Abstract: The Role of Commodity Value in Inconvertible Credit Money A Contemporary Unoist Perspective

 

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Endogenous money supply theories were critical tools used against mainstream economics. However, as the views for endogenous money supply become more widespread in both the general public and mainstream economics under the New Consensus, it has become increasingly important to understand the differences within these theories. This paper examines the distinction between endogeneity and exogeneity from two perspectives: logical emergence and money supply. It aims to elucidate the endogenous theory from both perspectives using the Unoist approach, which includes the Commodity Theory of Money and the “Inter-Capital Organization” theory.

In modern capitalism, money is issued by bank credit and held as bank liabilities. As long as money is issued through banking operations, it is backed by the borrowers' ability to repay, which is based on the salability of their commodities, either current or future. This relationship exists regardless of whether the money is convertible or inconvertible. Therefore, money issued by bank credit is essentially commodity money.

The importance of the commodity basis of money lies not only in its quantity of value but also in its use-value. Through credit assessment in lending , the bank indirectly aggregate and control many salable commodities in the borrowers’ assets. Thus, both in terms of value and use-value, bank money is aligned with the commodity theory of money.

To investigate the conditions for endogenous money supply, this paper utilizes the 'Inter-Capital Organization' theory, which highlights the organized and structured methods of trade, in contrast to simple and sporadic trades that occur in a distributed manner. The organized or structured trades within banks form inter-capital organizations that enable even individual banks to supply money endogenously.

The Commodity Theory of Money and the Inter-Capital Organization theory could provide insights into how competing banking capitals spontaneously form diverse organizations outside the formal structure led by the central bank.