Correspondence: The Mystery of "Sovereigns as Sovereigns, and not as Gold." (1920)

Letter to the Editors from the September 1920 issue of the Socialist Standard

To the Editors.

Dear Sirs — I understand that if one attempts to find error in your journal you lead off with “A superstitious Kaffir has,” etc, or something similarly showing innate race, creed, and colour bias. However, I will chance it.

F. F. in his article “Paradox or Illusion,” challenges Mr. Sandiway to explain why if Bradburys are not gold value they can be exchanged for sovereigns. True, they can be exchanged for sovereigns, but only sovereigns as sovereigns, not sovereigns as gold. Their gold value is limited by the reading of old law and Dora and its export restrictions. Gold on July 27 is quoted 108s. 9d. per oz., which is a considerable margin above sovereigns plus the highest freights to anywhere.

Also in the few lines previous to his challenge F. F. (I hope I am not misreading him) seems to distinguish between gold and commodities more than is necessary between one commodity and another. He must know that gold is merely the most suitable commodity to measure all other commodities, and that otherwise it follows strictly the law of commodities. Gold is a commodity which enters into all transactions simply to facilitate and expedite the barter of old days.—

Yours, etc., 

Bannochie.

Our Reply.

Quids Are Gold, Really.

When Bannochie says: “True, they can be exchanged for sovereigns,” he concedes my point. His further remark “but only sovereigns as sovereigns and not sovereigns as gold” does not qualify his admission for the simple reason that sovereigns are gold and gold to the full value represented. When the Government gave notes in exchange for sovereigns they gave, in effect, a receipt for so much gold, and the holder of such a receipt can to-day receive the same quantity of gold by tendering his receipt or note. The pound note has, therefore, the same gold basis that it had when it was first issued, and is accepted within the Empire as representing the sovereign.

The high price of gold in the open market explains itself when we remember that it is illegal to melt down sovereigns and unpatriotic to demand them from the Bank, which has held huge stocks of gold in reserve since the early days of the war.

The amusing side of Banaochie’s attempted criticism is that he endeavours to show that the “price of gold ” has risen, while my chief concern was to show that its “value had not fallen.” Apart from his confusion over the two terms, it is evident that even if his point were proved it would only go to support my contention—that prices have actually risen and not that paper juggling makes it merely appear so.

The distinction between gold and other commodities is that the latter, whatever their magnitude or use, express their value in the former. Gold, in this country, is alone the material in which values can be expressed. The position it occupies to day is due to its physical properties and the historical development of wealth-production, together with the social relationships arising therefrom. It is, therefore, just as correct to speak of gold and commodities as it is to speak of king and subjects. In neither case can the one exist without the other. To find the origin of such relationships we trace their development backwards. But even when we have done that and discovered that gold is only a commodity, that the king is merely a man, the fact still remains that in one country there is only one king and that gold is the one commodity to obtain which all other commodities are produced. If society persists in distinguishing between gold and commodities even Bannochie must fall into line—in practice. For instance, in times of crisis gold is in demand everywhere, is, in fact, the only form in which wealth is recognised. Again, if Bannochie is a wage-slave with any experience of unemployment, he has been forced to recognise the difference between gold and his commodity, labour-power : the latter is often a drug on the market, and most other commodities have been drugs as well; but when has gold been a drug ?

Gold is not merely “the most suitable commodity to measure all other commodities.” It is the substance in which all commodities express their value—a far different thing. When gold has become money it is then the universal equivalent, and all other kinds of wealth are merely commodities. Only when the money commodity is isolated in this way can it fulfil its various functions, as measure of value, as standard of price and circulating medium. The fact that it is generally recognised as the measure of value—its chief function—isolates it from other commodities, but in the process of becoming isolated the days of barter are left behind, and the full development of gold as a circulating medium is a sign that barter (in its simple form of direct exchanges) no longer exists.

F. Foan