James Devine wrote: > Obviously, most of Marx's ideas come from previous political economists and > not just from Hume (who developed quantity theory of money, not Locke).
This is of Locke: "So far as the Change of Interest conduces in Trade to the bringing in or carrying out Money or commodities, and so in time to the varying their Proportions here in England from what it was before, so far the change of Interest as all other things that promote or hinder Trade may alter the Value of Money in reference to Commodities." (Some Considerations of the Consequences of the Lowering of Interest and the Raising the Value of Money, London, 1691) > By the way, the quantity theory of money is a bit like Newtonian physics I agree with that, as the quantity theory absolutely needs an instantaneous and global confrontation between money and goods. Hume had jeopardized his theory in the same time he wrote it, as he saw the prices rising "by degree" (Of money in Essays Moral, Political and Literary, Indianapolis, Liberty Classics, 1985). But what is the adjustment variable, as long as prices, rising 'by degree", have not yet adjusted demand with supply? Of course, it is the variation of stocks. Now, when stocks stop declining, that means that supply matches demand, and there is then no reason left for prices to rise. It would be hard to admit that stocks were declining during inflation (and growth) periods of 16th and 20th centuries, for example. This is the reason why neoclassicists, in order to save their inflation theory, have invented the "rational expectations", thanks to which the instantaneous confrontation may do not exist on the real markets, as it is present into the minds. > it applies in very specific situations but fails in other situations. The > quantity theory applies best with countries with very poorly developed > financial systems if they are at full employment of resources. I have been believing that for years. I do not anymore. There are indeed two specific and different situations, but I now think that the diffrence is between the character of money issuing. There is a true inflation by money, when money issuing is pathogen. That is, if some power (official or criminal, or both) issues a money that can never been destroyed because it does not exist in any liability column of any account. On the contrary, the keynesian "budget deficit" mobilzes the saving it allows, so that accounts are balanced. As for the poorest countries, when they are not subverted by an irresponsible or criminal power, their inflation is the result of both the price of imports and the price of the currency they have to pay import with (at random, the dollar). Best wishes to you, James RK
