The measure of values

188:2 “The first main 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 acts as a universal measure of value, and only through performing this function does gold, the specific equivalent commodity, become money.“

We return to the end of the value-form analysis. All commodities express their value in gold: they express that they are value, they express how much value they are and they represent this uniformly in gold, so the many commodities compare their values with each other. They utilise gold for this purpose, which makes gold the measure of values. The simple expression of the value of commodities in money is the price form. The price is a determination of the commodity in which it is represented as money equal.

Since here we are only dealing with the representation of the value of commodities in money, no real money is needed. You do not need to put a bag of coins next to the merchandise to show what it is worth; a price tag is enough.

Because the price is a relation of the values of two commodities (the ordinary commodity and the money commodity), a decrease in the value of gold causes all prices to rise and vice versa.

Standard of prices

The purpose of commodities, to be social wealth and thus to access to social wealth, contains within it the consequence of wanting to compare their value with other commodities. The comparison of the commodities values takes place via the comparison of their prices. For the purpose of comparing the value of commodities, however, a uniform standard of gold is required. Different standards stand in the way of this comparison, e.g. if the price of two chairs is 100 grams of gold and the price of a coat is 2 ounces of gold.

As a measure of value, money measures the value of a commodity. As a standard of price, however, one gold quantum measures itself relative to another gold quantum only. Therefore, the measure of the values changes when the gold value changes. The standard of prices, on the other hand, remains the same. When the value of gold doubles, 1 pound of gold remains 12 ounces of gold.

The names of the material unit of gold (ounce) and its subdivisions served as money names. However, weight names and metal weights were separated in the development of circulation.

For example, if gold is replaced by silver, then the old weight names of gold are still used for silver. The counterfeiting by princes also ensured that the monetary unit “ounce” contained less unit of weight ounce. This separation of weight names and money names is neither detrimental to the measure of values nor to the standard of prices. For the function of value expression and for the function of uniform price comparison, it makes no difference whether 1 pound of gold as a designation for a certain quantity of gold actually corresponds to 1 pound of gold weight.

194:1 “Since the standard of money is on the one hand purely conventional, while on the other hand it must possess universal validity, it is in the end regulated by law.”

The interest in a uniform standard of prices can only be fulfilled if there is an authority that does not act as an economic subject of competition but has the power to set the conditions for this competition. This is the State as political power and not simply as a prince.

196:0 “But although price, being the exponent of the magnitude of a commodity’s value, is the exponent of its exchange-ratio with money, it does not follow that the exponent of this exchange-ratio is neecessarily the exponent of the magnitude of the commodity’s value.”

In a society characterised by competition, the deviation of price from value is functional. It can be worth selling below value to attract new groups of buyers. But to what extent does this possibility of deviation have its reason in the relation of commodities and money, as far as it is determined up to here?

Since the entire world of commodities looks for its value expression in the money commodity, it becomes the form of value. That is the side of equivalence. They seek in money to express what they are: value, nothing more and nothing less. This process brings with it that the money commodity is directly socially valid value and the commodity immediately only a particular use-value, which puts its value into doubt. This is the side of difference or non-equivalence. The commodities seek to express their value in a valid way. But if they have to do this, they express at the same time that they are simply not immediately valid abstract wealth at all.

This makes it necessary to redefine the purpose of commodities: their value is only revealed in the transformation into money. But then it is no longer the purpose of the commodities to realise their value. The new purpose of the commodity is to become money. The value of the commodities, the labour objectified in them is the means to become money. Marx tries to illustrate this when he writes “if circumstances now allow…”. It is not the value of the commodities that is honoured in the money or should be honoured, but the commodities are the means to get money.

This is also the reason that “price ceases altogether to express value, despite the fact that money is nothing but the value-form of commodities”. Money is the social power sans phrase and to get this, one only has to impress the money owners, e.g. by selling your silence.

With the expression of value in money, the commodities deny their own immediate existence as value. If the money is directly exchangeable with commodities through the anticipated purchase of the commodities in the price, the reverse does not apply to the commodities. The value of commodities only becomes apparent in the real exchange for real money.

Means of circulation

(a) The metamorphosis of commodities

If a commodity, e.g. a car, reaches the place where the car is actually used as a means of transport and if at the same time food reached the car manufacturer then “social metabolism” has taken place. As a result, it can be seen that through exchange a production for satisfying needs has taken place in society. In each case, the commodities have fallen out of the sphere of commodity exchange by falling into the sphere of consumption.

Instead of the commodity exchanging directly as products, commodities must first become money in order to then in the form of money become other commodities. The social metabolism takes the form of commodity — money — commodity, in short C-M-C. Marx calls this the metamorphosis of the commodity, which carries out a cycle. What is metamorphosing or going through a circle is the value of the commodity that takes various forms. First it changes to the monetary form and then reappears in the form of another commodity. Value proceeds in a cycle only in the sense that it is present at the beginning and at the end in the form of commodity. Money is the means of circulation in this process. It does not circulate the use-value of the commodities, but their value. In other words, money does not transport the commodities from A to B, but it circulates the legal title to the commodities.

In the measure of values the money transforms from a means of the commodities to a necessary purpose for commodities. As a means of circulation, money is always the purpose of commodities, but only temporarily. Once earned, the money is spent again to get the commodities that the owner wants.

The metamorphosis of commodities can be divided into two partial metamorphoses, so that C-M-C becomes C-M (sale) and then M-C (purchase). The last C can represent a number of commodities. So a coat is exchanged for 3 ounces of gold (C-M) and with this gold three chewing gum, a bracelet and a watering can are bought (M-C). Both partial metamorphoses represent two partial metamorphoses of two other commodities at the same time. Because the one who buys the coat ends her metmorphosis series. She had previously produced a chair, for example, and received 3 ounces of gold, which she then spends on her coat. Another one made the chewing gum and got some of the 3 ounces of gold the coat producer had earned.

However, the partial metamorphoses of the commodities represent different tasks. In purchase M-C, value is transformed from a monetary form back into a commodity form. Since money is directly valid wealth, only the value magnitude is limiting it. You can get anything with money, you just have to have enough of it.

In the first metamorphosis of the commodity, the sale, the task is much harder. Marx calls this the “Salto Mortale“ of the commodity. The deadly problem lies entirely on the side of the commodities, or more precisely, with the owner of the commodities. Her purpose of making money depends on external conditions, i.e. conditions which she does not control and which undermine her success.

Many problems present themselves to our commodity producer: her products must be met by effective demand, the competition must not be much more efficient etc. In addition, however, say, all coffee producers together are expanding the quantity of commodities they want to sell. Suppose they now all produce at the same level and each coffee contains nothing but socially necessary labour-time. In spite of this, all these pieces taken as a whole may contain superfluously expended labour-time. The need for coffee or the “market stomach” is limited. The demand for coffee is limited and therefore all coffee producers may have worked hard and conjured up top quality, they have produced too much coffee overall to realise the value of all coffees. It turns out that all producers as a whole have spent a portion of socially superfluous labour.

202:0 “The effect is the same as if each individual weaver had expended more labour-time on his particular product than was socially necessary. As the German proverb has it: caught together, hung together.“

202:1 “The owners of commodities therefore find out that the same division of labour which turns them into independent private producers also makes the social process of production and the relations of the individual producers to each other within that process independent of the producers themselves; they also find out that the independence of the individuals from each other has as its counterpart and supplement a system of all-round material dependence.”

The owners or producers of commodities are free to do whatever they want. This is guaranteed by the state. Yet, by doing what they want with this freedom, they are absolutely dependent in their success on what the others do. Thus, the social dependency asserts itself as a compulsion which appears in an objective form, namely in the prices that can be achieved on the market and the question of whether they are enough to live on. Commodity producers react to this by trying to realign their freedom in such a way that they are successful against the others. Thus, the producers make each other’s lives difficult and provide for an all-round insecurity of existence (which is guaranteed for those who have to labour for earning money, on the capitalists more in the rest of the book).

Buying is always selling at the same time. The end of a series of a metamorphosis of a commodity is always the beginning of another series. Because production is usually one-sided, i.e. specialised, but the needs varied, the sale of linen usually results in a purchase of many different other things. When the linen producer covers her needs in purchasing with the money she earned with it, then many new metamorphosis series of other product owners begin with it; the concluding metamorphosis of one commodity is the first metamorphosis of another.

This intertwining of the metamorphoses of commodities is reflected in the actors. The seller faces a buyer who was already the seller. Once the first seller has received her money, she becomes the buyer and faces another seller who is a future buyer.

206:1 “Being a seller and being a buyer are therefore not fixed roles, but constantly attach themselves to different persons in the course of the circulation of commodities.”

The two poles of a partial metamorphosis, i.e. commodities and money, as well as the corresponding actors, sellers and buyers, complement each other and at the same time stand in opposition. In terms of the actors: The seller can only get money if someone else wants to buy. The buyer can only get the object if someone else wants to sell. At the same time, it is neither the purpose of the seller to allow the buyer to satisfy her needs, nor is it the purpose of the buyer to provide the commodity’s owner with money. The seller wants to give as little as possible and get a lot of money. The buyer wants to get a lot, but wants to give as little as possible.

The question is therefore which moments in the all-round exchange of commodities keep the process alive, i.e. ensure the necessary complementation and which moments make the contradiction break out and may even bring the process to a standstill.

207:2 “Hence the circuit made by one commodity in the course of its metamorphoses is inextricably entwined with the circuits of other commodities. This whole process constitutes the circulation of commodities.”

Value proceeds in a cycle: C-M-C. In each partial metamorphosis, i.e. the sale and purchase, a partial metamorphosis of one or more other commodities takes place simultaneously.

207:3 “The circulation of commodities differs from the direct exchange of products not only in form, but in its essence.“

When children exchange marbles for stamps in the schoolyard, they know who has what and who wants what. This is not the case in the circulation of commodities. If someone wants to get money through linen production so that she can buy a Bible, then the Bible seller only knows that she has money in front of her. She doesn’t know where the money came from, she doesn’t care. What the Bible seller then does with the money, again, does not have to concern the linen producers.

207:3 “We see here, on the one hand, how the exchange of commodities breaks through all the individual and local limitations of the direct exchange of products, and develops the metabolic process of human labour.”

The mediation of social metabolism via money makes producers independent of concrete trading partners who produce exactly what you need and at the same time want exactly what you yourself offer.

207:3 “On the other hand, there develops a whole network of social connections of natural origin, entirely beyond the control of the human agents. Only because the farmer has sold his wheat is the weaver able to sell his linen, only because the weaver has sold his linen is our rash and intemperate friend able to sell his Bible, and only because the latter already has the water of everlasting life is the distiller able to sell his eau-de-vie.“

The emancipation has the other side that one thereby becomes dependent on the success of many other producers in their efforts to bring about the Salto Mortale of commodities. The opposition, which is contained in the project of making money, develops now in such a way: If the buyer tries to give to the seller as little money as possible, this may result in her later facing people who do not have enough money, when she must earn money again.

On the other hand, the general intertwining of commodity metamorphoses ensures that the mutual enabling of money-making is constantly in progress – continuity.

208:1 “The process of circulation, therefore, unlike the direct exchange of products, does not disappear from view once the use-values have changed places and changed hands.”

Money in the function of a means of circulation does not fall back into a merely individual sphere (of consumption):

208:1 “When one commodity replaces another, the money commodity always sticks to the hands of some third person. Circulation sweats money from every pore.”

The circulation of commodities itself also contains interruption as a moment. Money is earned and always remains in a state of rest for a while and if it only lasts until you buy your sandwich after you have earned your money. This situation, in which the money rests with the money owner, can also last longer, e.g. if she can wait whether the prices do not fall or she e.g. first wants to hoard money, until the money is enough for a larger purchase.

208:2 ”This identity further implies that the process, if it reaches fruition, constitutes a point of rest, an interval, long or short, in the life of the commodity.“

Earning money to satisfy needs, i.e. C-M-C, therefore runs through a process that is temporarily interrupted in the middle. This more or less weakens the success of other sellers. But everyone depends on the fact that many sellers are successful.

209:0 ”Circulation bursts through all the temporal, spatial and personal barriers imposed by the direct exchange of products, and it does this by splitting up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s into the two antithetical segments of sale and purchase. To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence [äusserliche Verselbständigung] proceeds to a certain critical point, their unity violently makes itself felt by producing – a crisis.”

At the social level it becomes clear how the two independent acts of buying and selling only function permanently if both take place. If everyone just wants to sell, but not buy, then selling does not work. The independent act of selling is therefore “internally” dependent, cannot exist by itself alone. C-M-C on all sides is the condition for C-M-C on all sides. If everyone only wants to sell, but nobody wants to buy, then this is one case of what Marx defines as “internal unity moves forward through external antitheses”.

If the partial metamorphoses generally become independent against their social condition, then they sabotage themselves and earning money no longer works ­ which can be taken as a first superficial characterisation of the crisis. So far, however, no provisions have been found that would make this independence against the conditions necessary. With the opposition between buyer and seller (wanting to earn a lot of money but give little) and the necessary interruption in time between sale and purchase, however, moments are known which promote such independence. Therefore (only) the “possibility of crises” is shown here.

In the function as a means of circulation, money is constantly in the sphere of circulation, while commodities are consumed at the end of their metamorphosis. In this function, money receives its own form of movement through the commodities and its own laws, which is determined in the circulation of money.

(b) The circulation of money

Money is constantly passed on in the function of the circulating agent for the circulation of commodities. The seller of commodities receives money and spends it on the next seller of commodities etc. Or vice versa: The buyer spends the money and it is now in the hands of a future buyer etc. Money has here constantly the function of “means of purchase”. Therefore Marx calls the movement of money in this function the “circulation” of money in contrast to the cycle of the value of the commodities in C-M-C. In this function – but not in every, as we will see later – money is subordinated to the movement of commodity values and therefore the laws of money in this function are to be determined by the circulation of commodities and not vice versa:

211:0 “Hence although the movement of money is merely the expression of the circulation of commodities, the situation appears to be the reverse of this, namely the circulation of commodities seems to be the result of the movement of money.”

212:2 “The frequently repeated displacement of the same coins reflects not only the series of metamorphoses undergone by a single commodity, but also the mutual entanglement of the innumerable metamorphoses in the whole world of commodities.“

If a commodity owner sells her commodity to a money owner and buys another one with the money, then three persons are involved, who possess the same coin successively. For the first money owner, however, the first metamorphosis of commodities is already behind her and so another original money owner is involved. The last commodity seller, in turn, will spend the money elsewhere and pass the money on. As already discussed in money as a means of circulation, all of society’s production processes intertwine – albeit under the contradictory dictum of value – and thus result in the circulation of commodities in society. The movement of money is due to this peculiar interlocking. Where the many private labours under the dictates of value do not fit together, there also no money moves around.

213:0 “Money, on the contrary, as the medium of circulation, haunts the sphere of circulation and constantly moves around within it. The question therefore arises of how much money this sphere continuously absorbs.”

The quantity of money that is constantly on the move in the sphere of circulation is determined as:

213:1 “In a given country there take place every day at the same time, though in different places, numerous one-sided metamorphoses of commodities; in other words, simple sales on one hand, simple purchases on the other. In their prices, the commodities have already been equated with definite but imaginary quantities of money. And since, in the direct form of circulation being considered here, money and commodities always come into physical confrontation with each other, one at the positive pole of purchase, the other at the negative pole of sale, it is clear that the amount of means of circulation required is determined beforehand by the sum of the prices of all these commodities. As a matter of fact, the money is only the representation in real life of the quantity of gold previously expressed in the imagination by the sum of the prices of the commodities.”

This result is modified as follows. If 10 purchases of £1 take place simultaneously, then this requires the amount of £10 in coins. If 10 purchases of £1 happen one after the other so that the seller buys directly from the next seller, so the 10 sales of commodities always complement each other, then only £1 is needed for the realisation of commodity prices of £10. The faster a coin circulates, i.e. from one seller to the next, etc., the more value of commodities the money can realise in a certain period of time, e.g. one day. The sooner the money is passed on, the less money is needed to turn a certain sum of commodities prices into a coin. This speed is not due to any characteristic of money. Money is here functionalised by the commodities. The speed depends entirely on how well the commodities fit together and interlock.

If a coin realises more commodity prices per time by increased circulation, then another coin slows down accordingly in circulation or falls completely out of circulation. For the later purposes or uses of money, it becomes clear here: the faster the metamorphoses of commodities intertwine, the faster the circulation of money, the more money is exempt from circulation and “one” can do better things with it than simply “waste” it on society’s metabolism. This also applies to coins or paper money, where the gold material tends to be completely replaced:

(c) Coin. The symbol of value

The coin is initially only a gold coin. The minting by the State guarantees a uniform standard of prices and certifies equal quantities of gold in the respective coins. This gives the money a national uniform that is different from the worldwide one.

However, the mere use of the coin as a means of circulation results in the gold content claimed by the State deviating from the actual gold content. The gold of the coin is worn away by the constant touch of the sellers and buyers.

222:2 “The fact that the circulation of money itself splits the nominal content of coins away from their real content, dividing their metallic existence from their functional existence, this fact implies the latent possibility of replacing metallic money with tokens made of some other material, i.e. symbols which would perform the function of coins.”

In order to save costs, states began to produce gold substitutes from materials whose material value is no longer remotely reminiscent of gold: paper. The State decrees that this paper note stands for two ounces of gold – that’s the price. It obliges its citizens to accept this paper note for demands against others.

224:1 “Here we are concerned only with inconvertible paper money issued by the state and given forced currency. This money emerges directly out of the circulation of metallic money. Credit-money on the other hand implies relations which are as yet totally unknown, from the standpoint of the simple circulation of commodities.”

This paper money should not be confused with banknotes. In the past, it was common for private banks to issue paper notes, which then circulated as money. These were accepted by the owners of the commodities as long as they considered the bank to be solvent. The substance of these banknotes was therefore the creditworthiness of the bank itself, which is why they are referred to as credit money. This business has been gradually banned for private banks since the beginning of the 19th century. Instead, the State has copied this procedure, operating itself as a banknote issuer and decreeing it as a general means of social payment. These are meanwhile no longer backed by gold, there is no state-fixed rate, you cannot bring the money back to the State and demand something else for it. The symbol of money based on metallic money commodities no longer exists today. Everything else belongs systematically in the third volume, i.e. in the chapters where credit is discussed. The object of metallic circulation is in a way historical. At the same time, the analytical steps taken here are necessary to understand today’s money.

The circulation process turns the coin into a symbol, so that the gold can even be replaced by paper notes. How does the circulation process do this?

Marx invokes a “natural” argument. Because the constant change of hands of the coin wears away the same, the process tends to make the coin into a symbol. But the question is why this natural circumstance does not contradict the circulation of commodities or why, in its first metamorphosis, the commodity can be bought with a paper note? One half of the answer is: because the State forces them to do so. But this compulsion alone is not enough, as historical examples show, where the subjects have made every effort to circumvent this compulsion and the paper notes have not achieved acceptance. Other examples show that the paper notes were accepted, so much so that one cannot really tell whether the State really had to enforce it. Acceptance must therefore be based on an economic reason which itself arises from the circulation of commodities.

226:0 “The presentation of the exchange-value of a commodity as an independent entity is here only a transient aspect of the process. The commodity is immediately replaced again by another commodity. Hence in this process which continually makes money pass from hand to hand, it only needs to lead a symbolic existence. Its functional existence so to speak absorbs its material existence. Since it is a transiently objectified reflection of the prices of commodities, it serves only as a symbol of itself, and can therefore be replaced by another symbol.”

Because the purpose of the simple circulation of commodities is the appropriation of other commodities, it depends entirely on the values of these commodities. These values are expressed as prices and so the function as a measure of the values depends entirely on the value of the money, which does not have to be present for the price determination. As a means of circulation, money is needed to be present, but it does not depend on its real value; it is of secondary importance. No owner of commodities loses any value just because the circulating coin is actually worth less than it claims. The aim of C-M-C is not the matter of money, but the matter in which the value is to be realised as the final purpose, i.e. the last commodity. The money does not realise the value of the commodities, but serves only as a means of exchanging commodities of the same prices.

The absolute condition of the monetary symbol is the continuous circulation of commodities. If this should stall for whatever reason, those who hold on to coins just possess worthless symbols.

The result of the measure of value and the means of circulation is: in the measure of values, the commodities attribute the direct interchangeability with gold. Although they make real gold superfluous in the circulation medium, they constantly confirm the immediate interchangeability of gold with them. Just because paper notes do the same service, gold does not lose its ability to buy. Gold as a thing, as a thing one can possess, is through this the socially valid power of access, which does not have to deal with the Salto Mortale. This also applies to gold, which is present external to circulation. Here value exists separately from social metabolism.

Money

(a) Hoarding

If the metamorphosis of commodities is interrupted after the first partial metamorphosis and the money is held against further circulation, then the money is in the function of a hoard. Money does not mediate the metabolism in this function, it is not only the temporary purpose of the commodities, but the end purpose of the commodities, or as Marx calls it, money becomes the “end in itself”.

Selling without subsequently buying: “This operation, conducted on a general scale, seems to involve a self-contradiction.” If all commodity owners only want to sell, but nobody wants to buy, then nobody can sell because there are no buyers. The owners of commodities are not only dependent on successful sellers of commodities elsewhere, but also on those who want to buy afterwards. Gold producers offer a solution to this hardship of hoarding. They do not sell their commodities, but their commodities are money. They can buy all the time without having to rely on money to buy from them.

227:3 “When the circulation of commodities first develops, there also develops the necessity and the passionate desire to hold fast to the product of the first metamorphosis. This product is the transformed shape of the commodity, or its gold chrysalis.”

The Salto Mortale of commodities implies the necessity of hoarding for every commodity producer. Wanting to live permanently from your labour is subject to all kinds of adversities: Is there demand for my commodities and if so, is it also effective? What do my direct competitors do? Do they produce a product that surpasses and replaces mine? Do they produce faster and thus cheaper, so that I can no longer make ends meet? Or have we all become faster, can produce more and have to organise a junk sale that does not pay off for anyone? What’s going on with suppliers, are prices rising there? What about the things I want to buy? Lastly, a commodity producer is dependent on a solvent public, i.e. on the success of other producers of commodities. Mutually, however, they undermine this success when they demand the highest possible prices but want to give little. Times during which you cannot labour at all, because of illness, age or because you are completely lacking the means of production are also still to think of. The simple circulation of commodities, in which people have the purpose of earning through money, fulfilling their needs, includes: having and producing all-round insecurity. Because of the uncertainty resulting from the purpose of earning money to satisfy needs, everyone must make hoarding their purpose, because the use of private power of access for consumption purposes, destroys this power.

229:0 “With the possibility of keeping hold of the commodity as exchange-value, or exchange-value as a commodity, the lust for gold awakens. With the extension of commodity circulation there is an increase in the power of money, that absolutely social form of wealth which is always ready to be used.”

229:0 “Just as in money every qualitative difference between commodities is extinguished, so too for its part, as a radical leveller, it extinguishes all distinctions. But money is itself a commodity, an external object capable of becoming the private property of any individual. Thus the social power becomes the private power of private persons.”

Money exists as an independent object that can be owned and gives power over the social production process and its results. Money gives the private owner economic, social power, lack of money makes her powerless. This gives private owners a new perspective on earning money: it is not to be earned in order to buy one or more specific use-values, but to secure social power. The purpose of making money is emancipated from concrete needs and therefore concrete prices that someone wants to be able to pay. Money is the possibility of all use-values.

230:1 “The commodity, as a use-value, satisfies a particular need and forms a particular element of material wealth. But the value of a commodity measures the degree of its attractiveness for all other elements of material wealth, and therefore measures the social wealth of its owner.“

230:1 “The hoarding drive is boundless in its nature. Qualitatively or formally considered, money is independent of all limits, that is 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 has only a limited efficacy as a means of purchase. This contradiction between the quantitative limitation and the qualitative lack of limitation of money keeps driving the hoarder back to his Sisyphean task: accumulation.”

If it is not a question of satisfying specific needs, but of acquiring the potency of all use-values, then money has no bounds. With £10 I can buy a shirt that was made on the other side of the globe. With £10 I have a bit of power over social labour, which functions worldwide. The power of money has its limits purely in its quantity and there £10 are quite meagre. The magnitude limits the power and thus the security of the private individual in a society where everything is mediated via the free market. The power of money is constantly curtailed by its quantity, therefore the mere increase of it, the accumulation, becomes the purpose, £200 is better than £100. Any larger amount of money is again a limited sum, so that the need for social power, held privately, is never satisfied.

231:1 “In order that gold may be held as money, and made to form a hoard, it must be prevented from circulating, or from dissolving into the means of purchasing enjoyment. The hoarder therefore sacrifices the lusts of his flesh to the fetish of gold.”

The possibility of social wealth is obtained by denying yourself the access and enjoyment of wealth. If money is piled up by saving it from disappearing into the circulation of commodities, the money is not social wealth, but only a hoard of metal.

Money has power because all commodities refer to it. By using the money as a hoard, the reference of the commodities to the money is broken. Practised on a general social scale, i.e. when everyone would predominantly practice hoarding, hoarding undermines the power that is to be accumulated.

If you use the money, the money’s gone. If you don’t use it, it’s not money.

Hoarding is thus downgraded to a function of money. It can only be a sub-project in society that owes its existence to a different economic principle. As a sub-project, hoarding remains a phenomenon of capitalist society: for example, when companies have a reserve fund for unexpected repairs or accumulate money to make the big investment at some point or wage labourers who try to save money in the event of unemployment, illness or old age.

(b) Means of payment

Money acts as a means of payment when it settles the debt of a loan.

232:1 “But with the development of circulation, conditions arise under which the alienation of the commodity becomes separated by an interval of time from the realization of its price.”

Every agricultural machine welder knows her farmer customers and knows that their income always comes in one shot after the harvest. Experience has shown that she can expect their success in selling agricultural products at certain times of the year. She thus has payments for repairs that are due beforehand put off for later. Rejecting farmers just because they do not have any cash at that moment would mean selling less commodities and foregoing money. Thus, the commodities are transferred now, money is only collected later.

233:0 “The seller sells an existing commodity, the buyer buys as the mere representative of money, or rather as the representative of future money. The seller becomes a creditor, the buyer becomes a debtor.”

The purchase takes place through a promise of future payment. This promise is secured by the State and thus becomes a debt obligation. A promise to pay or an obligation to pay replaces real money. The amount of this promise is determined by the price of the commodities. In this respect, all provisions which were established at the beginning of this chapter for the measure of values apply here. So at first the money is only ideal, real money is not required.

234:0 “Not until payment falls due does the means of payment actually step into circulation, i.e. leave the hand of the buyer for that of the seller. […] The money no longer mediates the process. It brings it to an end by emerging independently, as the absolute form of existence of exchange-value, in other words the universal commodity.”

In C-M-C, the buyer was dependent on that she succeeded in selling her commodities before buying. In commercial credit, the buyer or debtor must ensure that future sales justify her current purchase. She must earn money in the future, which he does not convert back into commodities. She has to sell commodities simply to make money so that she can pay the debt. In this respect, there is a financial purpose here that relates to the circulation of commodities, but where the financial purpose is not lost in commodities and their consumption. Money is the ultimate purpose when the debtor’s labour is expended purely for the acquisition of money.

234:1 “The obligations falling due within a given period of the circulation process represent the sum of the prices of the commodities whose sale gave rise to those obligations. The quantity of money necessary to realize this sum depends in the first instance on the rapidity of circulation of the means of payment.”

A certain sum of obligations exists at all times. This sum of money does not really have to be available, however, when it comes to the actual payment. Firstly, the amount of money required depends on the concatenation of obligations. If the agricultural machinery fitter has debt with the pub, the farmer to the agricultural machinery fitter, then only the farmer finally needs to earn her money to pay the fitter, who in turn pays the pub owner with the money. That the relations between creditors and debtors interlock, similar to the circulation of money as a means of circulation, makes real money less important.

However, the circulation of the means of payment and the circulation of the means of circulation differ considerably. The speed at which a coin moves from one purchase to the next expresses how well the commodities metamorphoses mesh with each other in the circulation medium. The interlocking has its basis in production, but only actually exists in the exchanges.

235:0 “The flow of the circulating medium does not merely express the connection between buyers and sellers: the connection itself arises within, and exists through, the circulation of money. The movement of the means of payment, however, expresses a social connection which was already present independently.”

235:1 “The fact that sales take place simultaneously and side by side limits the extent to which the rapidity of turnover can make up for the quantity of currency available. On the other hand, this fact gives a new impulse towards the economical use of the means of payment.”

For the means of circulation we have that if purchases take place simultaneously then the coin mass anticipated in their prices is required to process the purchases. The same seems to apply to the means of payment at first. If debt payments are due at the same time, the locksmith cannot pay the pub owner with the money that the farmer gives him. But if debt is institutionalised, then there is a new way of making real money superfluous. If the pub owner owes the farmer money because she has acquired eggs there on the basis of a commercial credit, then the three debtors can mutually compare their debts, offset and cancel debts, and only pay the surplus amount.

235:1 “The greater the concentration of the payments, the less is this balance in relation to the total amount, hence the less is the mass of the means of payment in circulation.”

This concentration of obligations takes place in the banking sector. Billions in debt payments are settled, compared, cancelled and only the balance is paid. The central bank, in turn, does the same for banks. It offsets the debts that the banks have with each other and only credits the difference to the bank that has more claims than liabilities.

235:2 “There is a contradiction immanent in the function of money as the means of payment. When the payments balance each other, money functions only nominally, as money of account, as a measure of value. But when actual payments have to be made, money does not come onto the scene as a circulating medium, in its merely transient form of an intermediary in the social metabolism, but as the individual incarnation of social labour, the independent presence of exchange-value, the universal commodity. This contradiction bursts forth in that aspect of an industrial and commercial crisis which is known as a monetary crisis.”

The balancing of debts and the settlement of the remaining debt carry two conflicting provisions of money at the same time. As far as the debts are offset, this does not depend at all on real money. Debt balancing itself encourages actors to feel independent from real money. Whoever gets a commercial loan and at the same time gives one to someone else, can count on the fact that she does not have to earn any real money at all, if in the end the debts offset with the demands against others.

At the same time, it is important that the difference is actually paid. Debt balancing encourages the actors to insist on payment in real money, i.e. to repeatedly encounter the hard, golden reality. These contrasting tendencies become clear when the monetary crisis occurs.

If – for whatever reason – the sale of commodities stalls, then the market participants become cautious with commercial credit. They do not expect any longer that a potential debtor will get their hands on money in the future. Commercial credit is denied. Then confidence in the otherwise normal settlement of debts is down the drain and all creditors, although they may also be debtors with other creditors as usual, insist on real payment. That’s what the others do to her. An all-round account in hard money takes place.

A relationship between producers, which has tended to emancipate itself from real money, and only exists on this basis, is now confronted with the demand to earn hard cash. This can’t work. Those who want to earn money by selling commodities are dependent on money owners who want to acquire commodities. In the all-round accounting in the crisis, however, everyone only wants to sell just to get money for the settlement of debts – not to buy commodities afterwards.

To the extent that all creditors (who are also debtors) insist that real money must be earned, they strangle the peculiar relationship of the producers even more. One more reason to be careful. So once the crisis has arrived, it already contains reasons to intensify.

236:0 “In a crisis, the antithesis between commodities and their value-form, money, is raised to the level of an absolute contradiction. Hence money’s form of appearance is here also a matter of indifference. The monetary famine remains whether payments have to be made in gold or in credit-money, such as bank-notes.”

When commercial credit works out in general, real money is only relatively important. If there is a money crisis, everyone involved is concerned about real money, but this undermines the production of commodities and thus value, which in turn undermines earning money. When money is used as means of payment it is the end, but credit contains within it the provisions to make money as means of payment superfluous.

238:1 “Credit-money springs directly out of the function of money as a means of payment, in that certificates of debts owing for already purchased commodities themselves circulate for the purpose of transferring those debts to others. On the other hand, the function of money as a means of payment undergoes expansion in proportion as the system of credit itself expands. As the means of payment money takes on its own peculiar forms of existence, in which it inhabits the sphere of large-scale commercial transactions. Gold and silver coin, on the other hand, are mostly relegated to the sphere of retail trade.”

Real money is further dethroned by further development of commercial credit. The locksmith receives an IOU of ₤100 from the farmer, payable in three months. The locksmith wants a new tool worth ₤100 and the tool seller can accept the debt claim against the farmer. After three months, the tool seller receives ₤100 from the farmer. Thus, the promise to pay, i.e. the legal title to future wealth, has done the same service as real money.

This transaction assumes the confidence of the tool seller in the economic performance of the farmer. If she does not know this performance, she will not accept the right to future payment as replacement for money. If the farmer is generally known as an efficient producer of commodities, she is awarded creditworthiness by society. The tool seller can go shopping again with the promise to pay, etc., until the debt is actually due.

Because this depends on creditworthiness of which everyone must know that the others also see it that way, the replacement of money by IOUs takes place between the big companies. In the retail trade, on the other hand, this money replacement will not prevail without a banking system. If it exists and credit cards are widely used, then it succeeds there because the creditworthiness of the bank stands behind it.

Hoarding, i.e. earning money without subsequent purchase, has a new function in the means of payment. The money should not be held as power over the material wealth, but for the possible compensation payments after the debts have been cleared. These differences fluctuate and are not in the hands of the commodity producers. Therefore, in the event of a compensation payment, a certain hoard is necessary for the functioning of commercial credit.

(c) World money

240:2 “When money leaves the domestic sphere of circulation it loses the local functions it has acquired there, as the standard of prices, coin, and small change, and as a symbol of value, and falls back into its original form as precious metal in the shape of bullion. In world trade, commodities develop their value universally. Their independent value-form thus confronts them here too as world money.”

The local forms of money, i.e. the standards of prices including the deviation of the money names from the weight names and the corresponding minted gold coins, are based on the power of the State. This also applies to the symbols of value, i.e. paper notes, which are to represent gold. Beyond the boundaries of a state’s power, gold in its original form, i.e. in quantities measured in weight, is considered money. Only when the commodities become such money are they the power of access to wealth par excellence, just as gold is considered universal wealth towards them.

Which commodities function as world money on the world market depends on the weight that nations can bring into world trade with their national money commodities (e.g. gold or silver).

242:1 “World money serves as the universal means of payment (…)”

International trade is conducted through the State and its central bank. As with the means of payment, mutual claims are compared and only the difference is paid in the form of world money. After a settlement period, a ship leaves with the gold from the treasury, away from the country with the negative trade balance, towards the country with the positive.

In the production of commodities for the world market (export), as with the help of the world market (import), the producers of commodities of a nation are dependent on a state that has acquired gold as world money. Importers and exporters depend on the State’s gold hoard, which depends on the performance of all of a nation’s commodity producers. So your private project depends on the success of your competitors within a nation.

242:1 “World money serves (…) as the universal means of purchase”

If a failed harvest or a nuclear reactor accident undermines the national economy, then the State simply buys the necessary things abroad. World money does not complete the back and forth of the commodities here as with the means of payment, but simply initiates access. Purchase and sale fall apart, only purchase takes place on the part of the damaged state.

In this case, the State must also be endowed with a hoard of gold and its society must be geared towards procuring world money.

242:1 “World money serves (…) as the absolute social materialization of wealth as such (universal wealth)“

If a state has world money, it has power in every respect. It, for example, can simply give money to other states, so that they can behave favourably. The dependence of other states on money can be exploited to blackmail political concessions.

In the balance of trade, real money tends to become superfluous, as is the case with the function of the means of payment. With all the peculiarities mentioned there – cue money crisis. World money is only necessary to settle the differences. Thus, the observations for means of payment also apply to world money: real money is only rudimentarily important. If there is a monetary crisis, everyone involved is concerned about real money, but this undermines the production of commodities and thus of value.

That the simple accumulation of world money is not the purpose of society, but only a sub goal, can also be seen in the behaviour of developed bourgeois nations:

244:1 “Countries with developed bourgeois production limit the hoards concentrated in the strong rooms of the banks to the minimum required for the performance of their specific functions. Whenever these hoards are strikingly above their average level, this is, with some exceptions, an indication of stagnation in the circulation of commodities, i.e. of an interruption in the flow of their metamorphoses.”