[OPE-L:2212] Gold and QMT

[Akira MATSUMOTO <akiram@xxxxxxxxxxxx>]

Dear Member

I have a question about the recent discussions about gold and prices.

*Costas said that
"If the gold industry is subject to profit rate equalization (as I agree
that we must assume), how will this happen without resorting to the
quantity theory of money? "[OPE-L: 2061]

To put it in another way.

"Specifically, capital moves into the gold industry (and, incidentally, it
is not critical whether this takes a long time or other mines are
discovered), more gold is produced and enters circulation, other prices
rise, the rate of profit for gold falls" [OPE-L: 2139].

First of all, if we assume the gold standard system (even IMF system before
1971), that is the gold price could be controlled at least as the standard
of price, did we see any fluctuations of gold price ? The answer is *NO!*.

Under the gold standard or the system like the IMF before 1971 (more
strictly 1968), the profit rate equalization worked out through *variations
of exchanging rate between gold and commodities*.

Under the unconvertible system I agree with Tsoulfidis' opinion in general.

The changing volumes of gold through this process are absorbed by the
fluctuation of the non-monetary demand, the demand and supply of the
Central Bank, and so on.

Shortly speaking, I guess you ignore the function of hoarding money.

Anyway the change of gold supply without value-relations between gold and
commodities, even though it makes the gold price fluctuate, doesn't lead
other prices to rise (or down).

Btw, I don't understand the process and difference of Ricard's *long term
and short term mechanism*

bye

Best wish



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MATSUMOTO, Akira

Visiting Scholar
Department of Economics,
University of California, Riverside
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Fax 909-787-5685
Email: akiram@xxxxxxxxxxxx
________________________

Associate Professor on Money and Banking
Department of Comprehensive Policy Making
school of Law & Letters
EHIME University
Matsuyama, Ehime
790-8577,  Japan
Tel:+81-89-927-9237(office)
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