THE THEORY OF MONEY BY K. MARX. THE ROLE OF GOLD IN MODERN CONDITIONS

ABSTRACT

This article examines the role of gold in the modern economy through the prism of Karl Marx’s theory of money. The article emphasizes that today gold is perceived as a multifaceted asset that combines the properties of metal, money, art and luxury. The concept of commodity fetishism is considered as an important element of the Marxist theory of money, and the modern functions of gold as a high-value commodity are analyzed.

Keywords: Karl Marx’s theory of money; gold; commodity fetishism; modern economics.

A combination of several reasons has contributed to the emergence of a new situation in the assessment of the value of gold in the last decade. Today, gold is considered in its entirety like metal, money, an object of art and luxury. In the modern conditions of globalization, the strong influence of macroeconomic processes on the state of national economies, and the increasing frequency of crisis phenomena, the attention of researchers is increasingly turning to the monetary functions of gold.

Karl Marx’s theory of money outlined in his writings such as ‘Capital’ lays the foundation for understanding the functions and role of money in capitalist society. Marx identifies several characteristics of money, including its function as an intermediary of exchange, a unit of measurement of value and a means of saving. This article considers the theory of money in the terms of modernity, functions and the role of gold as a commodity of high value [3].

The key point of Marx’s theory of money is in his concept of commodity fetishism. Marx argued that in terms of commodity production, the relationship between people is presented as a relationship between things, and money becomes a fetish personifying the power and wealth. Initially, due to its natural rarity and value, gold has received the role of a universal equivalent, and this role largely persists to this day.

According to Marx, money is a special commodity that performs several functions in the economy. The first and main function of money is the function of a medium of exchange, which makes it possible to simplify trade and replace barter. Therefore, money serves as a universal equivalent that facilitates transactions between producers and consumers [3]. They have also become the primary means of storing value allowing people to keep their income and wealth in liquid form. Marx describes how money acts as an intermediary in the process of exchanging goods. In contrast to the barter system, where the exchange is carried out directly between goods, money makes it possible to simplify and accelerate economic transactions. This creates conditions for more complex forms of production and consumption [1].

The second important point Marx highlights is the function of a measure of value. He says that money serves as a unit of measurement that allows estimating the value of various goods and services. They create a common basis for calculating and comparing prices, which facilitates the trading process and gives the opportunity to plan economic activities. Marx argues that money is an expression of the abstract labor contained in every commodity [1].

The third function of money is to use it as a means of saving. Karl Marx argues that money also acts as a means of preserving value. This is an important aspect that allows individuals and societies to store their resources and accumulate wealth over time. Marx emphasizes that the form of money affects the accumulation of capital and, accordingly, the dynamics of society’s development. Money can store value over time providing the opportunity to accumulate capital for future investments. From this point of view, money becomes the key to the formation of a capitalist society. [1].

Marx also carefully analyzes how money affects the process of expanded reproduction of capital. Under capitalism, money becomes not only a means of exchange, but also compensation for the workforce, which plays an important role in the life of society. These aspects make money a central topic for analyzing the dynamics of capitalist production [2].

Turning our attention to the role of gold in the modern economy, it is worth noting that for centuries gold has played the role of the main monetary equivalent. Like other precious metals, gold has properties that make it ideal for performing the functions of money – its physical properties (durability, divisibility, transference, uniformity and rarity) contributed to its widespread adoption. In modern conditions of globalization, the strong influence of macroeconomic processes on the state of national economies and the increased frequency of crisis phenomena, the attention of researchers is often drawn to the monetary functions of gold.

In the modern world, despite fluctuations in gold prices on the world market, its value shows a steady growth dynamics, significantly exceeding many other goods. In the global economy, gold is still perceived as a reliable asset, especially during periods of economic instability. In modern financial systems, gold plays several important roles:

1. Inflation hedging

An inflation hedge is an investment that is considered to protect the decreased purchasing power of a currency that results from the loss of its value due to rising prices either macro-economically or due to inflation. It typically involves investing in an asset that is expected to maintain or increase its value over a specified period of time. In times of economic instability and inflation, when the purchasing power of national currencies is declining, investors often turn to gold as a reliable tool for preserving capital. Gold, unlike fiat money, is not subject to inflation to the same extent, since its supply is limited and its value is based on the real value of the metal.

2. Portfolio diversification

Diversification is essentially a risk management strategy that aims to balance risk and reward within an investment portfolio. Portfolio diversification involves spreading investments across different asset types in order to reduce the volatility and risk involved with investing. Gold is an important tool for diversifying investment portfolios. In conditions of market volatility and economic uncertainty, a reasonable allocation of assets, including gold, reduces the overall level of risk. Gold, as a rule, behaves differently than stocks and bonds, which helps smooth out portfolio fluctuations.

3. Role in the global economy

Gold continues to play an important role as a reserve currency for central banks. Many states keep gold in their reserves, which confirms its importance in world trade and financial systems. Gold reserves serve not only as a guarantee of financial stability, but also strengthen confidence in the national currency [4].

The modern economy is increasingly paying attention to the gold reserves of central banks, which help maintain monetary stability. For example, in 2022, a published report by the World Gold Council showed that central banks had purchased a record amount of gold, which confirms its status as a safe asset in the face of financial market volatility [5].

However, with the advent of cryptocurrencies and digital money, the role of gold is also undergoing changes. Some analysts have suggested that gold is losing its appeal as a means of accumulation, as cryptocurrencies offer alternative investment and savings options. Others, on the contrary, believe that gold can coexist with cryptocurrencies giving investors the opportunity to diversify their portfolios. Such diversification allows both to protect the invested funds from significant market fluctuations and to reduce the overall level of risk associated with investments.

In the context of the Marxist theory of money, the interest in gold in the modern economy can be seen as confirmation that the material basis of the monetary system is still important even in the digital age. Gold, as a commodity with real value, continues to play the role of an anchor for the monetary system, especially during periods of crisis and instability.

Finally, it is necessary to note that the theory of money, according to Marx, emphasizes that money is not a simple tool. It represents complex economic and social relations. Considering Marxist theory in the context of gold makes it possible to better understand the dynamics of the monetary system and its impact on economic realities. Thus, gold continues to be an important element in the modern world that focuses on the stability and preservation of value in a rapidly changing economic environment.

References:

1. Marx. Kapital // M.: Gospolitizdat, 1951-1952. – 797 p.
2. Marx K., Engels F. On the criticism of political economy // Sobr. soch., ed. 2, vol. 13. – M.: Politizdat, 1959. – 771 p.
3. Proskurina K.Y. Legal forms of establishing the functions of money: measure of value, means of circulation, and function of world money. Bulletin of the Institute of Legislation and Legal Information of the Republic of Kazakhstan. 2022. №3 (70). [электронный ресурс] – Режим доступа. – URL:  https://cyberleninka.ru/article/n/pravovye-formy-ustanovleniya-funktsiy-deneg-mera-stoimosti-sredstvo-obrascheniya-funktsiya-mirovyh-deneg (дата обращения 22.12.2024).
4. Sukharev A. N. Gold as a monetary commodity: evolution and modernity // Finance and Credit. – Tver – 2015. – №45. – p. 4.
5. World Gold Council [электронный ресурс] – Режим доступа. – URL: https://www.gold.org/goldhub/research/gold-outlook-2022 (дата обращения 20.12.2024).