Whoever said fascist state fiat was money?

by Jehu

My name was recently dropped during a podcast where two Marxist were discussing the labor theory implications of modern money theory (MMT). You can find the episode here

Without getting too deep into the woods — you can listen to it yourself — I did want to comment on several points that podcast ignores in my opinion:

  1. Marx said money has to be a commodity, but he never said there had to be money.
  2. Money is the phenomenal expression of the fact that society lacks of control over its production relations, right? So, what happens when the state controls the thing serving as money in that society?
  3. Does a debased state issued fiat currency, (by which I mean a currency that is no longer tied to a definite quantity of a specific commodity), behave like a commodity money?

In Marx’s theory, no one controls money because money is an expression of the material production relations over which society has no control. If the state now controls the thing serving as money, obviously this money is no longer the expression of material relations over which society has no control; rather it expresses state policy.

Should this object still be called money in the sense Marx used that term?

I think what gets people twisted in knots is the idea both money and these debased fascist tokens serve as medium for the circulation of commodities. This, however, is a distraction from our analysis because commodities circulate only after they have been produced. Money is not just a medium for circulation of commodities, but also a historically specific expression of a mode of production — commodity production. The existence of money tells us that the members of society have no control over their material relations of production. (Anthropology)

But is this all labor theory tells us?


Since 1971 the object that tells us that the members of society have no control over their material relations of production is itself controlled by the state. In other words, money, which expresses society’s lack of control over their material production relations, is itself controlled by the state; an institution that expresses the interests of capital not commodity production in general.

Fascist tokens pose a puzzle because they suggest society doesn’t control its production relations. At the same time, they appear to be controlled indirectly through money.

If the material relations of society are not controlled by society, who is controlling those relations? If we assume the state is controlling them, we overlook the fact that the state only controls money and money is itself the expression of the lack of control over material production relations. State issued fiat doesn’t get us to control over our production relations, but only to control over the object whose existence implies we don’t control our material relations.

This is probably unnecessarily convoluted because I am going step by step in making the argument: we have to get from chapter 2 of Capital to Janet Yellen. In chapter 2, the existence of money tells us our production relations are out of control. However, today, Yellen controls the currency and manages it. Relations are still out of our control, but the object that tells us they are out of control is now itself controlled by the Fed.

Control of money cannot give the state control over material production relations because before a commodity is exchanged it already must be produced. State control over the object serving as money in an exchange thus is always reactive. The policies of the state is not determining but determined. The state reacts to changes in material relations of production and has no control over those relations.

Point 3 is the biggest problem for those who assume fascist tokens are money: in fact state issued fiat currency, once it is detached from a commodity money, actually behaves nothing like money: first, it depreciates — commodity monies can’t depreciate. Second, it cannot move into and out of hoards, while commodity monies constantly do this. Third, it cannot express the values of commodities, because, unlike commodity monies, it has no value of its own. Fourth, today fiat currencies circulate as a medium of exchange.

This last point might seem bizarre for me to say, but name another object that today circulates as medium of exchange. Don’t you find it odd that only fiat currencies can do this? Where are the privately issued gold, silver, platinum and other coins that, in theory at least, could easily serve as alternative forms of money to state issued fiat.

Why is it that even gold bugs don’t use gold as money? Not even gold bugs will use gold as means of exchange; they refuse to part with it.

If Marx was wrong to assert money had to be a commodity, it would appear he was further off base than hitherto assumed: today, money can never be a commodity for the simple reason that no commodity will function as medium for circulation of commodities. Fascist tokens don’t behave like money precisely because they can serve as a medium of exchange even when no commodity money can. Once you get beyond the tautology that money is whatever buys groceries, you realize that today only a valueless token can buy groceries.

How did that happen? When before in all of human history did ONLY valueless tokens count as money. And what is it about valueless tokens that make them uniquely suited to that function today? Why among all the materials that have served as money in all of human history has this function come to rest solely with valueless fascist tokens.

The answer is obvious: when all other monies were withdrawn from circulation, the only money form left was fascist tokens. The briefest examination of the historical record will show that members of society withdrew their bullion from circulation in the 1930s and again in the 1970s. All that remained after commodity money was withdrawn from circulation were fascist tokens precisely because, once severed from commodity money, these token do not behave like money; which is to say, they continue to circulate as means of exchange when no commodity money will.

Even if we knew nothing about the history of money, the fact that only a valueless token can serve as medium for circulation of commodities raises profound questions about the nature of, and the relation between, money and capital.

Here is the thing: the fact that only a valueless token can serve as means of exchange suggests that the exchange value of commodities is now an obstacle to their circulation as capital.

How can the exchange value of commodities become an obstacle to their circulation as capital? Isn’t capitalism just self-expanding exchange value? How can the exchange value of a commodity become an obstacle to its own self-expansion, i.e., function as capital?

Well, here is a hint: if the commodity in question is labor power and if the rate of profit is now zero, the exchange value of labor power becomes a barrier to the self-expansion of the value of the commodity. The easiest way to fix this is to employ a ‘money’ that cannot express the values of commodities because it has no value of its own, i.e., a debased state issued fiat currency

And what is the exchange value of labor power? The wages of the worker, of course. At some point in the development of the mode of production capitalist profit requires labor power to be sold below its value. (Grossman)