative purposes). That blanket has more value than the wool that made it, but where did that come from? When the wool becomes a blanket and gains value, it does so because someone put the labor into converting the wool to a blanket. So the generic function here is commodity + labor = higher value commodity. This goes all the way down. The wool comes from someone putting in labor to get it from the sheep. And it continues up, the blankets become part of hotels, bedding, other higher value commodities, etc. More expensive commodities are more expensive because they need more labor to produce. So a commodity is essentially a crystallization of labor value. It represents a complex chain of labor value multiplying other labor value. So back to your question. CMC transactions are about using gold to compare labor value crystalized in commodities. I'm selling my blankets to an iron miner, but I don't need iron ore. But with a universal money commodity like gold I can go buy the commodities I do need. The MCM transaction has you buy my blankets and sell them later for more than you paid me without adding labor. If the value has increased, but no additional labor has been done to it, it's still the same blanket I made. I can also sell my blankets at the higher current price, so what have you done except taken some value from me? Where else does the value come from?
- imtringued 5y ago
  I'm pretty sure the Marxists got that wrong. Most economic transactions hurt the consumer i.e. the person that spends most of his money on the daily necessities of life and other unavoidable expenses. Capital gains are paid by consumers to owners of capital. I mean the consumer decides how much he is going to spend on a product and thereby sets an upper bound to how profitable a product can be. Your boss uses external financing through debt and stocks must at least compete with the yields on bank accounts. The costs of capital are passed onto product prices as they aren't something that differs from company to company that much.

nly 5y ago

> Well, let's start with commodities. They have value, see, and that value contains both the exchange value and the use value Worth remembering also, that what you call "exchange value" is essentially a derivative of what you call "use value". I can use (eat) a side of beef. I cannot eat 50 sides of beef before it spoils. To get any value at all our of the other 49 sides of beef I have to find a market (49 other people who want to eat beef) and exchange it for something else. If there is no "use value" though, there's no market. Exchange value (prices) will change based on market conditions, but use value only changes with occasional technological innovation (freezers to freeze your beef, new industrial or chemical uses for gold, etc). This is where fiat currencies come in. Fiat currencies like the US$ have a "use value", and that use is legally settling debts (being legal tender[0]), and paying my taxes (which actually are debts). In any case, I think the extreme gold bugs who see fiat currencies all collapsing and gold going to the moon really over-estimate the market demand for gold in any scenario where shit hits the fan that bad. I mean, one way or another, whatever Government is in power is going to want to eat 25-50% of your income in taxes, regardless of what currency you use. [0] Many people also misunderstand what "legal tender" means. The Bank of England has a good explanation of this: https://www.bankofengland.co.uk/knowledgebank/what-is-legal-tender https://www.bankofengland.co.uk/knowledgebank/what-is-legal-...