there are two kinds of exchange value, temporary exchange value and true exchange value and that every one is free to decide for himself when a thing is exchanged for its temporary value and when for its true value. All you need to do therefore to save yourself in a debate is merely to remark that what your opponent calls value is not after all true value, (of which you are the sole judge) but only temporary value.
The labor theory of value may apply to the relative value of commodities as among themselves. It does not apply as between all commodities on one hand and the money commodity or money on the other. The relation between these two is never anything else than a temporary relation. Therefore the necessity for Marx to assume that gold has a stable value and thereby remove the discussion from this world to Utopia.
Let us again make use of Marx's favorite language, mathematics. Let P—price, or price level ; Q—quantity, scarcity or supply and demand; V—value; L—labor or labor power. Now, price says Marx, varies as quantity, but value varies as labor power, that is:
Now suppose with Marx that the value of gold is stable and the unit of price or weight of coin is stable, then price and value will coincide and be equal. So will quantity and labor power coincide and be equal. There will be no fluctuations between price and value. Then we will have:
Now, says, Marx, do you not see that price varies as labor power? Yes, we see it. We also see that this is only one quarter of the whole truth. Why does Marx ignore the other three forms, especially the fourth one, which shows the remarkable fact that value varies as quantity, and not as labor power? In supposing that price and value coincide Marx has abolished the difference between his labor theory of value and the quantity theory.
THAT FIAT MONEY REPRESENTS GOLD.
There are two kinds of fiat money; first, fiat money concurrent with gold; second, fiat money with gold demonetized. In the first case, it may be said in one sense that fiat money represents gold, inasmuch as it coalesces with gold money, and its movements conform to the movements of gold money, so long as any of that is left in circulation in the sphere in which fiat money circulates; when all the gold is driven out of this sphere, fiat money can no longer be said to represent gold. Neither does fiat money represent gold when gold is demonetized. The present fiat silver money of India does not represent gold and has no connection with gold. Neither does it represent silver bullion.
It is frequently claimed that California during the civil war of 1861 to 1865 formed an exception to the power of the state to create fiat money. The money in that case was a partial legal
