The People's Marx, Abridged Popular Edition of the the Three Volumes of Capital, Borchardt 1921

Chapter 16


Money

(Extracted from vol. I, CH. 2 & 3.)

Commodities cannot go to market and make exchanges of their own account. We must, therefore, have recourse to their guardians, the owners of commodities. The commodity possesses for the owner no immediate use-value. Otherwise, he would not bring it to the market. It has use-value for others; but for himself its only direct use-value is that of being a depository of exchange value, and, consequently, a means of exchange. [1] Therefore, he will part with it for commodities whose value in use is of service to him. All commodities are non-use-values for their owners, and use-values for their non-owners. Consequently, they must all change hands. This change of hands is what constitutes their exchange.

The sale of an object of utility first becomes possible when a greater quantity of it is available, than its proprietor needs. When this happens, the interested parties need only regard one another implicitly as the private owners of such objects. But such a state of reciprocal independence has no existence in a primitive society based on property in common, whether such a society takes the form of a patriarchal family, an ancient Indian community, or a Peruvian Inca State. The individual members of such a community, therefore, could not exchange their commodities. The exchange of commodities first begins on the boundaries of such communities, at their points of contact with other similar communities, or with members of the latter. As soon as the custom of exchanging things has been established, it is extended to the internal intercourse of the community. The proportions in which they are exchangeable are at first quite a matter of chance. Meantime the need for foreign objects of utility gradually establishes itself. The constant repetition of exchange makes it a normal social act. In the course of time, therefore, some portion at least of the products of labour must be produced with a special view to exchange. From that moment the distinction becomes firmly established between the utility of an object for the purposes of consumption, and its utility for the purposes of exchange. Its use-value becomes distinguished from its exchange-value. On the other hand, the quantitative proportion in which the articles are exchangeable, becomes dependent on their production itself. Custom stamps them as values with definite magnitudes.

Every proprietor of commodities is desirous of parting with the latter only in exchange for such other commodities, the use-value of which is capable of satisfying his wants. But he would nevertheless be willing to part with them in exchange for any other sort of commodity having the same value, whether his own commodity have any use-value for the proprietor of the other commodity or not. This would be impossible, seeing that the other proprietors cannot afford to acquire commodities, the use-value of which is of no service to them. If, then, the exchange of commodities becomes customary a commodity is needed, which possesses use-value, not merely for the one or the other, but for all proprietors of commodities without exception a commodity offering the possibility of exchanging it for every other sort of commodity. In other words, a general medium of exchange is required.

The problem arises simultaneously with the means of solving it. As soon as traffic has been developed in the course of which commodity-owners equate their goods to various others, it has already become customary for various commodities to be exchanged by their various proprietors, in the course of business, for a third, homogeneous type of commodity of equivalent value. Such last-mentioned commodity, being an exchange medium for various other commodities, assumes at once although within narrow limits - the character of a general, or social, exchange medium. This character comes and goes with the momentary social contact that called it into life. Alternately and transiently it attaches itself first to this, and then to that commodity. But with the development of exchange it fixes itself firmly and exclusively to particular sorts of commodities, and becomes crystallised by assuming the money-form. Money is a commodity generally recognised by all commodity-owners as a medium of exchange for all their various commodities, and employed by them as such. The particular kind of commodity to which it sticks is at first a matter of accident. Nevertheless there are two circumstances whose influence is decisive. The money-form attaches itself either to the most important articles of exchange from- outside; or else it attaches itself to the object of utility that forms, like cattle, the chief portion of indigenous alienable wealth. Nomad races are the first to develop the money-form, because all their worldly goods consist of moveable objects and are therefore directly alienable; and because their mode of life, by continually bringing them into contact with foreign communities, solicits the exchange of products. Man has often made man himself, under the form of slaves, serve as the primitive material of money, but has never used land for that purpose. Such an idea could only spring up in a bourgeois society already well developed. It dates from the last third of the 17th century, and the first attempt to put it in practice on a national scale was made a century afterwards, during the French bourgeois revolution.

In proportion as exchange bursts its local bonds, the character of money attaches itself to commodities that are by nature fitted to perform the social function of a universal equivalent. Those commodities are the precious metals. If money is to equate every other commodity to any amount, and thus to represent any exchange-value that may be wished for, a material is needed, whose every sample exhibits the same uniform qualities. On the other hand, since the difference between the magnitudes of value is purely quantitative, the money commodity must be divisible at will, and equally capable of being re-united. Gold and silver possess these properties by nature.

Although we may be aware that gold is money, and consequently directly exchangeable for all other commodities, yet that fact by no means tells how much 10 Ibs., for instance, of gold is worth. Money, like every other commodity, cannot express the magnitude of its value except relatively in other commodities. This value is determined by the labour-time required for its production, and is expressed by the quantity of any other commodity that costs the same amount of labour-time. Such quantitative determination of its relative value takes place at the source of its production by means of barter. When it steps into circulation as money, its value is already given.

Throughout this work, I assume, for the sake of simplicity, gold as the money-commodity.

The first chief function of gold is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold become money.

It is not money that renders commodities commensurable. Just the contrary. It is because all commodities, as values, are realised human labour, and therefore commensurable, that their values can be measured by one and the same special commodity, and the latter be converted into the common measure of their values, i. e., into money. Money as a measure of value is the phenomenal form that must of necessity be assumed by that measure of value which is immanent in commodities, labour-time.

The expression of the value of a commodity in gold is its money-form or price. A single equation, such as 1 ton of iron = 2 ounces of gold, now suffices to express the value of the iron in a socially valid manner, i. e. to indicate the value of the iron relatively to all other commodities, seeing that all other commodities likewise indicate their value in gold. But money itself has no price. Otherwise, we should be obliged to equate it to itself as its own equivalent.

The price or money-form of commodities is, like their form of value generally, a form quite distinct from their palpable bodily form; it is, therefore, a purely ideal or mental form. Although invisible, the value of iron, linen and corn has actual existence in these very articles: it is ideally made perceptible by their equality with gold. The value, or in other words, the quantity of human labour contained in a ton of iron, is expressed in imagination by such a quantity of the money-commodity as contains the same amount of labour as the iron.

Let us now accompany the owner of some commodity - say, the weaver of linen --to the scene of action, where the process of exchange takes place, the market. His 20 yards of linen has a definite price, £ 2. He exchanges it for the £ 2, and then, like a man of the good old stamp that he is, he parts with the £ 2 for a family Bible of the same price. The linen, which in his eyes is a mere commodity, a depository of value, he alienates in exchange for gold, which is the linen's value-form, and this form he again parts with for another commodity, the Bible, which is destined to enter his house as an object of utility and of edification to its inmates. The exchange becomes an accomplished fact by two metamorphoses of opposite yet supplementary character - the conversion of the commodity into money, and the re-conversion of the money into a commodity. For the weaver, these constitute two acts: selling and buying; and, the unity of the two acts, selling in order to buy.

The result of the whole transaction, as regards the weaver, is this, that instead of being in possession of the linen, he now has the Bible; instead of his original commodify, he now possesses another of the same value but of different utility. In like manner he procures his other means of subsistence and production. From his point of view, the whole process effectuates nothing more than the exchange of the product of his labour for the product of some one else's.

The exchange of commodities is therefore accompanied by the following changes in their form.

Commodity - Money - Commodity
C - M - C

The result of the whole process is, so far as concerns the objects themselves, C - C, the exchange of one commodity for another, the circulation of materialised social labour. When this result is attained, the process is at an end.

The money which serves to buy a commodity has previously been obtained by selling another one.

We will assume that the two gold pieces, in consideration of which our weaver has parted with his linen, are the metamorphosed shape of a quarter of wheat. The sale of the linen, C - M, is at the same time its purchase, M - C. But the sale is the first act of a process that ends with a transaction of an opposite nature, namely, the purchase of a Bible; the purchase of the linen, on the other hand, ends a movement that began with a transaction of an opposite nature, namely, with the sale of the wheat. C - M (linen - money), which is the first phase of C - M - C (linen - money - Bible), is also M - C (money - linen), the last phase of another movement C - M - C (wheat - money - linen). The metamorphosis of one commodity into money is therefore also invariably the retransformation of a second from money into a commodity. [2]

The same is the case in another direction. With regard to our weaver, the life of his commodity ends with the Bible, into which he has reconverted his £ 2. But suppose the seller of the Bible turns the £ 2 set free by the weaver into brandy. M - C, the concluding phase of C - M - C (linen money Bible), is also C - M, the first phase of C - M - C (Bible - money - brandy). The producer of a particular commodity has that one article alone to offer; this he sells very often in large quantities, but his many and various wants compel him to split up the price realised, the sum of money set free, into numerous purchases. Hence one sale leads to many purchases oi various articles. The concluding metamorphosis of a commodity thus constitutes an aggregation of first metamorphoses of various other commodities.

The circuit made by every commodity with its sale and ensuing purchase of another commodity, is inextricably mixed up with the circuits of other commodities. The total of all the different circuit's constitutes the circulation of commodities.

The circulation of commodities differs from the direct exchange of products, not only in form, but in substance. Only consider the course of events. The weaver has, as a matter of fact, exchanged his linen for a Bible, his own commodity for that of someone else. But this is true only so far as he himself is concerned. The seller of the Bible, who prefers something to warm his inside, no more thought of exchanging his Bible for linen than our weaver knew that wheat had been exchanged for his linen. B's commodity replaces that of A, but A and B do not mutually exchange those commodities. We see here, on the one hand, how the exchange of commodities breaks through all local and personal bounds inseparable from direct barter, and develops the circulation of the products of social labour; and on the other hand, how it develops a whole network of social relations entirely beyond the control of the actors. It is only because the farmer has sold his wheat that the weaver is enabled to sell his linen, only because the weaver has sold his linen that our hotspur is enabled to sell his Bible, and only because the latter has sold the water of everlasting life that the distiller is enabled to sell his eau-de-vie, and so on.

The process of circulation, therefore, does not, like direct barter of products, become extinguished upon the use-values changing places and hands. The money does not vanish on dropping out of the circuit of the metamorphosis of a given commodity. It is constantly being precipitated into new places in the arena of circulation vacated by other commodities. In the complete metamorphosis of the linen, for example, linen-money-Bible, the linen first falls out of circulation, and money steps into its place. Then the Bible falls out of circulation, and money again takes its place. When one commodity replaces another, the money commodity always sticks to the hands of some third person. Circulation sweats money from every pore.

As agent of the process of circulation of commodities, money acquires the function of a medium of circulation.

The movement of the labour-product C - M - C is a Circuit. For its result is that a given value in the shape of a commodity shall begin the process, and shall also, in the shape of a commodity, end it. On the other hand, the movement of money is not, and cannot be, a circuit. The result is not the return of the money, but its continued removal further and further away from its starting-point. So long as the seller sticks fast to his money, which is the transformed shape of his commodity, that commodity has completed only half its course. But so soon as he completes the process, so soon as he supplements his sale by a purchase, the money again leaves the hands of its possessor. It is true that if the weaver, after buying the Bible, sell more linen, money comes back into his hands. But this return is not owing to the circulation of the first 20 yards of linen; that circulation resulted in the money getting into the hands of the seller of the Bible. The return of money into the hands of the weaver is brought about only by the circulation of a fresh commodity, which new process ends with the same result as its predecessor did. Hence the movement directly imparted to money by the circulation of commodities takes the form of a constant motion awy from its starting-point, of a course from the hands of one commodity owner into those of another. This course constitutes its currency (cours de la monnaie).

That this one-sided character of the money's motion arises out of the two-sided character of the commodity's motion, is a circumstance that is veiled over. The very nature of the circulation of commodities begets the opposite appearance .The first metamorphosis of a commodity (C-M) is. visibly, not only the money's imminent, but also that of the commodity itself; in the second metamorphosis (M-C), on the contrary, the movement appears to us as the movement of the money alone. In the first phase of its circulation the commodity changes place with the money. Thereupon the commodity, under its aspect of a useful object, falls out of circulation into consumption. (Even when the commodity is sold over and over again, it falls, when definitely sold for the last time, out of the sphere of circulation into that of consumption). In its stead we have its value-shape the money. It then goes through the second phase of its circulation, not under its own natural shape, but under the shape of gold. The continuity of the movement is therefore kept up by the money alone, and the same movement that as regards the commodity consists of two processes of an antithetical character, is, when considered as the movement of the money, always one and the same process, a continued change of places with ever fresh commodities. Hence the result brought about by the circulation of commodities, namely, the replacing of one commodity by another, takes the appearance of having been effected not by means of the change of form of the commodities, but rather by the action of the money, an action, that circulates commodities, to all appearance motionless in themselves, and appears to set them in motion; and that in a direction constantly opposed to the direction of the money. Hence, although the movement of the money is merely the expression of the circulation of commodities, yet the circulation of commodities seems to be the result of the movement of the money.

Every commodity, when it first steps into circulation, and undergoes its first change of form, does so only to fall out of circulation again and to be replaced by other commodities. Money, on the contrary, as the medium of circulation, keeps continually within the sphere of circulation and moves about in it. The question therefore arises, how much money this sphere constantly absorbs?

In a given country there take place every day at the same time numerous sales and numerous purchases of commodities. And since, in the form of circulation now under consideration, money and commodities always come bodily face to face, it is clear that the amount of the means oi circulation required is determined beforehand by the sum of the prices of all these commodities. If, in consequence of a rise or fall in the value of gold, the sum of the prices of commodities fall or rise, the quantity of money in currency must fall or rise to the same extent. A one-sided observation of the results that followed upon the discovery of fresh supplies of gold and silver, led some economists in the 17th, and particularly in the 18th century, to the false conclusion, that the prices of commodities had gone up in consequence of the increased quantity of gold and silver serving as means of circulation. As a matter of fact the value of the gold and silver had diminished in consequence of the increased facility of exploitation, the prices of commodities had concurrently increased, and the more expensive commodities required naturally greater quantities of money for their circulation. - Henceforth we shall consider the value of gold to be given.

If now we further suppose the price of each commodity to be given, the sum of the prices clearly depends on the mass of commodities in circulation. It requires but little racking of brains to comprehend that if one quarter of wheat costs £ 2, 100 quarters will cost £ 200, 200 quarters £ 400, and so on, that consequently the quantity of money that changes place with the wheat, when sold, must increase with the quantity of that wheat.

If the mass of commodities remain constant, the quantity of circulating money varies with the fluctuations in the prices of those commodities. It increases and diminishes because the sum of the prices increases or diminishes in consequence of the. change of price. Whether the change in the price correspond to an actual change of value in the commodities, or whether it be the result of mere fluctuations in market prices, the effect on the quantity of the medium of circulation remains the same.

This holds good for simultaneous sales and purchases, but not for successive ones.

Suppose the following articles to be sold simultaneously: say, one quarter of wheat, 20 yards of linen, one Bible, and 4 gallons of brandy. If the price of each article be £ 2, it follows that £ 8 in money must go into circulation. If, on the other hand, these same articles are links in the following chain of metamorphoses: 1 quarter of wheat - £ 2 - 20 yards of Linen - £ 2 - 1 Bible £ 2 2 - 4 gallons of brandy - £ 2, a chain that is already well known to us, in that case the £ 2 thus make four moves. Only 1/4 of the quantity of money is required, which would have been needed in the case of a simultaneous turnover of the four commodities. The more moves the same sum of money makes in a given time, i. e. the greater the velocity of its currency, and the less money does the process of circulation require. Hence, the quantity of money functioning as the circulating medium is equal to the sum of the prices of the commodities divided by the number of moves made by coins of the same denomination.

Sum of prices of commodities /Number of moves by coins of same denomination = Quantity of money serving as circulating medium.

This law holds generally. Hence if the number of moves made by the separate pieces increase, the total number of those pieces in circulation diminishes. If the number of the moves diminish, the total number of pieces increases. Since the quantity of money capable of being absorbed by the circulation is given for a given mean velocity of currency, all that is necessary in order to abstract a given number of sovereigns from the circulation is to throw the same number of one-pound notes into it, a trick well known to all bankers.

Just as the currency of money, generally considered, is but a result and a reflex of the circulation of commodities, so, too, the velocity of that currency reflects the rapidity with which commodities circulate - not inversely. Thus the retardation of the currency reflects the stagnation in the circulation of commodities. The circulation itself, of course, gives no clue to the origin of this stagnation. The general public, who, simultaneously with the retardation of the currency, see money appear and disappear less frequently at the periphery of circulation, naturally attribute this retardation to a quantitative deficiency in the circulating medium. [3]

The total quantity of money functioning during a given period as the circulating medium, is determined, on the one hand, by the sum of the prices of the circulating commodities, and on the other hand, by the rapidity of their circulation. But the sum of the prices of the circulating commodities depends on the quantity, as well as on the prices, of the commodities. These three factors, however, state of prices, quantity of circulating commodities, and velocity of money-currency, are all variable in different proportions, and can therefore compensate each other. Consequently we find, especially if we take long periods into consideration, that the deviations from the average level of the quantity of money current in any country, are much smaller than we should at first sight expect, apart of course from excessive perturbations mostly arising from industrial and ccmmercial crises.

The erroneous opinion that it is prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country; this opinion was based by those who first held it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation, and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals.

That money takes the shape of coin, springs from its function as the circulating medium. The weight of gold represented in imagination by the prices of commodities, must confront those commodities, within the circulation, in the shape of coins or pieces of gold of a given denomination. The only difference, therefore, between coin and bullion, is one of shape, and gold can at any time pass from one form to the other. But no sooner does coin leave the mint, than it immediately find itself on the high-road to the melting pot. During their currency, coins wear away, some more, others less. Name and substance begin their process of separation. Coins of the same denomination become different in value, because they are different in weight. Gold thereby ceases any longer to be a real equivalent of the commodities whose prices it realises. The natural tendency of circulation is thus to convert coins into a mere semblance of what they profess to be, into a symbol of the weight of metal they are officially supposed to contain. This fact implies the possibility of replacing metallic coins by tokens of some other material, by symbols serving tin purposes as coins. The practical difficulties in the way of coining extremely minute quantities of gold or silver, and the circumstance that at first the less precious metal is used as a measure of value instead of the more precious, copper instead of silver, silver instead of gold, and that the less precious circulates as money until dethroned by the more precious - all these facts explain the parts historically played by silver and copper tokens as substitutes for gold coins. Silver and copper tokens take the place of gold in those regions of the circulation where coins pass from hand to hand most rapidly, and are subject to the maximum amount of wear and tear. This occurs where sales and purchases on a very small scale are continually happening. In order to prevent these satellites from establishing themselves permanently in the place of gold, positive enactments determine the extent to which they must be compulsorily received as payment instead of gold.

The weight of metal in the silver and copper tokens is arbitrarily fixed by law. When in currency, they wear away even more rapidly than gold coins. Hence their functions are totally independent of their weight, and consequently of all value. The function of gold as coin becomes completely independent of the metallic value of 'that gold. Therefore things that are relatively without value, such as paper notes, can serve as coins in its place. This purely symbolic character is to a certain extent masked in metal tokens. In paper money it stands out plainly.

We allude here only to paper money issued by the State and having compulsory circulation. It has its immediate origin in the metallic currency. Money based upon credit implies on the other hand conditions, of which we have here entirely abstained from treating.

The State puts in circulation bits of paper on which their various denominations, say £ 1, £ 5, &c., are printed. In so far as they actually take the place of gold to the same amount, their movement is subject to the laws that regulate the currency of money itself. A law peculiar to the circulation of paper money can spring up only from the proportion in which that paper money represents gold. Such a law exists; stated simply, it is as follows: the issue of paper money must not exceed in amount the gold which would actually circulate if not 'replaced by symbols. Now the quantity of gold which the circulation can absorb, constantly fluctuates about a given level. Still in a given country it never sinks below a certain minimum easily ascertained by experience. The fact that this minimum mass continually undergoes changes in its constituent parts, i. e. that the pieces of gold of which it consists are being constantly replaced by fresh ones, causes of course no change either in its amount or in the continuity of its circulation. It can therefore be replaced by paper symbols. If, on the other hand, all the conduits of circulation were to-day filled with paper money to the full extent of their capacity for absorbing money, they might to-morrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceed its proper limit, which* is the amount in gold coins of the like denomination that can actually be current, it would, apart from the danger of falling into general disrepute, represent only that quantity of gold, which, in accordance with the laws of the circulation of commodities, is required, and is alone capable of being represented by paper. If the quantity of paper money issued be double what it ought to be, then, as a matter of fact, £ 1 would be the money-name not of l/4 of an ounce, but of 1/8 of an ounce of gold. Those values that were previously expressed by the price of £ 1 would now be expressed by the price of £ 2.

With the very earliest development of the circulation of commodities, there is also developed the necessity, and the passionate desire, to hold fast the product of the first metamorphosis. Commodities are thus sold not for the purpose of buying others, but in order to replace their commodity-form by their money-form. From being the mere means of effecting the circulation of commodities, this change of form becomes the end and aim. The money becomes petrified into a hoard, and the seller becomes a hoarder of money.

Precisely in the early stages of the circulation of commodities, the surplus use-values alone are converted into money. Gold and silver thus become of themselves social expressions for superfluity or wealth.

As the production of commodities further develops, every producer of commodities is compelled to make sure of the nervus rerum or the social pledge. His wants are constantly making themselves felt, and necessitate the continual purchase of other people's commodities, while the production and sale of his own goods require time, and depend upon circumstances. In order then to be able to buy without selling, he must have sold previously without buying. In this way, all along the line of exchange, hoards of gold and silver of varied extent are accumulated. With the possibility of holding and storing up exchange value in the shape of a particular commodity, arises also the greed for gold. Along with the extension of circulation, increases the power of money. To a barbarian owner of commodities, and even to a West-European peasant, value is the same as value-form, and, therefore, to him the increase in his hoard of gold and silver is an increase in value.

In order that gold may be held as money, it must be prevented from circulating, or from transforming itself into a means of enjoyment. The hoarder, therefore, makes a sacrifice of the lusts of the flesh to his gold fetish. He acts in earnest up to the Gospel of abstention. On the other hand, he can withdraw from circulation no more than what he has thrown into it in the shape of commodities. The more he produces, the more he is able to sell. Hard work, saving, and avarice are therefore his three cardinal virtues, and to sell much and buy little the sum of his political economy.

By the side of the gross form of a hoard, we find also its aesthetic form in the possession of gold and silver articles. This grows with the wealth of civil society. In this way there is created, on the one hand, a constantly extending market for gold and silver, unconnected with their functions as money, and, on the other hand, a latent source of supply, to which recourse is had principally in times of crisis and social disturbance.

Hoarding serves various purposes. Its first function is the following: we have seen how, along with the continual fluctuations in the extent and rapidity of the circulation of commodities and in their prices, the quantity of money current unceasingly ebbs and -flows. This mass must, therefore, be capable of expansion and contraction. At one time money must be attracted in order to act as circulating coin, at another, circulating coin must be repelled. In order that the mass of money, actually current, may constantly saturate the absorbing power of the circulation, it is necessary that the quantity of gold and silver in a country be greater than the quantity required to function as coin. This condition is fulfilled by money taking the form of hoards. These reserves serve as conduits for the supply or withdrawal of money to or from the circulation, which in this way never overflows its banks.

With the development of the circulation of commodities, conditions arise under which the alienation of commodities becomes separated, by an interval of time, from the realisation of their prices. It will be sufficient to indicate the most simple of these conditions. One sort of article requires a longer, another a shorter time for its production. Again, the production of different commodities depends on different seasons of the year. One sort of commodity may be born on its own market place, another has to make a long journey to market. Commodity-owner No. 1 may therefore be ready to sell, before No. 2 is ready to buy. When the same transactions are continually repeated between the same persons, the conditions of sale are regulated in accordance with the conditions of production. On the other hand, the use of a given commodity, of a house, for instance, is sold for a definite period. Here, it is only at the end of the term that the buyer has actually received the use-value of the commodity. He therefore buys it before he pays for it. The vendor becomes a creditor, the purchaser becomes a debtor. Thus money also acquires a fresh function; it becomes the means of payment.

The character of creditor, or of debtor, results here from the simple circulation. The change in the form of that circulation stamps buyer and seller with this new die. \l first, therefore, these new parts are just as transient and alternating as those of seller and buyer, and are in turns played by the same actors. But the opposition is not nearly so pleasant. The same characters can, however, be assumed independently of the circulation of commodities. The class-struggles of the ancient world, for instance, took the form chiefly of a contest between debtors and creditors, which in Rome ended in the ruin of the plebeian debtors, who were displaced by slaves. In the Middle Ages the contest ended with the ruin of the feudal debtors, who lost their political power together with the economical basis on which it was established. Nevertheless, the money relation of debtor and creditor that existed at these two periods reflected only the deeper-lying antagonism between the general economical conditions of existence of the classes in question.

Let us return to the circulation of commodities. The appearance of commodities and money has ceased to be simultaneous. The money functions now, first as a measure of value in the determination of the price of the commodity sold; the price fixed by the contract measures the obligation of the debtor, of the sum of money that he has to pay at a fixed date. Secondly, it serves as an ideal means of purchase. Although existing only in the promise of the buyer to pay, it causes the commodity to change hands. It is not before the day fixed for payment that the means of payment actually steps into circulation, leaves the hand of the buyer for that of the seller. The means of payment enters the circulation, but only after the commodity has left it. The money is no longer the means that brings about the process. It 'only brings it to a close.

The seller turned his commodity into money, in order thereby to satisfy some want; the hoarder did the same in order to keep his commodity in its money-shape, and the debtor in order to be able to pay; if he do not pay, his goods will be sold by auction. Money is therefore now the end and aim of a sale, and that owing to a social necessity springing out of the process of circulation itself.

The buyer converts money back into commodities before he has turned commodities into money: in other words, he achieves the second metamorphosis of commodities before the first. The seller's commodity circulates, and realises its price, but only in the shape of a legal claim upon money. It is converted into a use-value before it has been converted into money. The completion of its first metamorphosis follows only at a later period.

The obligations falling due within a given period of circulation represent the sum of the prices of the commodities, the sale of which gave rise to those obligations. The quantity of money necessary to realise this sum, depends, in the first instance, on the rapidity of currency of the means of payment. This rapidity is conditioned by two circumstances: first the relations between debtors and creditors form a sort of chain, in such a way that A, when he receives money from his debtor B, straightway hands it over to C his creditor, and so on; the second circumstance is the length of the intervals between the different due-days of the obligations. The continuous chain of payments is essentially different from that interlacing of the series of purchases and sales which we considered on a former page. By the currency of the circulating medium, the connexion between buyers and sellers, is not merely expressed. This connexion is originated by, and exists in, the circulation alone. Contrariwise, the movement of the means of payment expresses a social relation that was already in existence before.

In proportion as payments are concentrated at one spot, special institutions and methods are developed for their liquidation. Such in the Middle Ages were the virements in Lyons. The debts due to A from B, to B from C, to C from A, .and so on, have only to be confronted with each other, in order to annul each other to a certain extent. There thus remains only a single balance to pay. The greater the amount of the payments concentrated, the less is this balance relatively to that amount, and the less is the mass of the means of payment in circulation.

If we now consider the sum total of the money current during a given period, we shall find that, given the rapidity of currency of the circulating medium and of the means of payment, it is equal to

the sum of the prices to be realised
plus the sum of the payments falling due
minus the payments that balance each other
minus the number of circuits in which the same piece of coin serves in turn as means of circulation and of payment.

The peasant, for instance, sells his wheat for £ 2,which thus serve as circulating medium. When due, lie pays his debt to the weaver, who supplied him with linen, with that sum. The same £ 2 now function as means of payment. The weaver, in turn, buys a Bible for cash; the sum functions once more as circulating medium, etc. Hence, tin- quantity of money current and the mass of commodities circulating during a given period, such as a day, no longer correspond. Money that represents commodities long withdrawn from circulation, continues to be current. Commodities circulate, whose equivalent in money will not appear on the scene till some future day. Moreover, the debts contracted each day, and the payments falling due on the same day, are quite different quantities.

Credit-money springs directly out of the function of money as a means of payment. Certificates of the debts owing for the purchased commodities circulate for the purpose of transferring those debts to others. On the other hand, to the same extent as the system of credit is extended, so is the function of money as a means of payment.

The development of money into a medium of payment makes it necessary to accumulate money against the dates fixed for the payment of the sums owing. While hoarding, as a distinct mode of acquiring riches, vanishes with the progress of civil society, the formation of reserves of the means of payment grows with that progress.

Notes

[1] "For two-fold is the use of every object . . . The, one is peculiar to the object as such, the other is not, as a sandal which may be worn, and is also exchangeable. Both are uses of the sandal, for even he who exchanges the sandal for the food he is in want of, makes use of the sandal as a sandal. But not in its natural way. For it has not been made for the sake of being exchanged." (Aristoteles, De Replica, liber 1. ch. 9.)

[2] The actual producer of gold or silver forms an exception. He exchanges his product directly for another commodity, without having first sold it.

[3] But if, on the one hand, it is a popular delusion to ascribe stagnation in production and circulation to insufficiency of the circulating medium, it by no means follows, on the other hand, that an actual paucity of the medium in consequence, e. g., of bungling legislative interference with the regulation of currency, may not give rise to such stagnation.

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