Chapter 3, Section 2b of Capital, Volume 1. A Critical Analysis of Capitalist Production, Volume 1 by Karl Marx. Translated from the 3rd German edition by Samuel Moore and Edward Aveling, and edited by Frederick Engels. Part 1. Commodities and Money. Chapter 3. Money or the Circulation of Commodities. Section 2. The Medium of Circulation. Section 3. The Currency of Money. There is a footnote on the word currency. Translators note, this word is here used in its original signification of the course or track pursued by money as it changes from hand to hand, a course which essentially differs from circulation. End footnote. The change of form C to M to C, by which the circulation of the material products of labor is brought about, requires 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. The movement of the commodity is therefore a circuit. On the other hand, the form of this movement precludes a circuit from being made by the money. 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 is still in the first phase of its metamorphosis, and 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 twenty 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 renewal or repetition of the process of circulation with a fresh commodity, which renewed 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 away from its starting point, of a course from the hands of one commodity owner into those of another. This course constitutes its currency, core de la monnaire. The currency of money is the constant and monotonous repetition of the same process. The commodity is always in the hands of the seller, the money as a means of purchase, always in the hands of the buyer, and money serves as a means of purchase by realizing the price of the commodity. This realization transfers the commodity from the seller to the buyer and removes the money from the hand of the buyer into those of the seller, where it again goes through the same process with another commodity. 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 is visible not only in the money's movement, but also in that of the commodity itself. In the second metamorphosis, 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 of money, thereupon the commodity, under its aspect as a useful object, falls out of circulation into consumption. Footnote, even when the commodity is sold over and over again, a phenomenon that at present has no existence for us, it falls, one definitely sold for the last time, out of the sphere of circulation into that of consumption, where it serves either as a means of subsistence or means of production. And footnote, 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 money. 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 affected not by means of the change of form of the commodities, but rather by the money acting as a medium of circulation, by an action that circulates commodities, to all appearance motionless in themselves, and transfers them from hands in which they are non-use values to hands in which they are use values, and that in a direction constantly opposed to the direction of the money. The latter is continually withdrawing commodities from circulation and stepping into their places, and in this way continually moving further and further from its starting point. Hence, although the movement of the money is merely the expression of the circulation of commodities, yet the contrary appears to be the actual fact, and the circulation of commodities seems to be the result of the movement of the money, footnote, quote, it money has no other motion than that imparted to it by the products, end quote, lotrasna, loco citato, page 885, end footnote. Again, money functions as a means of circulation, only because in it the values of commodities have independent reality. Hence, its movement, as the medium of circulation, is in fact merely the movement of commodities while changing their forms. This fact must therefore make itself plainly visible in the currency of money. Thus the linen, for instance, first of all changes its commodity form into its money form. The second term of its first metamorphosis, C to M, the money form, then becomes the first term of its final metamorphosis, M to C, its reconversion into the Bible, but each of these two changes of form is accomplished by an exchange between commodity and money by their reciprocal displacement. The same pieces of coin come into the cellar sand as the alienated form of the commodity, and leave it as the absolutely alienable form of the commodity. They are displaced twice. The first metamorphosis of the linen puts these coins into the weaver's pocket. The second draws them out of it. The two inverse changes undergone by the same commodity are reflected in the displacement twice repeated but in opposite directions of the same pieces of coin. If, on the contrary, only one phase of the metamorphosis is gone through, if there are only sales or only purchases, then a given piece of money changes its place only once. Its second change of place always expresses the second metamorphosis of the commodity, its reconversion from money. The frequent repetition of the displacement of the same coins reflects not only the series of metamorphoses that a single commodity has gone through, but also the inter-twenty of the innumerable metamorphoses in the world of commodities in general. It is a matter, of course, that all this is applicable to the simple circulation of commodities alone, the only form that we are now considering. 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 but in different localities, numerous one-sided metamorphoses of commodities, or in other words, numerous sales, and numerous purchases. The commodities are equated beforehand in imagination by their prices to definite quantities of money, and since in the form of circulation now under consideration, money and commodities always come bodily face to face, one at the positive pole of purchase, the other at the negative pole of sale, it is clear that the amount of the means of circulation required is determined beforehand by the sum of the prices of all these commodities. As a matter of fact, the money in reality represents the quantity or sum of gold ideally expressed beforehand by the sum of the prices of the commodities. The equality of these two sums is therefore self-evident. We know, however, that the values of commodities remaining constant, their prices vary with the value of gold, the material of money, rising in proportion as it falls, and falling in proportion as it rises. Now if, inconsequent of such a rise or fall in the value of gold, the sum of the prices of commodities fall or rise, the quantity of money and currency must fall or rise to the same extent. The change in the quantity of the circulating medium is, in this case, it is true, caused by the money itself, yet not in virtue of its function as a medium of circulation, but of its function as a measure of value. First, the price of commodities varies inversely as the value of the money, and then the quantity of the medium of circulation varies directly as the price of commodities. Exactly the same thing would happen if, for instance, instead of the value of gold falling, gold were replaced by silver as the measure of value, or if instead of the value of silver rising, gold were to thrust silver out from being the measure of value. In the one case, more silver would be current than gold was before. In the other case, less gold would be current than silver was before. In each case, the value of the material of money, i.e., the value of the commodity that serves as the measure of value, would have undergone a change, and therefore so too with the prices of commodities which express their values in money, and so too with the quantity of money current whose function it is to realize those prices. We have already seen that the sphere of circulation has an opening through which gold, or the material of money generally, enters into it as a commodity with a given value. Hence, when money enters on its function as a measure of value when it expresses prices, its value is already determined. If now its value fall, this fact is first evidenced by a change in the prices of those commodities that are directly bartered for the precious metals at the sources of their production. The greater part of all other commodities, especially in the imperfectly developed stages of civil society, will continue for a long time to be estimated by the former antiquated and illusory value of the measure of value. Nevertheless, one commodity infects another through their common value relation so that their prices, expressed in gold or in silver, gradually settle down into the proportion determined by their comparative values, until finally the values of all commodities are estimated in terms of the new value of the metal that constitutes money. This process is accompanied by the continued increase in the quantity of the precious metals, an increase caused by their streaming in to replace the articles directly bartered for them at their sources of production. In proportion therefore, as commodities in general acquire their true prices, in proportion as their values become estimated according to the fallen value of the precious metal, in the same proportion the quantity of that metal necessary for realizing those new prices is provided beforehand. 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 the means of circulation. In the following, the value of gold will be taken as a given, as in fact it is at the moment when we estimate the price of a commodity. On this supposition then, the quantity of the mediums circulation is determined by the sum of the prices that have to be realized. 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 two pounds sterling, one hundred quarters will cost two hundred pounds sterling, two hundred quarters four hundred pounds sterling, and so on that consequently the quantity of money that changes place with the wheat, one 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. To produce this effect, it is by no means requisite that the prices of all commodities should rise or fall simultaneously. A rise or a fall in the prices of a number of leading articles is sufficient in the one case to increase, in the other to diminish, the sum of the prices of all commodities and therefore to put more or less money in circulation. 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. Suppose the following articles are to be sold or partially metamorphosed simultaneously in different localities, say one quarter of wheat, two hundred yards of linen, one Bible, and four gallons of brandy. If the price of each article be two pound sterling and the sum of the prices to be realized be consequently eight pound sterling, it follows that eight pound sterling in money must go into circulation. If, on the other hand, these same articles are links in the following chain of metamorphoses, one quarter of wheat, two two pound sterling, two twenty yards of linen, two two pound sterling, two one Bible, two two pound sterling, two four gallons of brandy, two two pound sterling, a chain that is already well known to us. In that case, the two pound sterling caused the different commodities to circulate one after the other, and after realizing their prices successively, and therefore the sum of those prices, eight pound sterling, they come to rest at last in the pocket of the distiller. The two pound sterling thus make four moves. This repeated change of place of the same pieces of money correspond to the double change in form of the commodities, to their motion in opposite directions through stages of circulation, and to the interlacing of the metamorphoses of different commodities. Footnote. It is products which set it money in motion and make it circulate. The velocity of its, money's, motion supplements its quantity. When necessary, it does nothing but slide from hand to hand, without stopping for a moment. End quote. These antithetic and complementary phases, of which the process of metamorphoses consists, are gone through not simultaneously, but successively. Time is therefore required for the completion of the series. Hence the velocity of the currency of money is measured by the number of moves made by a given piece of money in a given time. Suppose the circulation of the four articles takes a day. The sum of the prices to be realized in the day is eight pound sterling. The number of moves of the two pieces of money is four, and the quantity of money circulating is two pound sterling. Hence, for a given interval of time during the process of circulation, we have the following relation. 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 the coins of the same denomination. This law holds generally. The total circulation of commodities in a given country during a given period is made up on the one hand of numerous isolated and simultaneous partial metamorphoses, sales which are at the same time purchases, in which each coin changes its place only once or makes only one move. On the other hand, of numerous distinct series of metamorphoses partly running side by side, and partly coalescing with each other, in each of which series each coin makes a number of moves, the number being greater or less according to circumstances. The total number of moves made by all the circulating coins of one denomination being given, we can arrive at the average number of moves made by a single coin of that denomination or at the average velocity of the currency of money. The quantity of money thrown into the circulation at the beginning of each day is of course determined by the sum of the prices of all the commodities circulating simultaneously side by side. But once in circulation coins are, so to say, made responsible for one another. If the one increases its velocity, the other retards its own, or altogether falls out of circulation. For the circulation can absorb only such a quantity of gold as when multiplied by the mean number of moves made by one single coin or element is equal to the sum of the prices to be realized. 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 reflex of the circulation of commodities or of the antithetical metamorphoses they undergo. So too, the velocity of that currency reflects the rapidity with which commodities change their forms, the continued interlacing of one series of metamorphoses with another, the hurried social interchange of matter, the rapid disappearance of commodities from the sphere of circulation, and the equally rapid substitutions of fresh ones in their places. Hence, in the velocity of the currency we have the fluent unity of the antithetical and complementary phases, the unity of the conversion of the useful aspect of commodities into their value aspect, and their reconversion from the latter aspect to the former or the unity of the two processes of sale and purchase. On the other hand, the retardation of the currency reflects the separation of these two processes into isolated antithetical phases, reflects the stagnation in the change of form and therefore in the social interchange of matter. The circulation itself, of course, gives no clue to the origin of this stagnation. It merely puts in evidence the phenomenon itself. 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. Footnote Quote Money being the common measure of buying and selling, everybody who have anything to sell and cannot procure Chapman for it is presently apt to think that want of money in the kingdom or country is the cause why his goods do not go off, and so want of money is the common cry, which is a great mistake. What do these people want who cry out for money? The farmer complains he thinks that were more money in the country he should have a price for his goods. Then it seems money is not his want, but a price for his corn and cattle, which he would sell, but cannot. Why cannot he get a price? One, either there is too much corn and cattle in the country, so that those who come to market have need of selling, as he have, and few of buying. Or two, there once the usual vent abroad by transportation. Or three, the consumption fails, as when men, by reason of poverty, do not spend so much in their houses as formerly they did. Wherefore it is not the increase of specific money, which would at all advance the farmer's good, but the removal of any of these three causes, which do truly keep down the market. The merchant and shopkeeper want money in the same manner, that is, they want a vent for the goods they deal in by reason that the markets fail. A nation never thrives better than when riches are tossed from hand to hand. Sir Dudley North discourses upon trade London, 1691, pages 11 to 15. Heron-Chfont's fanciful notions amount merely to this that the antagonism, which has its origin in the nature of commodities, and is reproduced in their circulation, can be removed by increasing the circulating medium. 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. the bungling legislative interference with the regulation of currency, may not give rise to such stagnation. And footnote, 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 with which the antithetical phases of the metamorphosis follow one another. On this rapidity depends what proportion of the sum of the prices can, on the average, be realized by each single coin. 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. Hence, the sum of the prices to be realized, and consequently the quantity of the circulating medium, depending on that sum, will vary with the numerous variations of these three factors in combination. Of these variations we shall consider those alone that have been the most important in the history of prices. While prices remain constant, the quantity of the circulating medium may increase owing to the number of circulating commodities increasing, or to the velocity of currency decreasing, or to a combination of the two. On the other hand, the quantity of the circulating medium may decrease with a decreasing number of commodities, or with an increasing rapidity of their circulation. With a general rise in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities in circulation decrease proportionally to the increase in their prices, or provided the velocity of currency increase at the same rate as prices rise, the number of commodities in circulation remaining constant. The quantity of the circulating medium may decrease owing to the number of commodities decreasing more rapidly, or to the velocity of currency rise. With a general fall in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities increase proportionally to their fallen prices, or provided the velocity of currency decrease in the same proportion. The quantity of the circulating medium will increase, provided the number of commodities increase quicker, or the rapidity of circulation decrease quicker than the prices fall. The variations of the different factors may mutually compensate each other, so that notwithstanding their continued instability, the sum of the prices to be realized and the quantity of money in circulation remain constant. 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, a part of course from excessive perturbations periodically arising from industrial and commercial crises, or less frequently, from fluctuations in the value of money. The law that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and the average increasing more rapidly than the prices velocity of currency may also be stated as follows. Given the sum of the values of commodities, and the average rapidity of their metamorphosis, the quantity of precious metal current as money depends on the value of that precious metal. There is a certain measure and proportion of money requisite to drive the trade of a nation, more or less than which would prejudice the same. Just as there is a certain proportion of farthings necessary in a small retail trade to change silver money, enter even such reckonings as cannot be adjusted with the smallest silver pieces. Now as the proportion of the number of farthings requisite in commerce is to be taken from the number of people, the frequency of their exchanges, as also and principally from the value of the smallest silver pieces of money, so in like manner the proportion of money gold and silver species requisite in our trade is to be likewise taken from the frequency of commutations, and from the bigness of the payments." William Petty, a Treatise of Taxes and Contributions, London, 1667, page 17. The theory of Hume was defended against the attacks of Jay Stewart and others by A. Young in his political arithmetic London, 1774, in which work there is a special chapter entitled, Prices Depend on Quantity of Money, at page 112, I have stated in Sir Critique, etc., page 149, he, Adam Smith, passes over without remark the question as to the quantity of coins in circulation, and treats money quite wrongly as a mere commodity. This statement applies only in so far as Adam Smith, ex officio, treats of money. Now and then, however, as in his criticism of the earlier systems of political economy, he takes the right view. Quote, The quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it. The value of the goods evenly bought and sold in any country requires a certain quantity of money to circulate and distribute them to their proper consumers, and can give employment to no more. The channel of circulation necessarily draws to itself a sum sufficient to fill it, and never admits any more. End quote. Wealth of Nations, Book 4, Chapter 1 In like manner, ex officio, he opens his work within apotheosis on the division of labour. Afterwards, in the last book which treats of the sources of public revenue, he occasionally repeats the denunciations of the division of labour made by his teacher, A. Ferguson. End footnote. The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in the 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 adequate part of the medley of commodities is exchanged for an adequate part of the heap of precious metals. There are two footnotes. First footnote. That the price of each single kind of commodity forms a span of the sum of the prices of all the commodities in circulation is a self-evident proposition. But how use-values, which are incommensurable with regard to each other, are to be exchanged, and mass for a total sum of gold or silver in a country is quite incomprehensible. If we start from the notion that all commodities together form one single commodity, of which each is but an adequate part, we get the following beautiful result. The total commodity equals x-carat weight of gold. Commodity A equals an adequate part of the total commodity equals the same adequate part of x-carat weight of gold. This is stated in all seriousness by Montesquieu. If one compares the amount of gold and silver in the world with the sum of the commodities available, it is certain that each product or commodity, taken in isolation, could be compared with a certain portion of the total amount of money. Let us suppose that there is only one product, or commodity, in the world, or only one that can be purchased, and that it can be divided in the same way as money. A certain part of this commodity would then correspond to a part of the total amount of money. Half the total of the one would correspond to half the total of the other, etc. The determination of the prices of things always depend fundamentally on the relation between the total amount of things and the total amount of their monetary symbols. As to the further development of this theory by Ricardo and his disciples, James Mill, Lord Overstone, and others, see Zur critique, etc. pages 140 to 146, and page 150. John Stuart Mill, with his usual eclectic logic, understands how to hold at the same time the view of his father, James Mill, and the opposite view. On a comparison of the text of his compendium, principles of political economy, with his preface to the first edition, in which preface he announces himself as the Adam Smith of his day, we do not know whether to admire more the simplicity of the man, or that of the public, who took him in good faith for the Adam Smith he announced himself to be, although he bears about as much resemblance to Adam Smith as, say, General Williams of Cars to the Duke of Wellington. The original researchers of Mr. J. S. Mill, which are neither extensive nor profound in the domain of political economy, will be found mustered in rank and file in his little work some unsettled questions of political economy, which appeared in 1844. Locke asserts point blank the connection between the absence of value in gold and silver, and the determination of their values by quantity alone. Quote, mankind having consented to put an imaginary value upon gold and silver, the intrinsic value regarded in these metals is nothing but the quantity. End quote. Some considerations, etc. 1691, works edition 1777, volume 2, page 15. End footnote. Second footnote. It lies, of course, entirely beyond my purpose to take into consideration such details as the seniorage on minting. I will, however, cite for the benefit of the romantic sycophant Adam Muller, who admires the generous liberality with which the English government coins gratuitously, the following opinion of Sir Dudley North. Quote, Silver and gold, like other commodities, have their ebbing and flowings. Upon the arrival of quantities from Spain, it is carried into the tower and coined. Not long after, there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt it down again, there is no loss in it, for the coining costs the owner nothing. Thus the nation has been abused and made to pay for the twisting of straw for asses to eat. If the merchant were made to pay the price of the coinage, he would not have sent his silver to the tower without consideration, and coined money would always keep a value above uncoined silver. End quote. North, local citato, page 18. North was himself one of the foremost merchants in the reign of Charles II. End footnote. End of chapter 3, section 2b, of capital, volume 1. Chapter 3, section 2 of capital, volume 1. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. Capital. A critical analysis of capitalist production. Volume 1 by Karl Marx. Translated from the 3rd German edition by Samuel Moore and Edward Eveling. And edited by Frederick Engels. Part 1. Commodities and Money. Chapter 3. Money or the circulation of commodities. Section 2. The medium of circulation. C. Coins and symbols of value. 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 or money names of commodities, must confront those commodities within the circulation in the shape of coins or pieces of gold over given denomination. Coining, like the establishment of a standard of prices, is the business of the state. The different national uniforms worn at home by gold and silver as coins, and doffed again in the market of the world, indicate the separation between the internal or national spheres of the circulation of commodities and their universal sphere. 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. Footnote 34. It lies, of course, entirely beyond my purpose to take into consideration such details as the sign you're edge on minting. I will, however, cite for the benefit of the Romantic Psychophant Adam Muller, who admires the, quotes, generous liberality, with which the English government coins gratuitously, the following opinion of Sir Dudley North. Quote, Silver and gold, like other commodities, have their ebbing and flowings. Upon the arrival of quantities from Spain, it is carried into the tower uncoined. Not long after there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt it down again. There's no loss in it, for the coining costs the owner nothing. Thus the nation has been abused and made to pay for the twisting of straw for asses to eat. If the merchant were made to pay the price of the coinage, he would not have sent his silver to the tower without consideration, and coined money would always keep a value above uncoined silver. Close quotes. North Lococetato Page 18 North was himself one of the foremost merchants in the reign of Charles II. End of footnote But no sooner does the coin leave the mint, than it immediately finds itself on the high road to the melting pot. During their currency, coins wear away, some more, others less. Name and substance, nominal weight and real weight, begin their process of separation. Coins of the same denomination become different in value, because they are different in weight. The weight of gold fixed upon as the standard of prices deviates from the weight that serves as the circulating medium, and the latter thereby ceases any longer to be the real equivalent of the commodities whose prices it realizes. The history of coinage during the Middle Ages and down into the 18th century records the ever renewed confusion arising from this cause. The natural tendency of circulation 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, is recognized by modern legislation, which fixes the loss of weight sufficient to demonetize a gold coin, or to make it no longer legal tender. The fact that the currency of coins itself affects the separation between their nominal and their real weight, creating a distinction between them as mere pieces of metal on the one hand and as coins with a definite function on the other. This fact implies the latent possibility of replacing metallic coins by tokens of some other material, by symbols serving the same purposes as coins. The practical difficulties in the way of coining extremely minute quantities of gold or silver are 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 compulsively received as payment instead of gold. The particular tracks pursued by the different species of coin in currency run naturally into each other. The tokens keep company with gold to pay fractional parts of the smallest gold coin. Gold is, on the one hand, constantly pouring into retail circulation and on the other hand is as constantly being thrown out again by being changed into tokens, footnote 35. If silver never exceeds what is wanted for the smaller payments, it cannot be collected in sufficient quantities for the larger payments. The use of gold in the main payments necessarily implies also its use in the retail trade. Those who have gold coin offering them for small purchases and receiving with the commodity purchased a balance of silver in return, by which means the surplus of silver that would otherwise encumber the retail dealer is drawn off and dispersed into the general circulation. But if there is as much silver as will transact the small payments independent of gold, the retail trader must then receive silver for small purchases and it must of necessity accumulate in his hands. David Buchanan, Inquiry into the Taxation and Commercial Policy of Great Britain, Edinburgh 1844 pages 248 and 249. End of footnote 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. In fact, snickle a premiering park he could. We allude here only to inconvertible 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, which from our standpoint of the simple circulation of commodities are as yet totally unknown to us. But we may affirm this much. The just as true paper money takes its rise in the function of money as the circulating medium. So money based upon credit takes root spontaneously in the function of money as the means of payment. Footnote 36 The Banderen Wan Mao Yin, the Chinese chancel of the Exchequer, took it into his head one day to lay before the Son of Heaven a proposal that secretly aimed at converting the Asenia of the Empire into convertible banknotes. The Asenia Committee in its report of 1854 gives him a severe snubbing, whether he also received the traditional drubbing with bamboos is not stated. The concluding part of the report is as follows. Quote, The committee has carefully examined his proposal and finds that it is entirely in favour of the merchants and that no advantage will result to the crown, close quotes. Arbiter der Kaiserslich Russischen gesamt schaft zu pinking über China. Als dem Russischen von Dr. K. Arbel und F. A. Mecklenburg, Erster Bandt, Berlin, 1858, page 47 and following. In his evidence before the Committee of the House of Lords on the Bank acts, a Governor of the Bank of England says with regard to the abrasion of gold coins during currency, quotes, Every year a fresh class of sovereigns becomes too light. The class which one year passes with full weight loses enough by wear and tear to draw the scales next year against it. Close quotes. House of Lords Committee, 1848, note 429. End of footnote. The state puts into circulation bits of paper on which their various denominations say £1, £5 etc. 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 an amount, the gold or silver as the case may be, 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 the mass of the circulating medium in a given country never sinks below a certain minimum easily ascertained by actual experience. The fact that this minimum mass continually undergoes changes in its constituent parts or 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 today filled with paper money to the full extent to their capacity for absorbing money, they might tomorrow be overflowing in consequence of a fluctuation in the circulation of commodities. There would no longer be any standard. If the paper money exceeds 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, one pound would be the money name not of one quarter of an ounce, but of one eighth of an ounce of gold. The effect would be the same as if an alteration had taken place in the function of gold as the standard of prices. Those values that were previously expressed by the price of one pound would now be expressed by the price of two pounds. Paper money is a token representing gold or money. The relation between it and the values of commodities is this, that the latter are dearly expressed in the same quantities of gold that are symbolically represented by the paper. Only insofar as paper money represents gold, which like all other commodities has value, is it a symbol of value, footnote 37. The following passage from Fullerton shows the want of clearness are the part of even the best writers on money, in their comprehension of its various functions. Quotes, that as far as concerns are domestic exchanges, all the monetary functions which are usually performed by golden silver coins may be performed as effectually by a circulation of incovertible notes, paying no value but that factitious and conventional value they derive from the law, is a fact which admits I conceive of no denial. Value of this description may be made to answer all the purposes of intrinsic value and supersede even the necessity for a standard provided only the quantity of issues be kept under due limitation. Close quotes. Fullerton, regulation of currencies, London 1845 page 21. Because the commodity that serves as money is capable of being replaced in circulation by mere symbols of value, therefore its functions as a measure of value and a standard of prices are declared to be superfluous. End of footnote. Finally, someone may ask why gold is capable of being replaced by tokens that have no value. But as we have already seen, it is capable of being so replaced, only in so far as it functions exclusively as coin or the circulating medium and as nothing else. Now money has other functions besides this one, and the isolated function of serving as the mere circulating medium is not necessarily the only one attached to gold coin, although this is the case with those abraded coins that continue to circulate. Each piece of money is a mere coin or means of circulation, only so long as it actually circulates. But this is just the case with that minimum mass of gold, which is capable of being replaced by paper money. That mass remains constantly within the sphere of circulation, continually functions as a circulating medium and exists exclusively for that purpose. Its movement therefore represents nothing but the continued alternation of the inverse phases of the metamorphosis C to M to C, phases in which commodities confront their value forms only to disappear again immediately. The independent existence of the exchange value of a commodity is here a transient apparition, by means of which the commodity is immediately replaced by another commodity. Hence in this process, which continually makes money pass from hand to hand, the mere symbolical existence of money suffices. Its functional existence absorbs, so to say, its material existence. Being a transient and objective reflex of the prices of commodities, it serves only as a symbol of itself and is therefore capable of being replaced by a token. Footnote 38 From the fact that gold and silver so far as they are coins or exclusively serve as the medium of circulation become mere tokens of themselves, Nicholas Barbon deduces the right of governments, quote, to raise money, close quotes, that is to give to the weight of silver that is called a shilling, the name of a greater weight such as a crown, and so to pay credit to shillings instead of crowns. Quotes Money does wear and grow lighter by often telling over. It is the denomination and currency of the money that men regard in bargaining, not the quantity of silver. It is the public authority upon the metal that makes it money, close quotes. End Barbon Lococetato pages 29, 30 and 25. End of footnote One thing is, however, requisite. This token must have an objective social validity of its own, and this the paper symbol acquires by its forced currency. This compulsory action of the state can take effect only within that inner sphere of circulation, which is coterminous with the territories of the community. But it is also only within that sphere that money completely responds to its function of being the circulating medium, or becomes coin. End of Part 1, Chapter 3, Section 2c Chapter 3, Section 3, Part A of Capital, Volume 1. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. Capital, a critical analysis of capitalist production, Volume 1, by Karl Marx. Translated from the third German edition by Samuel Moore and Edward Abbelling and edited by Friedrich Engels. Part 1, Commodities and Money, Chapter 3, Money or the Circulation of Commodities, Section 3, Money, Introduction and Hoarding The commodity that functions as a measure of value and either in its own person or by a representative as the medium of circulation is money. Gold or silver is therefore money. It functions as money, on the one hand, when it has to be present in its own golden person. It is then the money commodity, neither merely ideal as in its function of a measure of value, nor capable of being represented as in its function of circulating medium. On the other hand, it also functions as money, when by virtue of its function, whether that function be performed in person or by a representative, it congeals into the sole form of value, the only adequate form of existence of exchange value in opposition to use value represented by all other commodities. Part A, Hoarding The continual movement in circuits of the two antithetical metamorphosis of commodities, or the never ceasing alteration of sale and purchase, is reflected in the restless currency of money or in the function that money performs of a perpetual mobile of circulation. But so soon as the series of metamorphosis is interrupted, so soon as sales are not supplemented by subsequent purchases, money ceases to be mobilized. It is transformed, as Boise Gilbert says, from movable into immovable, from movable into immovable, from coin into money. 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. This product is the transformed shape of the commodity or its gold chrysalis. Commodities are thus not sold for the purpose of buying others, but in order to replace their commodity form by their money form. From being the mere means of affecting the circulation of commodities, this change of form becomes the end and aim. The changed form of the commodity is thus prevented from functioning as its unconditionally alienable form or as its merely transient money form. The money becomes petrified into a hoard and the seller becomes a hoarder of money. Footnote. Monetary wealth is nothing but wealth in products transformed into money. Mercier de la revière, first si. Une valeur, une production ne fait que changer de forme. A value in the form of products which has merely changed its form. First d, page 486, end note. In the early stages of the circulation of commodities, it is the surplus use value alone that are converted into money. Gold and silver thus become of themselves social expressions for superfluity or wealth. This naive form of hoarding becomes perpetual in those communities in which the traditional mode of production is carried on for the supply of a fixed and limited circle of home wants. It is thus with the people of Asia and in particularly of the East Indies. Vonderlandt, who fancies that the prices of commodities in a country are determined by the quantity of gold and silver to be found in it, asks himself why Indian commodities are so cheap. Answer, because the Hindus bury their money. From 1602 to 1734, he remarks, they buried 150 million pounds sterling of silver which originally came from America to Europe. In the ten years from 1865 to 1866, England exported to India and China 120 million pounds in silver which had been received in exchange for Australian gold. Most of the silver exported to China makes its way to India. Footnote. Tis by this practice they keep all their goods and manufacturers at such low rates. Vonderlandt first see page 95, 96, and note. As the production of commodities further develops, every producer of commodities is compelled to make sure of the nexus rarum 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. This operation conducted on a general scale appears to imply a contradiction, but the precious metals at the sources of their production are directly exchanged for other commodities. And here we have sales by the owners of commodities without purchases by the owners of gold or silver, and subsequent sales by other producers unfollowed by purchases merely bring about the distribution of the newly produced precious metals among all the owners of commodities. In this way all along the line of exchange, hordes 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 that absolutely social form of wealth ever ready for use. Gold is a wonderful thing. Whoever possesses it is Lord of all he wants. By means of gold one can even get souls into paradise. Columbus in his letter from Jamaica, 1503. Since gold does not disclose what has been transformed into it, everything commodity or not is convertible into gold. Everything becomes saleable and viable. The circulation becomes the great social retort into which everything is thrown to come out again as gold crystal. Not even on the bones of saints, and still less are more delicate race sacrosancta extra commercial hominem able to withstand this alchemy. Just as every qualitative difference between commodities is extinguished in money, so money on its side like the radical leveler that it is, does away with all distinctions. But money itself is a commodity, an external object, capable of becoming the private property of any individual. Thus social power becomes the private power of private persons. The ancients therefore denounced money as subversive of the economic and moral order of things. Modern society, which soon after its birth, pulled Plutus by the hair of his head from the bowels of the earth, greets gold as its holy grail, as the glittering incarnation of the very principle of its own life. Money is a pledge. John Bellar's Essays about the Poor, Manufacturers, Trade, Plendations, and Immorality. London, 1699, page 13. A purchase, in the categorical sense, implies that gold and silver are already the converted form of commodities, or the product of a sale. Endnote. Footnote. Henry III, most Christian king of France, robbed cloisters of their relics and turned them into money. It is well known what part the disboiling of the Delphic Temple, by the Phocians, played in the history of Greece. Temples with ancients served as the dwellings of the gods of commodities. They were sacred banks. With the Phoenicians, a trading people par excellence, money was the transmuted shape of everything. It was therefore quite in order that the Virgins, who at the feast of the goddess of love, gave themselves up to strangers, should offer to the goddess the piece of money they received. Endnote. Footnote. Gold, yellow, glittering, precious gold. Thus much of this will make black-white, foul, fair, wrong-right, base, noble, old, young, cowered, valiant. What this, you gods, why this will lug your priests and servants from your sides, pluck stout men's pillows from below their heads. This yellow slave will knit and break religions, bless the accursed, make the whore leprosy adored, place thieves and give them title, knee and approbation, with senators on the bench. This is it. That makes the Wappened Widow wet again, come damned earth, the common whore of mankind. Shakespeare. Timon of Athens. Endnote. Note. Sophocles Antigone. Endnote. Note. The desire of avarice to draw Pluto himself out of the bowels of the earth. The Dipnosophists. Six. Twenty-three. Atheneus. Endnote.  But the value of a commodity measures the degree of its attraction for all other elements of material wealth, and therefore measures the social wealth of its owner. 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. It is true that the value of money varies, at one time in consequence of a variation in its own value at another, in consequence of change in value of commodities. But this, on the one hand, does not prevent two hundred ounces of gold from still containing more value than one hundred ounces, nor, on the other hand, does it hinder the actual metallic form of this article from continuing to be the universal equivalent form of all other commodities. And the immediate social incarnation of all human labor. The desire after hoarding is, in its very nature, unsatiable. In its qualitative aspect, or formerly considered, money has no bounds to its efficacy, i.e., it is the universal representative of material wealth, because it is directly convertible into any other commodity. But at the same time, every actual sum of money is limited in amount, and therefore, as a means of purchasing, has only a limited efficacy. This antagonism between the quantitative limits of money and its qualitative boundlessness continually acts as a spur to the hoarder in his sisyphus-like labor of accumulating. It is with him, as it is with a conqueror, who sees in every new country annexed only a new boundary. In order that gold may be held as money, and made to form a hoard, 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 flesh to his golden 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 is 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 by little the sum of his political economy. Footnote. These are the pivots around which all the measures of political economy turn, the maximum possible increase in the number of sellers of each commodity, and the maximum possible decrease in the number of buyers. Very, page 52. Endnote. 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. Soyons riche ou Paris sont richeux. Diderot. 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 in the economy of metallic circulation. Its first function arises out of the conditions to which the currency of gold and silver coins is subject. 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 to act again as more or less stagnant money. 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. There is required for carrying on the trade of the nation a determinant sum of specific money which varies, and is sometimes more, sometimes less, as the circumstances we are in require. This ebbing and flowing of money supplies and accommodates itself without any aid of politicians. The buckets work alternately. When money is scarce, bullion is coined. When bullion is scarce, money is melted." Sir D. North, 1st C. Postscript, Page 3 John Stuart Mill, who for a long time was an official of the East India Company, confirms the fact that in India silver ornaments still continue to perform directly the functions of a hoard. The silver ornaments are brought out and coined when there is a high rate of interest, and go back again when the rate of interest falls. Mill's Evidence on Reports on Bank Acts, 1857, Page 2084 According to a parliamentary document of 1864 on the gold and silver import and export of India, the import of gold and silver in 1863 exceeded the export by 19,367,764 pounds sterling. During the eight years immediately preceding 1864, the excess of imports over exports of the precious metals amounted to 109,652,917 pounds sterling. During this century, far more than 200 million pounds has been coined in India. End of Chapter 3, Section 3, Part A Chapter 3, Section 3, Part B of Capital, Volume 1 This is the LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org Capital, A Critical Analysis of Capitalist Production, Volume 1 by Karl Marx Translated from the 3rd German edition by Samuel Moore and Edward Aveling and edited by Friedrich Engels Part 1 Commodities and Money Chapter 3 Money or the Circulation of Commodities Section 3 Money Part B Means of Payment In the simple form of the circulation of commodities hitherto considered, we found a given value always presented to us in a double shape, as a commodity at one pole, as money at the opposite pole. The owners of commodities came, therefore, into contact as the respective representatives of what were already equivalents. But with the development of circulation, conditions arise under which the alienation of commodities becomes separated by an interval of time from the realization 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 marketplace. Another has to make a long journey to market. Commodity owner number one may therefore be ready to sell before number two 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 in common parlance, let, 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 sells an existing commodity, the purchaser buys as the mere representative of money, or rather a future money. The vendor becomes a creditor, the purchaser becomes a debtor. Since the metamorphosis of commodities or the development of their value form appears here under a new aspect, 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. At 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 and is far more capable of crystallization. The same characters can, however, be assumed independently of the circulation of commodities. The class struggles of the ancient world took the form chiefly of a contest between debtors and creditors, which in Rome ended in the ruin of the Plebeian debtors. They 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 economic 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 economic conditions of existence of the classes in question. Footnote. The following shows the debtor and creditor relations existing between English traders at the beginning of the eighteenth century. Such a spirit of crudity reigns here in England among the men of trade that is not to be met with in any other society of men, nor in any other kingdom of the world. An essay on credit and the bankrupt act. London. Endnote. Let us return to the circulation of commodities. The appearance of the two equivalents, commodities and money, at the two poles of the process of sale, 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, or 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 fits for payment that the means of payment actually steps into circulation, leaves the hand of the buyer for that of the seller. The circulation medium was transformed into a hoard because the process stopped short after the first phase, because the converted shape of the commodity, vis, the money, was withdrawn from circulation. 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, by stepping in as the absolute form of existence of exchange value, or as the universal commodity. 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 the sheriff. The value form of commodities, 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 realizes 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. Footnote. It will be seen from the following quotation from my book, which appeared in 1859, why I take no notice in the text of an opposite form. Contrary wise, in the process in money, commodity, the money can be alienated as a real means of purchase, and in that way the price of the commodity can be realized before the use value of the money is realized and the commodity is actually delivered. This occurs constantly under everyday form of prepayments, and it is under this form that the English government purchases opium from the riyats of India. In these cases, however, the money always acts as a means of purchase. Of course, capital also is advanced in the shape of money. This point of view, however, does not fall within the horizon of symbol circulation. Zur critic page 119, 120. Endnote. The obligations falling due within a given period represent the sum of the prices of the commodities, the sale of which gave rise to these obligations. The quantity of gold necessary to realize this sum depends in the first instance on the rapidity of currency of the means of payment. The quantity 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 received 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 dates of the obligations. The continuous chain of payments, or retarded first metamorphosis, is essentially different from that interlacing of the series of metamorphoses which we considered on a former page. By the currency of the circulating medium, the connection between buyers and sellers is not merely expressed. This connection is originated by and exists in the circulation alone. Contrary wise, the movement of the means of payment expresses a social relation that was in existence long before. The fact that a number of sales take place simultaneously and side by side limits the extent to which coin can be replaced by the rapidity of currency. On the other hand, this fact is a new lever in economizing the means of payment. 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 vehemence at Lyon. The debts due to A from B, from B to 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, like positive and negative quantities. There thus remains only a single balance to pay. The greater the amounts 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. The function of money as the means of payment implies a contradiction without a terminus medius. Insofar as the payments balance one another, money functions only ideally as money of account, as a measure of value. Insofar as actual payments have to be made, money does not serve as a circulating medium, as a mere transient agent in the interchange of products, but as the individual incarnation of social labor, as the independent form of existence of exchange value, as the universal commodity. This contradiction comes to a head in those phases of industrial and commercial crisis, which are known as monetary crises. Such a crisis occurs only where the ever-lengthening chain of payments and an artificial system of settling them has been fully developed. Whenever there is a general and extensive disturbance of this mechanism, no matter what its cause, money becomes suddenly and immediately transformed, from its merely ideal shape of money of account into hard cash. Profane commodities can no longer replace it. The use value of commodities become valueless, and their value vanishes in the presence of his own independent form. On the eve of the crisis, the bourgeoisie, with the self-sufficiency that springs from intoxicating prosperity, declares money to be a vain imagination. Commodities alone are money, but now the cry is everywhere. Money alone is a commodity. As the heart pants after fresh water, so pants his soul after money, the only wealth. In a crisis, the antithesis between commodities and their value form, money, becomes heightened into an absolute contradiction. Hence in such events the form under which money appears is of no importance. The money famine continues, whether payments have to be made in gold or in credit money, such as banknotes. Footnote The monetary crisis referred to in the text, being a phase of every crisis, must be clearly distinguished from the particular form of crisis, which is also called a monetary crisis, but which may be produced by itself as an independent phenomenon in such a way as to react only indirectly on industry and commerce. The pivot of these crises is to be found in money capital, and their sphere of direct action is therefore the sphere of that capital, vis, banking, the stock exchange, and finance, and note. Note The sudden reversion from a system of credit to a system of hard cash heaps the eretical fright on top of the practical panic, and the dealers by whose agency circulation is affected, shudder before the imprenetrable mystery in which their own economic relations are involved. Karl Marx I C. Page 126 The poor stand still because the rich have no money to employ them, though they have the same land and hands to provide victuals and clothes as ever they had, which is the true riches of a nation and not the money. John Bellers Proposals for Raising a College of Industry London 1696 Page 3 Endnote Footnote The following shows how such times are exploited by the Amis du Commerce. On one occasion, 1839, an old grasping banker in the city in his private room raised the lid of the desk he sat over and displayed to friend rolls of banknotes, saying with intense glee there were six hundred thousand pounds of them, they were held to make money tight, and would all be let out after three o'clock on the same day. The Theory of Exchanges The Bank Charter Act of 1844 London 1864 Page 81 The Observer, a semi-official government organ, contained the following paragraph on the 24th of April 1864. Some very curious rumors are current of the means which have been resorted to in order to create a scarcity of banknotes. Questionable as it would seem, to suppose that any trick of the kind would be adopted, the report has been so universal that it really deserves mention. Endnote If we now consider the total sum 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 realized, plus the sum of the payments falling due, minus the payments that balance each other, minus finally the number of circuits in which the same piece of coin serves in turn as a means of circulation and payment. Hence, even when prices, rapidity of currency, and the extent of the economy and payments are given, the 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 incommensurable quantities. Footnote The amount of purchases or contracts entered upon during the course of any given day will not affect the quantity of money afloat on that particular day, but in the vast majority of cases will resolve themselves into multifarious drafts upon the quantity of money which may be afloat at subsequent dates more or less distant. The bills granted or credits opened today need have no resemblance whatever, either in quantity, amount, or duration, to those granted or entered upon tomorrow or the next day. Nay, many of today's bills and credits, when due, fall in with a mass of liabilities whose origins traverse a range of antecedent dates altogether indefinite. Bills at twelve, six, three months, or one, often aggregate together to swell the common liabilities of one particular day. The currency theory reviewed, in a letter to the Scottish people, by a banker in England, Edinburgh, 1845, pages 29, 30, pass him, end note. 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. In that character it takes various forms peculiar to itself, under which it makes itself at home in the sphere of great commercial transactions. Gold and silver coin, on the other hand, are mostly relegated to the sphere of retail trade. Footnote. As an example of how little ready money is required in true commercial operations, I give below a statement by one of the largest London houses of its yearly receipts and payments. Its transactions during the year 1856, extending to many millions of pounds sterling, are here reduced to the scale of one million. Receipts. Bankers and merchants bills payable after a certain date, five hundred thirty-three thousand five hundred ninety-six pounds. Checks on bankers, etc., payable on demand, three hundred fifty-seven thousand seven hundred fifteen pounds. Country notes, nine million six hundred twenty-seven pounds. Bank of England notes, sixty-eight thousand five hundred fifty-four pounds. Gold, twenty-eight thousand eighty-nine pounds. Silver and copper, one thousand four hundred eighty-six pounds. Post office orders, nine hundred thirty-three pounds. Payments. Bills payable after a certain date, three hundred two thousand six hundred seventy-four pounds. Checks on London bankers, six hundred sixty-three thousand six hundred seventy-two pounds. Bank of England notes, twenty-two thousand seven hundred forty-three pounds. Gold, nine thousand four hundred twenty-seven pounds. Silver and copper, one thousand four hundred eighty-four pounds. From the report from the select committee on the bank acts, July 1858. When the production of commodities has sufficiently extended itself, money begins to serve as the means of payment beyond the sphere of the circulation of commodities. It becomes the commodity that is the universal subject matter of all contracts. Rents, taxes, and such like payments are transformed from payments in kind into money payments. To what extent this transformation depends upon the general conditions of production is shown, to take one example, by the fact that the Roman Empire twice failed in its attempt to levy all contributions in money. The unspeakable misery of the French agricultural population under Louis XIV, a misery so eloquently denounced by Boyle Gilbert, Marshall Vauban, and others, was due not only to the weight of taxes, but also to the conversion of taxes in kind into money taxes. In Asia, on the other hand, the fact that state taxes are chiefly composed of rents payable in kind depends on conditions of production that are reproduced with the regularity of natural phenomenon. And this mode of payment tends in its turn to maintain the ancient form of production. It is one of the secrets of the conservation of the Ottoman Empire. If the foreign trade forced upon Japan by Europeans should lead to the substitution of money rents for rents in kind, it will be all up with the exemplary agriculture of that country. The narrow economic conditions under which that agriculture is carried on will be swept away. The course of trade being thus turned from exchanging of goods for goods, or delivering and taking, to selling and paying, all the bargains are now stated upon the foot of a price in money. An essay in public credit, third edition, London, 1710, page 8, EndNote. Money has become the executioner of all things. Finance is the alembic that evaporates a frightful quantity of goods and commodities in order to obtain this fatal extract. Money declares war on the whole human race. Boise Gilbert, Dissertation sur la nature des riches de l'argent et des tributs. Additions d'air économistes financiers, Paris, 1843, pages 413, 419, 417, EndNote. In every country, certain days of the year become by habit recognized settling days for various large and recurrent payments. These dates depend, apart from other revolutions, in the wheel of reproduction, on conditions closely connected with the seasons. They also regulate the dates for payments that have no direct connection with the circulation of commodities, such as taxes, rents, and so on. The quantity of money requisite to make the payments, falling due on those dates all over the country, causes periodical, though merely superficial, perpetuations in the economy of the medium of payment. Footnote on Whitsun Tide, 1824, says Mr. Craig before the Commons Committee of 1826, there was an immense demand for notes upon the banks of Edinburgh, that by eleven o'clock they had not a note left in their custody. They sent round to all the different banks to borrow, but could not get them, and many of the transactions were adjusted by slips of paper only. Yet by three o'clock the whole of the notes were returned into the banks from which they had issued. It was a mere transfer from hand to hand. Although the average effective circulation of banknotes in Scotland is less than three million sterling, yet on certain paydays in the year, every single note in the possession of the bankers, amounting in the whole to about seven million pounds, is called into activity. On these occasions the notes have a single and specific function to perform, and so soon as they have performed it, they howl back into the various banks from which they issued. See John Fullerton, Regulation of Currencies, London, 1845, page 86. An explanation it should be stated that in Scotland at the date of Fullerton's work, notes and not checks were used to withdraw deposits, and note. From the law of the rapidity of currency of the means of payment, it follows that the quantity of the means of payment required for all periodical payments, whatever their source, is in in first proportion to the length of their periods. Footnote. Note by the Institute of Marxism-Leninism in the Russian edition. Apparently a slip of the pen. When writing Fawbers the author evidently meant direct. Endnote. Footnote. To the question if there were occasion to raise forty millions, P.A., whether the same six millions gold would suffice for such revolutions and circulations thereof, as trade requires, P.E. replies in his usual masterly manner, I answer yes, for the expense being forty millions, if the revolutions were in such short circles, vis, weekly, as happens among poor artisans and laborers, who receive and pay every Saturday, then forty out of fifty-two parts of one million of money would answer these ends. But if the circles be quarterly, according to our system of paying rent and gathering taxes, then ten millions were requisite. Wherefore, supposing payments in general to be of a mixed circle between one week and thirteen, then add ten millions to forty out of fifty-two, the half of which will be five and one half, so as if we had five and a half millions we have enough. Political Anatomy of Ireland. 1672. Edition London. 1691. Pages thirteen and fourteen. Endnote. 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. End of Chapter 3, Section 3, Part B. Chapter 3, Section 3 of Capital, Volume 1. This is a LibriVox recording. All LibriVox recordings are in the public domain. For more information or to volunteer, please visit LibriVox.org. Recording by Kirsten Ferreri. Capital. A critical analysis of capitalist production, Volume 1, by Karl Marx, translated from the third German edition by Samuel Moore and Edward Aveling, and edited by Frederick Engels. Part 1. Commodities and Money. Chapter 3. Money or the circulation of commodities. Section 3. Money. C. Universal Money. When money leaves the home sphere of circulation, it strips off the local garbs which it there assumes of a standard of prices, of coin, of tokens, and of a symbol of value, and returns to its original form of bullion. In the trade between the markets of the world, the value of commodities is expressed so as to be universally recognized. Hence their independent value form also, in these cases, confronts them under the shape of universal money. It is only in the markets of the world that money acquires to the full extent the character of the commodity whose bodily form is also the immediate social incarnation of human labor in the abstract. Its real mode of existence in this sphere adequately corresponds to its ideal concept. Within the sphere of home circulation there can be but one commodity which, by serving as the measure of value, becomes money. In the markets of the world a double measure of value holds sway, gold, and silver. Footnote 59. The opponents themselves of the mercantile system, a system which considered the settlement of surplus trade balances in gold and silver as the aim of international trade, entirely misconceived the functions of money of the world. I have shown by the example of Ricardo in what way their false conception of the laws that regulate the quantity of the circulating medium is reflected in their equally false conception of the international movement of the precious metals. His erroneous dogma, quote, an unfavorable valence of trade, never arises but from a redundant currency, the exportation of the coin is caused by its cheapness, and is not the effect but the cause of an unfavorable balance, end quote, already occurs in Barbon, quote, the balance of trade, if there be one, is not the cause of sending away the money out of a nation, but that proceeds from the difference of the value of bullion in every country, end quote. McCulloch in the literature of political economy, a classified catalogue, London 1845, praises Barbon for this anticipation, but prudently passes over the naive forms in which Barbon clothes the absurd supposition on which the currency principle is based. The absence of real criticism and even of honesty in that catalogue culminates in the sections devoted to the history of the theory of money. The reason is that McCulloch in this part of the work is flattering Lord Overstone, whom he calls Facile Princeps Argentinorum. End footnote. Money of the world serves as the universal medium of payment, as the universal means of purchasing, and as the universally recognized embodiment of all wealth. Its function as a means of payment in the settling of international balances is its chief one, hence the watchword of the mercantilists, balance of trade. Gold and silver serve as international means of purchasing chiefly and necessarily in those periods when the customary equilibrium in the interchange of products between different nations is suddenly disturbed. And lastly, it serves as the universally recognized embodiment of social wealth, whenever the question is not of buying or paying, but of transferring wealth from one country to another. And whenever this transference in the form of commodities is rendered impossible, either by special conjunctures in the markets, or by the purpose itself that is intended. Footnote. Sixty. For instance, in subsidies, money loans for carrying on wars or for enabling banks to resume cash payments, etc., it is the money form and no other of value that may be wanted. End footnote. Just as every country needs a reserve of money for its home circulation, so too it requires one for external circulation in the markets of the world. The functions of hordes, therefore, arise in part out of the function of money, as the medium of the home circulation payments, and in part, out of its function of money in the world. Footnote. Sixty. Two. L'argent sépatage entre les nations relativement habessants quels annonces. Et tant aux jours attirés par les productions. That is, the minds which are continually giving gold and silver to give sufficient to supply such a needful balance to every nation. End footnote. For this latter function, the genuine money commodity, actual gold and silver, is necessary.  The current of the stream of gold and silver is a double one. On the one hand, it spreads itself from its sources over all the markets of the world in order to become absorbed to various extents, into the different national spheres of circulation, to fill the conduits of currency, to replace gold and silver coins, to supply the material of articles of luxury, and to petrify into hordes. Footnote. Sixty-three. Exchanges rise and fall every week, and at some particular times in the year run high against a nation, and at other times run as high on the contrary. End footnote. This first current is started by the countries that exchanged their labor, realized in commodities, for the labor embodied in the precious metals by gold and silver in countries. On the other hand, there is a continual flowing backwards and forwards of gold and silver between the different national spheres of circulation, a current whose motion depends on the ceaseless fluctuations in the course of exchange. Footnote. Sixty-four. These various functions are liable to come into dangerous conflict with one another whenever gold and silver have also to serve as a fund for the conversion of banknotes. End footnote. Countries in which the bourgeois form of production is developed to a certain extent limit the hordes concentrated in the strong rooms of the banks to the minimum required for the proper performance of their peculiar functions. Footnote. Sixty-five. What money is more than of absolute necessity for a home trade is dead stock, and brings no profit to that country it's kept in, but as it is transported in trade, as well as imported. What if we have too much corn? We may melt down the heaviest and turn it out into the splendor of plate, vessels or utensils of gold and silver, or send it out as a commodity, where the same is wanted or desired, or let it out at interest where interest is high. Money is but the fat of the body politic, where of too much cloth as often hinder its agility as too little makes it sick, as fat lubricates the motion of the muscles, feeds in want of victuals, fills up the uneven cavities and beautifies the body. So cloth money in the state quicken its action, feeds from a broad in time of dearth at home, evens accounts, and beautifies the whole, although more especially the particular persons that have it in plenty. End Footnote. Whenever these hordes are strikingly above their average level, it is with some exceptions an indication of stagnation in the circulation of commodities, of an interruption in the even flow of their metamorphoses. End of Part 1, Chapter 3, Section 3C.