What are good exchange rates?

When Marx wrote 'Das Kapital', currencies were closely related to Gold - they had a fixed exchange rate. For him, this almost seemed necessary, because if you don't back up your currency with a commodity, there's no clear measure how much your currency is worth. Marxists nowadays often argue that the very fact that we have given up on the gold standard is responsible for exchange rate fluctuations because you cannot give good measures what the exchange rates should be. But what if the whole world had a single fiat currency? This case can be partially studied in Europe, where many different nations have given up their individual currencies and introduced the Euro. I claim two things: 1. fiat currencies are superior to currencies backed by some commodity as their lack of any use value and the fact that you can produce as much of it as you wish make it perfectly fit to keep the commodities moving. 2. When it comes to international trade relations, a single fiat currency for everyone can be treated exactly like the gold standard - and it has the very same problems. So, when discussing good exchange rates if countries use different fiat currencies, we should ask: what should happen with the relative prices in the different countries if they used the same fiat currency? And then we should use the exchange rates to correct errors if they occur. So, from a marxist point of view, what should different countries using a common currency do to make the common economy work?

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  • Markus Pfeifer
    published this page in Ask Prof. Wolff 2017-11-21 14:37:13 -0500