what is the deal with fiat currency? how does it arise and where does it attain its exchange-value? i’m currently participating in the hexbear capital reading group and in chapters 2 and 3 marx goes heavily into the way that gold standard money becomes exchange-value. fiat money is discussed only a little, and somewhat dismissively, although as far as i can tell none of the actual theory of the time precludes it from existing. are there any texts that go into it in detail?
important context: https://lemmygrad.ml/post/10346359/7603669
Money is a pie, we each get paid with pieces of the pie. Government prints their fiat money, but unless economic production also increases, their newly printed money just means the pieces of the pie get smaller.
So you will still get paid in the same amount of pieces of the pie, only they’re smaller now. This is the best way I’ve found to think about inflation. This also helps me to understand how cost of living is generally 3 times as expensive now as it was back in the 70s (for most of the western world). Because money is worth about 3 times less than it was. Because so much God damn fiat money has been printed. Look at those insane Fred charts. 2008 was a massive inflexion point, as was 2020.
The government printed so much money, so much more than the increased production of economic value, that the pieces of pie that we all get paid in are 3 times smaller than they were 50 years ago. The pie didn’t necessarily get bigger, there’s just more pieces of it.
And certainly the pie has grown since then, but not as much as they’ve printed in fiat.
So the amount of money in circulation has increased faster than value has been created. Hence that money being worth less, and it taking more of it to buy the same thing.
I’m clearly not an economist, but this is how I think about it.
This is correct, AND not only does the government print new money, it decides who to give it to.
In the US, the government almost exclusively gives this money to banks and financiers to invest for their own profit, especially inflating the prices of stocks, bonds and real estate. All this free money going into these specific markets causes house prices and stock market valuations to continuously increase, but no one calls it ‘house price inflation’ or ‘stock price inflation’, they call it ‘a good economy’ because otherwise it would give the game away. The increase in asset prices relative to wages and the price of goods (which still increase more slowly) means workers end up paying a larger and larger portion of their wages to land-owning financial capitalists. They then have less to spend on actual goods, putting pressure on manufacturers who end up with a smaller market. It becomes more and more difficult to turn a profit by hiring people to actually make things, so the economy becomes deindustrialized.
Alternatively, government could use the money to hire more employees or purchase goods and services, which would cause the inflation of wages and goods relative to assets and cause the formation of an industrial economy. But that would challenge and eventually overturn the control of the economy by financial capital, so it can never be allowed to happen.
Well said. Yes, we already live in socialism, just that it’s socialism for the wealthy with harsh austerity for the rest of us.
I agree with everything you say there. It sounds more and more like a return to feudalism everytime I think about it.
The wealthy are literally trying to price working people out of existence. This is one of many forms of increasing class warfare we’re forced to endure.
Certainly the only solution is organised militant resistance 💪 eat the rich asap 🔥
On a similar tangent, I once read something about gold prices. That basically, a gold coin has about the same amount of buying power over time with only minor fluctuations. Gold “price” doesn’t go up so much as moneys “value” goes down. So buying and “investing” in metals like gold doesn’t really increase the value of your investment so much as it does prevent your savings from deflating in value.
That’s a brilliant way to think about it, thx for sharing 🙌