Can Gold Ever Be Overproduced?

Reader Julio Huato quotes me as writing, “Gold as money cannot be overproduced.”

“Do you,” Julio writes, “mean that somehow the commodity money abolishes the laws of the relative value form? I think not.”

He continues: “For a given period of time, the demand for gold is the sum of the demand for gold as object of use plus its demand as money — i.e. as a means of circulation, payment, and value storage. And that total is never an infinite figure. Gold has to be ‘purchased’ with other commodities, which are not produced in infinite amount, since the productive force of labor is always finite. You seem to be conflating the qualitative determination of money as universally desirable (vis-a-vis other commodities) and its quantitative determination, which is necessarily bounded.

“Marx’s critique of the view that the inflows of gold into the New World led to price inflation do not imply that an oversupply of gold above and beyond the size of the social stomach for gold will not lead to a fall in the relative value of gold in terms of the other commodities. His view is that, on average, that relative value is determined by the requirements of social labor producing, respectively, gold and the other commodities. But fluctuations around that average are allowed. The aim of Marx’s critique is the misunderstanding that gold makes the commodities valuable, rather than their being products of labor.

“I suggest that you re-check that section on the quantitative determination of relative value in chapter 1. And also this, from Marx:

“‘The expression of the value of a commodity in gold — x commodity A = y money-commodity — is its money-form or price. A single equation, such as 1 ton of iron = 2 ounces of gold, now suffices to express the value of the iron in a socially valid manner. There is no longer any need for this equation to figure as a link in the chain of equations that express the values of all other commodities, because the equivalent commodity, gold, now has the character of money. The general form of relative value has resumed its original shape of simple or isolated relative value. On the other hand, the expanded expression of relative value, the endless series of equations, has now become the form peculiar to the relative value of the money-commodity.'”

Julio is asking, if too much gold is produced relative to other commodities, won’t what Marx calls the expanded relative form of the value of gold—in plain language, price lists read backwards—fall? Or what comes to exactly the same thing, won’t an overproduction of gold cause prices in terms of gold to rise?

And therefore, isn’t it true that in fact gold can be overproduced?

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