token of a quantity of gold expressed in its currency name, i. e., it
is a gold token. Just as a certain quantity of gold does not in itself
express a value ratio, so is that true of the token which takes its
place. In so far as a certain quantity of gold, as embodied labor-time,
has a value of a certain magnitude, the gold token represents value.
But the magnitude of the value which it represents depends all the
time on the value of the quantity of gold for which it stands. As
regards commodities the token of value expresses _the reality of their
price_, it is _signum pretii_ and sign of their value only because
their value is expressed in their price. In the process C―M―C, in so
far as it represents the dynamic unity or direct alternation of the
two metamorphoses―and that is the aspect it assumes in the sphere of
circulation in which the token of value discharges its function―the
exchange value of commodities acquires in price only an ideal
expression and in money only an imaginary symbolic existence. Exchange
value thus acquires _only_ an imaginary though material expression,
but it has no real existence except in the commodities themselves, in
so far as a certain quantity of labor-time is embodied in them. It
_appears_, therefore, that the token of value represents _directly_
the value of commodities, by figuring not as a token of gold but as
a token of the value which exists in the commodity alone and is only
expressed in price. But it is a false appearance. The token of value is
directly only _a token of price_, i. e., a _token of gold_, and only
indirectly a token of value of a commodity. Unlike Peter Shlemihl, gold
has not sold its shadow, but buys with its shadow. The token of value
operates only in so far as it represents the price of one commodity
as against that of another within the sphere of circulation, or in so
far as it _represents gold_ to every owner of commodities. A certain
comparatively worthless object such as a piece of leather, a slip of
paper, etc., becomes by force of custom a token of money material, but
maintains its existence in that capacity only so long as its character
as a symbol of money is guaranteed by the general acquiescence of
the owners of commodities, i. e., so long as it enjoys a legally
established conventional existence and compulsory circulation. Paper
money issued by the state and circulating as legal tender is the
perfected form of the token of value, and the only form of paper money,
which has its immediate origin in metallic circulation or even in the
simple circulation of commodities. _Credit money_ belongs to a higher
sphere of the social process of production and is governed by entirely
different laws. Symbolic paper money does not in fact, differ in the
least from subsidiary metal coin, except that it reaches wider spheres
of circulation. We have seen that the mere technical development of the
standard of price or of the mint price and later the shaping of gold
bullion into coin have called forth the interference of the state; this
circumstance brought about a visible separation of national circulation
from the world circulation of commodities: this separation is completed
by the evolution of coin into a token of value. As a mere medium of
circulation money can assume an independent existence only within the
sphere of national circulation.[80]
Our presentation has shown that the coin form of gold as a token of
value differentiated from the gold substance itself, has its direct
origin in the process of circulation and not in any agreement or state
interference. Russia offers a striking example of the natural origin of
the token of value. At the time when hides and furs played there the
part of money, the conflict between the perishable and bulky nature of
the material and its function as a medium of circulation resulted in
the custom of replacing it by small pieces of stamped leather which
thus became a kind of draft payable in hides and furs. Later on they
became under the name of copecs mere tokens for fractions of the silver
rouble and remained in use in some parts until 1700, when Peter the
Great ordered their withdrawal in exchange for small copper coins
issued by the state. Ancient writers who could observe the phenomena
of exclusively metallic circulation, already took the view of coin
as a symbol or token of value. That is true both of _Plato_[81] and
_Aristotle_.[82] In countries where credit is not developed, as e. g.
in China, legal tender paper money is found at an early date[83]. Early
advocates of paper money expressly point out the fact that metallic
coin is transformed into a token of value in the very process of
circulation. So Benjamin Franklin[84] and Bishop Berkeley.[85]
How many reams of paper cut up into bills can circulate as money? Put
in that way, the question would be absurd. The worthless tokens are
signs of value only in so far as they represent gold within the sphere
of circulation and they represent it only to the extent to which it
would itself be absorbed as coin by the process of circulation; this
quantity is determined by its own value, the exchange values of the
commodities and the rapidity of their metamorphoses being given. Bills
of a denomination of £5 could circulate in a quantity five times
less than those of £1 denomination, and if all payments were made in
shilling bills, then twenty times as many shilling bills would have to
be in circulation as are one pound bills. If the gold currency were
represented by bills of different denominations, e. g. five pound,
one pound and ten shilling bills, then the quantity of these different
tokens of value would be determined not only by the quantity of gold
necessary for circulation as a whole, but also by that required in the
sphere of circulation of each kind of bills. If fourteen million pounds
sterling (this is the provision of the English Bank Law, not for the
entire currency but only for credit money) were the level below which
the circulation of a country never sank, then fourteen million paper
bills, each a token of value of one pound, could circulate. If the
value of gold fell or rose because the labor-time necessary for its
production had fallen or risen, then, the exchange value of the same
volume of commodities remaining the same, the number of one pound bills
in circulation would rise or fall in inverse ratio to the change in the
value of gold. If gold were replaced by silver as a measure of value,
the ratio of the respective values of silver and gold being 1:15, and
if each bill were to represent now the same quantity of silver as it
represented gold before, then there would be 210 million one pound
bills in circulation instead of the previous fourteen million. The
number of paper bills is thus determined by the quantity of gold money
which they represent in circulation, and since they are tokens of value
only in so far as they represent it, their value is simply determined
by their _quantity_. Thus, while the quantity of gold in circulation
is determined by the prices of commodities, the value of the paper
bills in circulation, on the contrary, depends exclusively on their own
quantity.
The interference of the state which issues paper money as legal
tender―and we are treating of paper money of that kind only―seems to
do away with the economic law. The state which in its mint price gave
a certain name to a piece of gold of certain weight, and in the act of
coinage only impressed its stamp on gold, seems now to turn paper into
gold by the magic of its stamp. Since paper bills are legal tender,
no one can prevent the state from forcing as large a quantity of them
as it desires into circulation and from impressing upon it any coin
denomination, such as £1, £5, £20. The bills which have once gotten
into circulation can not be removed, since on the one hand their course
is hemmed in by the frontier posts of the country and on the other
they lose all value, use-value, as well as exchange-value, outside
of circulation. Take away from them their function and they become
worthless rags of paper. Yet this power of the state is a mere fiction.
It may throw into circulation any desired quantity of paper bills of
whatever denomination, but with this mechanical act its control ceases.
Once in the grip of circulation and the token of value or paper money
becomes subject to its intrinsic laws.
If fourteen million pounds sterling were the quantity of gold
required for the circulation of commodities and if the state were to
put into circulation two hundred and ten million bills each of the
denomination of £1, then these two hundred and ten millions would
become the representatives of gold to the amount of fourteen million
pounds sterling. It would be the same as if the state were to make
the one pound bills represent a fifteen times less valuable metal or
a fifteen times smaller weight of gold. Nothing would be changed but
the nomenclature of the standard of price, which by its very nature is
conventional, no matter whether such change takes place as a direct
result of a change of the mint standard or indirectly owing to an
increase of paper bills to an extent required by a new lower standard.
Since the name £ would stand now for a fifteen times smaller quantity
of gold, the prices of all commodities would increase fifteen times and
two hundred and ten million one pound bills would now be actually as
necessary as fourteen million had been before. To the same extent to
which the combined quantity of tokens of value would increase now, the
quantity of gold which each of them represents would decrease. The rise
of prices would constitute but a reaction on the part of the process of
circulation which forcibly equates the tokens of value to the quantity
of gold which they are supposed to replace.
In the history of the debasement of money in England and France by
their governments, we find repeatedly that prices had not risen in the
same proportion in which the silver coinage had been debased. That was
simply due to the fact that the proportion in which the currency was
increased did not correspond to the proportion in which it had been
debased; that is to say, because an inadequate quantity of coins of
the poorer metallic composition was issued, if the exchange values
of commodities were to be estimated in the future in the new coin as
a measure of value and be realized in coins corresponding to this
smaller unit of measure. This solves the difficulty left unsettled in
the controversy between Locke and Lowndes. The ratio which a token
of value, whether made of paper or of debased gold or silver, bears
to certain weights of gold or silver estimated according to the mint
price, depends not on its own composition but on the quantity in which
it is found in circulation. The difficulty in understanding this is
due to the fact that money in its two functions of a measure of value
and a medium of circulation is subject to two not only opposite but
apparently contradictory laws corresponding to the difference in the
two functions. In the discharge of its function of a measure of value
where money serves merely as money of account and gold only as ideal
gold, everything depends on the natural substance of money. Estimated
in silver or expressed in silver prices exchange values are naturally
estimated quite differently than when measured in gold or as gold
prices. On the contrary, in its function of a medium of circulation,
where gold is not only imagined but is actually present side by side
with other commodities, its substance is immaterial and everything
depends on its quantity. For the unit of measure the determining factor
is whether it consists of a pound of gold, silver or copper; while in
the case of coin, no matter what its own composition is, it will become
the embodiment of each of these units of measure in accordance with its
quantity. But it goes against common sense that in the case of mere
imaginary money everything should depend on its material substance,
while in that of the palpably present coin all should be determined by
an ideal ratio of numbers.
The rise or fall of prices of commodities following a rise or fall
of the quantity of paper notes―the latter only where paper currency
constitutes the exclusive medium of circulation―is thus nothing but
an assertion through the process of circulation of a law mechanically
violated from without; namely, that the quantity of gold in circulation
is determined by the prices of commodities, and the quantity of tokens
of value in circulation is determined by the quantity of gold coin
which it represents. For that reason any desired number of paper notes
will be absorbed and equally digested by the process of circulation,
because the token of value, no matter with what gold title it may enter
circulation, will be compressed within the latter to a token of that
quantity of gold which could actually circulate in its place.
In the case of the circulation of tokens of value all laws pertaining
to the circulation of real money appear to be reversed and standing
on their heads. While gold circulates because it has value, paper has
value because it circulates. While with a given exchange value of
commodities, the quantity of gold in circulation depends on its own
value, the value of paper depends on its own quantity in circulation.
While the quantity of gold in circulation rises or falls with the
rise or fall of prices of commodities, the prices of commodities
seem to rise or fall with the change in the quantity of paper in
circulation. While the circulation of commodities can absorb only a
definite quantity of gold coin and as a result of that the alternating
contraction and expansion of the currency appears as a necessary law,
paper money seems to enter circulation in any desired amount. While
the state is guilty of debasing gold and silver coin and of disturbing
their function of a medium of circulation, if it turns out a coin,
only 1-100 of a grain below its nominal weight; it performs a perfectly
proper operation by issuing absolutely worthless paper notes which
contain nothing of the metal except its mint denomination. While gold
coin apparently represents the value of commodities only in so far as
that value is itself estimated in gold or is expressed in price, the
token of value seems to represent directly the value of commodities.
It is, therefore, clear why students who examined one-sidedly the
phenomena of circulation of money by confining their observations to
the circulation of legal tender paper money, should have failed to
grasp the intrinsic laws governing the circulation of money. As a
matter of fact, these laws appear not only reversed but extinct in the
circulation of tokens of value, since paper currency, if issued in
the right quantity, goes through certain movements which are not in
its nature as a token of value, while its proper movement instead of
growing directly out of the metamorphosis of commodities, springs from
the violation of its proper proportion to gold.
3. MONEY.
Money as distinguished from coin, the result of the circulation process
C―M―C, forms the starting point of the circulation process M―C―M, i.
e. the exchange of money for commodity in order to exchange commodity
for money. In the form C―M―C, commodity forms the starting and final
points of the movement; in the form M―C―M, money plays that part. In
the former case money is the medium of exchange of commodities, in
the latter the commodity helps money to become money. Money which
appears merely as a means of circulation in the first form becomes
an end in the second form; while commodity which appeared first as
the end, now becomes but a means. Since money is itself the result of
circulation C―M―C, the result of circulation appears at the same time
as its starting point in the form M―C―M. While in the case of C―M―C the
interchange of matter constituted the real import of the process, the
form of the commodity resulting from this first process constitutes the
import of the second process M―C―M.
In the form C―M―C the two extreme members are commodities of the same
value, but qualitatively different use-values. Their mutual exchange
C―C constitutes actual interchange of matter. In the form M―C―M the
two extremes are gold and at the same time gold of equal value. To
exchange gold for a commodity in order to exchange the commodity for
gold, or if we consider the final result M―M, to exchange gold for
gold, seems absurd. But if we translate the formula M―C―M into the
expression: _to buy_ in order _to sell_, which means nothing but to
exchange gold for gold through an intervening movement, we recognize
at once the prevailing form of capitalist production. In actual
practice, however, people do not buy in order to sell, but they buy
cheap in order to sell dear. Money is exchanged for a commodity in
order to exchange the same commodity for a larger amount of money, so
that the extremes M, M are, if not qualitatively, then quantitatively
different. Such a quantitative difference presupposes the _exchange of
non-equivalents_, yet commodity and money as such are only opposite
forms of the same commodity, i. e. they are different forms of the same
magnitude of value. The circuit M―C―M thus conceals under the forms
of money and commodity more highly developed relations of production,
and is but a reflection within the sphere of simple circulation of a
movement of a more advanced character. Money, as distinguished from the
medium of circulation, must therefore be developed from the direct form
of circulation of commodities, C―M―C.
Gold, i. e., the specific commodity which serves as a measure of
value and a medium of circulation, becomes money without any further
assistance on the part of society. In England, where silver is neither
the measure of value nor the prevailing medium of circulation, it
does not become money, just as gold in Holland, as soon as it had been
dethroned as a measure of value, ceased to be money. A commodity thus
becomes money only in its combined capacity of a measure of value
and medium of circulation; or, the unity of the measure of value and
medium of circulation is money. As such a unity, however, gold has a
separate existence independent of its existence in the two functions.
As a measure of value it is only ideal money and ideal gold; as a mere
medium of circulation it is symbolic money and symbolic gold; but in
its plain metallic bodily form gold is money or money is real gold.
Let us now consider for a moment the commodity gold when it is in a
state of rest, and plays the part of money in its relation to other
commodities. All commodities represent in their prices a certain
quantity of gold, that is to say, they are merely imaginary gold or
imaginary money, representatives of gold, just as, on the other hand,
money in the form of a token of value appeared as a mere representative
of prices of commodities.[86] Since all commodities are thus but
imaginary money, money is the only real commodity. Contrary to
commodities, which only represent the independently existing exchange
value, i. e., universal social labor, or abstract wealth, gold is the
_material form of abstract wealth_. Through its use-value, every
commodity, by its relation to some particular want, expresses only one
aspect of material wealth, but one side of wealth. Money, however,
satisfies every want since it can be directly converted into the object
of any want. Its own use-value is realized in the endless series of
use-values which form its equivalents. In its virgin metallic state
it holds locked up all the material wealth which lies unfolded in the
world of commodities. Thus, while commodities represent in their prices
the universal equivalent or abstract wealth, viz., gold, the latter
represents in its use-value the use-values of all commodities. Gold
is, therefore, _the bodily representative of material wealth_. It is
the “precis de toutes les choses” (Boisguillebert), the compendium
of the wealth of society. At one and the same time, it is the direct
incarnation of universal labor in its form, and the aggregate
of all concrete labor in its substance. It is universal wealth
individualized.[87] As a medium of circulation it underwent all kinds
of injury, was clipped, and even reduced to the condition of a mere
symbolic paper rag. As money it is restored to its golden glory.[88]
From a serve it becomes a lord. From a mere understrapper it rises to
the position of Lord of commodities.[89]
a. HOARDING.
Gold separates itself as money from the process of circulation whenever
a commodity interrupts the process of its metamorphosis and remains
in its form of a gold chrysalis. This occurs every time a sale is not
immediately followed by purchase. The independent isolation of gold
as money is, thus, a material expression of the disintegration of the
process of circulation, or of the metamorphosis of commodities, into
two separate acts independent of each other. The coin itself becomes
money as soon as its course is interrupted. In the hands of the seller
who takes it in exchange for his commodity, it is money and not coin;
as soon as it passes out of his hands it is again coin. Everybody is
a seller of the one commodity which he produces, but a buyer of all
other commodities which he needs for his existence in society. While
his selling is determined by the labor-time required for the production
of his commodity, his buying is determined by the continual renewal
of the wants of life. In order to be able to buy without having sold
anything, he must sell without buying. In fact, the circulation process
C―M―C is a dynamic unity of sale and purchase only in so far as it
constitutes at the same time the constant process of its separation.
In order that money should flow continuously as coin, coin must
constantly coagulate as money. The continuous flow of coin depends on
its constant accumulations in the form of reserve-funds of coin which
spring up throughout the sphere of circulation and form sources of
supply; the formation, distribution, disappearance, and reformation of
these reserve funds is constantly changing, their existence constantly
disappears, their disappearance constantly exists. Adam Smith expressed
this never-ceasing transformation of coin into money and of money
into coin by saying that every owner of commodities must always keep
in supply besides the particular commodity which he sells, a certain
quantity of the universal commodity with which he buys. We saw, that
in the process C―M―C the second member M―C splits up into a series of
purchases which do not take place at once, but at intervals of time,
so that one part of M circulates as money while the other rests as
money. Money is in that case only _suspended coin_ and the separate
parts of the circulating mass of coins appear now in one form, now in
another, constantly changing. This first transformation of the medium
of circulation into money represents, therefore, but a technical aspect
of money circulation.[90]
The primitive form of wealth is that of a surplus or superabundance,
i. e., that part of the products which are not immediately required as
use-values, or the possession of such products whose use-value falls
outside the sphere of mere necessaries. When considering the transition
of commodity into money we saw that this surplus or superabundance of
products constitutes the proper sphere of exchange at a low stage of
development of production. Superfluous products become exchangeable
products or commodities. The adequate form of this surplus is gold and
silver, the first form in which wealth as abstract social wealth is
preserved. Commodities can not only be stored up in the form of gold
and silver, i. e., in the substance of money, but gold and silver are
wealth in preserved form. While every use-value performs its service
as such by being consumed, i. e., destroyed, the use-value of gold as
money consists in its being the bearer of exchange value, in embodying
universal labor-time as a shapeless raw material. As shapeless metal,
exchange value possesses an indestructible form. Gold or silver thus
brought to rest as money, forms a _hoard_. Among nations with an
exclusively metallic circulation, such as the ancients were, hoarding
is practiced universally from the individual to the state which guards
its state hoard. In more ancient times, in Asia and Egypt, these
hoards under the protection of kings and priests appear rather as a
mark of their power. In Greece and Rome it was part of public policy
to accumulate state hoards as the safest and most available form of
surplus. The quick transfer of such hoards by conquerors from one
country to another and the sudden outpour of a part of these hoards
into the general circulation constitute a peculiar feature of ancient
economy.
As the incarnation of labor-time gold is a pledge for its own value,
and since it is the embodiment of _universal_ labor-time, the process
of circulation pledges gold its constant rôle of exchange value.
Owing to the mere fact that the owner of commodities can retain his
commodity in the form of exchange value or retain the exchange-value as
a commodity, the exchange of commodities for the purpose of retaining
them in the transformed shape of gold becomes circulation’s own motive.
The metamorphosis C―M takes place for the sake of the metamorphosis,
i. e., in order to transform it from particular natural wealth into
universal social wealth. Instead of change of matter, change of form
becomes its own purpose. From a mere form of the movement exchange
value becomes its substance. Commodity is preserved as wealth, as
commodity, only in so far as it keeps within the sphere of circulation,
and it keeps in that fluent state only in so far as it solidifies in
the form of silver and gold. It remains in the stream of circulation as
its crystal. At the same time gold and silver themselves become money
only in so far as they do not play the part of mediums of circulation.
_As non-mediums of circulation they become money._ The withdrawal of a
commodity from circulation in the form of gold is therefore the only
means of keeping it constantly within the sphere of circulation.
The owner of commodities can receive money from circulation only
in return for a commodity which he gives to it. Constant selling,
continual throwing of commodities into circulation is, therefore, the
first condition of hoarding from the standpoint of the circulation
of commodities. On the other hand, money as a medium of circulation
constantly disappears in the very process of circulation by being
realized all the time in use-values and becoming dissolved in fleeting
pleasures. It must, therefore, be taken out of the all-consuming
stream of circulation or the commodity must be kept up in its first
metamorphosis, so that money is prevented from performing its function
of a means of purchase. The commodity owner who has now become a
hoarder, must sell as much as possible and buy as little as possible,
as old Cato had taught: “patrem familias vendacem, non emacem esse.”
While industry constitutes the positive condition of hoarding, saving
forms the negative one. The less the equivalent of a commodity is
withdrawn from circulation in the form of particular commodities
or use-values, the more it is withdrawn in the shape of money or
exchange value.[91] The acquisition of wealth in its universal form
thus requires abstinence from wealth in its material reality. Thus
the stimulating impulse for hoarding is _greed_, the objects of which
are not commodities as use-values, but exchange value as commodity.
In order to get possession of the surplus in its universal form, the
particular wants must be treated as so much luxury and excess. Thus
the Cortes presented a report to Philipp II., in 1593, in which, among
other things, was said: “The Cortes of Valladolid in the year 1586
petitioned Your Majesty not to allow the further importation into the
Kingdom of candles, glassware, jewelry, knives and similar articles;
these things useless to human life come from abroad to be exchanged
for gold, as though the Spaniards were Indians.” The hoarder despises
the worldly, temporary and transitory enjoyments in his hunt after
the eternal treasure, which neither moth nor rust can eat, which is
perfectly celestial and earthly at the same time. “The general remote
cause of our want of money is the great excess of this Kingdom in
consuming the Commodities of Forreine Countries, which prove to us
discommodities, in hindering us of so much treasure, which otherwise
would bee brought in, in lieu of those toyes.... Wee ... consume
amongst us, that great abundance of the Wines of Spaine, of France, of
the Rhene, of the Levant ... the Raisins of Spaine, the Corints of the
Levant, the Lawnes and Cambricks of Hannaults ... the Silkes of Italie,
the Sugers and Tobaco of the West Indies, the Spices of the East
Indies: All which are of no necessetie unto us and yet are bought with
ready mony.”[92]
In the form of gold and silver, wealth is indestructible, both
because exchange value is preserved in the shape of indestructible
metal, and, especially, because gold and silver are prevented from
becoming, as mediums of circulation, mere vanishing money forms of
the commodity. The destructible substance is thus sacrificed for the
indestructible form. “If money be taken (by means of taxation) from
him, who spendeth the same ... upon eating and drinking, or any other
perishing Commodity; and the same transferred to one that bestoweth it
on Cloaths; I say that even in this case the Commonwealth hath some
little advantage; because Cloaths do not altogether perish so soon as
Meats and Drinks. But if the same be spent in Furniture of Houses,
the advantage is yet a little more; if in Building of Houses, yet
more; if in improving of Lands, working of Mines, Fishing, etc., yet
more; but most of all, in bringing Gold and Silver into the Country;
because those things are not only not perishable, but are esteemed
for Wealth at all times and everywhere; whereas other Commodities
which are perishable, or whose value depends upon the Fashion; or
which are contingently scarce and plentiful, are Wealth, but pro hic
et nunc.”[93] The withdrawal of money from the stream of circulation
and the saving of it from the social interchange of matter reaches
its extreme form in the _burying_ of money, so that social wealth is
brought as an underground indestructible treasure into a perfectly
secret private relation with the owner of commodities. Dr. Bernier, who
stayed for some time at the court of Aurenzeb at Delhi, tells us how
the merchants, especially the Mohammedan heathens, who control nearly
all the trade and all money, secretly bury their money deep in the
ground, “being imbued with the faith that the gold and silver which
they put away during their lives will serve them after death in the
next world.”[94] However, in so far as the asceticism of the hoarder is
combined with active industry, he is rather a Protestant by religion
and still more a Puritan. “It can not be denied that buying and selling
are necessary, that one can not get along without them, and that one
can buy like a Christian especially things that serve in need and in
honor; for the patriarchs had also bought and sold cattle, wool, grain,
butter, milk and other goods. They are gifts of God which He gives out
of the earth and divides among men. But foreign trade which brings
over from Calcutta, India and other such places commodities consisting
of costly silks, and gold ware, and spices which only serve for luxury
and are of no use, draining the land and the people of their money,
should not be tolerated if we but had a government of princes. Yet I
do not wish to write of that now, for I believe it will have to stop
of itself, when we have no money any longer; and so will luxury and
gluttony; for no writing or teaching will help until want and poverty
will force us.”[95]
In times of disturbance in the process of the social interchange of
matter, the burying of money takes place even in bourgeois societies
which are at a high stage of development. The social bond in its
compact form is being saved from the social movement (with the owner
of commodities this bond is the commodity and the adequate form of the
commodity is money). The social _nervus rerum_ is buried next to the
body whose nerve it is.
The hoard would now become mere useless metal, its money soul would
depart from it and it would remain as the burnt ashes of circulation,
as its caput mortuum, if it did not constantly tend to get back into
circulation. Money, or crystallized exchange value, is, according to
its nature, the form of abstract wealth; but, on the other hand, any
given sum of money is a quantitatively limited magnitude of value.
The quantitative limitation of exchange value is in contradiction
with its qualitative universality and the hoarder conceives in it a
barrier which turns, in fact, into a qualitative barrier as well and
makes of the hoard merely a limited representative of material wealth.
Money, in its capacity of a universal equivalent, appears, as we have
seen, as a member of an equation, the other member of which consists
of an endless series of commodities. It depends on the magnitude of
the exchange value to what extent money will be realized in such an
endless series, i. e., to what degree it corresponds to the conception
of it as an exchange value. The automatic movement of exchange value
as exchange value can only tend to its passing beyond its quantitative
limits. But by exceeding the quantitative limits of the hoard a new
limit is created which must be removed in its turn. There is no
definite limit which appears as a barrier to further hoarding, every
limit plays that part. Hoard accumulation has, therefore, no inherent
limits, no inherent measure; it is an endless process which finds in
each successive result an impulse for a new beginning. While the hoard
is increased only by being preserved, it is preserved only by being
increased.
Money is not only _an_ object of the passion for riches; it is _the_
object of that passion. The latter is essentially _auri sacra fames_.
The passion for riches, contrary to that for special kinds of natural
wealth or use-values, such as clothing, ornaments, herds, etc., is
possible only when universal wealth has been individualized as such
in a particular object and can, therefore, be retained in the form of
a single commodity. Money appears then no less as an object than as
a source of the passion for riches.[96] The underlying fact of the
matter is that exchange value as such and with it its increase become
the final aim. Greed holds the hoard fast by not allowing the money
to become a medium of circulation, but the thirst for gold saves the
money soul of the hoard by keeping up the lasting affinity of gold for
circulation.
To sum up, the activity by which hoards are built up resolves itself
into withdrawal of money from circulation by continually repeated
sales, and simple hoarding or _accumulation_. In fact, it is only
in the sphere of simple circulation and, especially, in the form of
hoarding, that accumulation of wealth as such takes place, while, as we
shall see later, in the case of other so-called forms of accumulation
it is only a misnomer to call them by that name in mere recollection
of the simple accumulation of money. All other commodities are hoarded
either as use-values, in which case the manner of storing them up is
determined by the peculiarities of their use-value: the storing of
grain, e. g., requires special equipment; the accumulation of sheep
makes one a shepherd; the accumulation of slaves and land creates
relations of master and servant, etc.; the accumulation of particular
kinds of wealth requires special processes different from the simple
act of hoarding, and develops special individual traits. Or, wealth
in the form of commodities is hoarded as exchange-value and in that
case hoarding appears as a commercial or a specific economic operation.
The one who carries on such operations becomes a dealer in corn, in
cattle, etc. Gold and silver are money not through some activity of
the individual who accumulates it, but as crystals of the process of
circulation which goes on without any aid on his part. He has nothing
to do but to put them aside, adding new weights of metal to his
hoard, a perfectly senseless operation which, if applied to all other
commodities, would deprive them of all value.[97]
Our hoarder appears as a martyr of exchange value, a holy ascetic
crowning the metal pillar. He cares for wealth only in its social
form and therefore he buries it away from society. He wants to have
the commodity in the form in which it is always capable of entering
circulation and therefore he withdraws it from circulation. He dreams
of exchange value and therefore does not exchange. The fluid form of
wealth and its petrification, the elixir of life and the stone of
wisdom madly haunt each other in alchemic fashion. In his imaginary
unlimited passion for enjoyment he denies himself all enjoyment.
Because he wishes to satisfy all social wants, he barely satisfies
his elementary natural wants. While holding fast to his wealth in
its metallic bodily form, the latter escapes him as a phantom. As a
matter of fact, however, the hoarding of money for the sake of money
is the barbaric form of production for production’s sake, i. e., the
development of the productive forces of social labor beyond the limits
of ordinary wants. The less the production of commodities is developed,
the more important is the first crystallization of exchange value into
money, or hoarding, which plays, therefore, an important part among
the ancient nations, in Asia until the present day, and among modern
agricultural nations where exchange value has not as yet taken hold of
all the relations of production. Before taking up the consideration
of the specific economic function of hoarding within the sphere of
metallic circulation, let us mention another form of hoarding.
Quite apart from their aesthetic properties, silver and gold
commodities are convertible into money, since the material of which
they are made is a money material; and, inversely, gold money and gold
bullion can be converted into commodities. Because gold and silver
constitute the material of abstract wealth, the greatest display
of wealth consists of the utilization of these metals as concrete
use-values, and if the owner of commodities hides his treasure at
certain stages of production, he is very anxious to appear before
other owners of commodities as _rico hombre_ whenever he can do so
with safety. He gilds himself and his house.[98] In Asia, especially
in India, where, unlike under the capitalist system, the hoarding
of wealth appears not as a subordinate function of the system of
production, but as an end in itself, gold and silver commodities are
practically but aesthetic forms of hoards. In mediaeval England gold
and silver commodities were considered before the law as mere forms of
treasure, since their value was but slightly increased by the crude
labor spent upon them. They were destined to re-enter circulation
and their fineness was therefore prescribed in the same manner as
that of coin. The increasing use of gold and silver as objects of
luxury with the growth of wealth is such a simple matter that it was
perfectly clear to the ancients,[99] while modern economists have
advanced the erroneous proposition that the use of silver and gold
articles increases not in proportion to the growth of wealth, but
in proportion to the fall in value of the precious metals. Their
otherwise accurate references to the use of Californian and Australian
gold are inconclusive, since the increased consumption of gold as a
raw material does not find justification, according to their theory,
in any corresponding decline in its value. From 1810 to 1830, in
consequence of the struggle of the American colonies against Spain and
the interruption of mining caused by revolutions, the annual average
production of precious metals declined by more than one-half. The
decline of coin in circulation in Europe amounted to nearly one-sixth,
comparing the years 1829 and 1809. Although the quantity produced had
thus declined and the cost of production, if it had changed at all,
had increased, yet the consumption of precious metals as objects of
luxury increased to an extraordinary extent in England during the very
war and on the continent after the Peace of Paris. The consumption
increased with the general growth of wealth.[100] It may be stated
as a general law that the conversion of gold and silver money into
articles of luxury prevails in times of peace, while their reconversion
into bullion or even coin takes place in stormy periods.[101] How
considerable the proportion is of the gold and silver treasure in the
form of articles of luxury to the quantity of precious metals serving
as money may be seen from the fact that in 1829 the proportion in
England, according to Jacob, was two to one, and in entire Europe and
America the precious metals in the form of articles of luxury exceeded
those in the form of money by one-fourth.
We have seen that the circulation of money is but the manifestation of
the metamorphoses of commodities, or of the form under which the social
interchange of matter takes place. With the change in the total price
of commodities in circulation or in the volume of their simultaneous
metamorphoses, the rapidity of their change of form in each case being
given, the total quantity of gold in circulation must always expand
or contract. That is possible only under the condition that the total
quantity of money in the country continually bear a varying ratio to
the quantity of money in circulation. This condition is met by the
process of hoarding. With a fall in prices or rise in the rapidity
of circulation, the hoard-reservoirs absorb that part of money which
is thrown out of circulation; with a rise in price or a decline in
the rapidity of circulation, the hoards open up and return a part
of their contents to the stream of circulation. The solidification
of circulating money into hoards and the outpouring of hoards into
circulation is a constantly oscillating movement in which the
prevalence of the one or the other tendency is determined exclusively
by fluctuations in the circulation of commodities. Hoards thus serve as
conduits for the supply and withdrawal of money to or from circulation,
so that every time only that quantity of money circulates as coin which
is required by the immediate needs of circulation. If the volume of the
entire circulation suddenly expands and the fluent unity of sale and
purchase assumes such dimensions that the total sum of prices to be
realized increases more rapidly than the rapidity of the circulation of
money, the hoards decrease perceptibly; but when the combined movement
slackens to an unusual extent, or the movement of buying and selling
steadies itself, the medium of circulation solidifies into money in
large measure, and the treasure reservoirs fill up far above their
average level. In countries with an exclusively metallic circulation
or where production is at a low stage of development, the hoards are
endlessly split up and scattered all over the land, while in countries
where the capitalist system is developed they are concentrated in bank
reservoirs. Hoards are not to be confounded with coin reservoirs, which
form a constituent part of the total supply of money in circulation,
while the interaction between hoards and currency implies the decline
or rise of its total supply. Gold and silver commodities form, as we
have seen, both conduits for the withdrawal of precious metals, as
well as sources of their supply. In ordinary times only their former
function is of importance to the economy of metallic circulation.[102]
b. MEANS OF PAYMENT.
The two forms which have so far distinguished money from the
circulating medium are those of _suspended coin_ and of the _hoard_.
The temporary transformation of coin into money in the case of the
former means that the second phase of C―M―C, namely purchase M―C,
must break up within a certain sphere of circulation into a series
of successive purchases. As to hoarding, it is simply based on the
isolation of the act C―M when it does not immediately pass into M―C,
or is but an independent development of the first metamorphosis of
a commodity; it represents money as the result of the alienation of
all commodities in contradistinction to the medium of circulation as
the embodiment of commodities in their always alienable form. Coin
reserves and hoards are money only as non-circulating mediums and
are non-circulating mediums only because they do not circulate. In
the capacity in which we consider money now, it circulates or enters
circulation, but does not perform the function of a circulating medium.
As a medium of circulation money is always a means of purchase, now it
does not act in that capacity.
As soon as money develops through the process of hoarding into the
embodiment of abstract social wealth and the tangible representative
of material wealth, it assumes in that capacity special functions
within the process of circulation. If money circulates merely as a
medium of circulation and therefore as a means of purchase, it is
understood that commodity and money confront each other at the same
time, i. e., that the same value is present in a double form: at one
pole, as a commodity in the hands of the seller; at the other pole as
money in the hands of the buyer. This simultaneous existence of the two
equivalents at opposite poles and their simultaneous change of places
or mutual alienation presupposes in its turn that seller and buyer
enter into relations as owners of equivalents that are on hand. But in
the course of time, the process of the metamorphosis of commodities
which produces the different forms of money, transforms also the owners
of commodities or changes the character in which they appear before
each other in the community. In the process of metamorphosis of the
commodity the guardian of the latter changes his skin as often as
the commodity changes place or as the money assumes new forms. Thus,
the owners of commodities originally confronted each other only as
commodity owners, but later on they became one a buyer, the other a
seller; then each became alternately buyer and seller, then hoarders,
and finally rich men. In that manner, the owners of commodities do not
come out of the process of circulation the same men that they entered.
In fact the different forms which money assumes in the process of
circulation are but crystallized changes of form of the commodities
themselves, which in their turn are but concrete expressions of the
changing social relations in which commodity owners carry on the
interchange of matter with one another. New trade relations spring up
in the process of circulation, and, as representatives of these changed
relations, commodity owners assume new economic roles. Just as gold
becomes idealized within the process of circulation and plain paper,
in its capacity of a representative of gold, performs the function
of money, so does the same process of circulation lend the weight of
actual seller and buyer to the buyer and seller who enter it merely as
representatives of future money and future commodities.
All the forms in which gold develops into money, are but the unfolding
of potentialities which the metamorphosis of commodities bears within
itself. These forms did not become distinctly differentiated in the
process of simple money circulation where money appears as coin and
the movement C―M―C forms a dynamic unity; at most, they appeared
as mere potentialities as, e. g., in the case of the break in the
metamorphosis of a commodity. We have seen that in the process C―M
the relations between the commodity and money were those of an actual
use-value and ideal exchange-value to an actual exchange value and
only ideal use-value. By alienating his commodity as a use-value the
seller realized its own exchange value and the use-value of money. On
the contrary, the buyer, by alienating his money as exchange value,
realized its own use-value and the price of the commodity. Commodity
and money changed places accordingly. When it comes to a realization
in actual life of this bi-polar contrast, a new break occurs. The
seller actually alienates his commodity, but realizes its price only in
idea: he has sold his commodity at its price, which is to be realized,
however, only subsequently, at a time agreed upon. The purchaser buys
as the representative of future money, while the vender sells as the
owner of present goods. On the part of the vender, the commodity as
use-value is actually alienated, without the price being actually
realized; on the part of the purchaser, money is actually realized
in the use-value of the commodity, without being actually alienated
as exchange value. Instead of a token of value representing money
symbolically as was the case before, the purchaser himself performs
that part now. And just as in the former case the symbolic nature of
the token of value called forth the guarantee of the state which has
made it legal tender, so does the personal symbolism of the buyer bring
about legally enforcible private contracts among commodity owners.
The contrary may happen in the process M―C, where 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 actually delivered. This occurs constantly under
the everyday form of pre-payments. And it is under this form that the
English government purchases opium from the ryots of India, or, foreign
merchants residing in Russia mostly buy agricultural products. In these
cases, however, the money always acts in its well known role of a means
of purchase and therefore, does not assume any new forms.[103] We need
not dwell, therefore, on this case any longer; but with reference to
the changed form which the two processes M―C and C―M assume now, we
may note that the difference between purchase and sale which appeared
but imaginary in the direct process of circulation, now becomes a real
difference, since in the former case only the money is present and in
the latter only the commodity, and in either case only that extreme is
present from which the initiative comes. Besides, the two forms have
this in common: that in either, one of the equivalents is present only
in the common will of the buyer and seller,―a will that is binding on
both and assumes definite legal forms.
Seller and buyer become creditor and debtor. While the commodity
owner looked comical as the guardian of a treasure, he now becomes
awe-inspiring, since he no longer identifies himself but his neighbor
with a certain sum of money and makes him and not himself a martyr of
exchange value. From a believer he becomes a creditor, for religion he
substitutes law.
“I stay here on my bond!”
Thus, in the modified form C―M in which the commodity is present and
money is only represented, money plays first of all the part of a
measure of value. The exchange value of the commodity is estimated in
money as its measure; but as exchange value, established by contract,
price exists not only in the mind of the seller, but also as a measure
of obligation on the part of the buyer. Besides serving as a measure of
value, money plays here the part of a means of purchase, although in
that capacity it only casts ahead the shadow of its future existence.
It attracts the commodity from its position in the hand of the seller
into that of the buyer. As soon as the term of the contract expires,
money enters circulation, since it changes its position by passing
from the hands of the former buyer into those of the former seller.
But it does not enter circulation as a circulating medium or as a
means of purchase. It performed those functions before it was present
and it appears after it has ceased to perform them. It now enters
circulation as the only adequate equivalent of the commodity, as the
absolute form of existence of exchange value, as the last word of the
process of exchange, in short as money, and money in its distinct role
of a _universal means of payment_. In this capacity of a means of
payment money appears as the absolute commodity, but within the sphere
of circulation and not without it as was the case with hoards. The
difference between the means of purchase and the means of payment makes
itself unpleasantly felt in periods of commercial crises.[104]
Originally, the conversion of the product into money in the sphere of
circulation appears only as an individual necessity for the commodity
owner in so far as his own product has no use-value to him, but has
to acquire it first by being alienated. But in order to pay at the
expiration of the contract, he must have sold commodities before that.
Thus, entirely apart from his individual wants, the movement of the
circulation process makes selling a social necessity with every owner
of commodities. As a former buyer of a commodity he is compelled to
become a seller of another commodity in order to get money not as a
means of purchase but as a means of payment, as the absolute form of
exchange value. The conversion of commodity into money as a final act,
or the first metamorphosis of a commodity as an end in itself which in
the case of hoarding seemed to be a matter of caprice on the part of
the commodity owner, becomes now an economic function. The motive and
essence of sale for the sake of payment becomes from a mere form of the
process of circulation its self emanating substance.
In this form of sale the commodity completes its change of position;
it circulates while it postpones its first metamorphosis, viz. its
transformation into money. On the contrary, on the part of the buyer
the second metamorphosis is completed, i. e. money is reconverted
into a commodity before the first metamorphosis has taken place,
i. e., before the commodity has been turned into money. The first
metamorphosis thus takes place after the second in point of time;
and thereby, money i. e. the form of the commodity in its first
metamorphosis, acquires a new destination. Money or the spontaneous
development of exchange value, is no longer a mere intermediary form of
the circulation of commodities, but its final result.
That such _time sales_ in which the two poles of the sale are separated
in point of time, have their natural origin in the simple circulation
of commodities, requires no elaborate proof. In the first place, the
development of circulation leads to a continual repetition of the
mutual transactions between the same commodity owners who confront
each other as seller and buyer. The repetition is not accidental; on
the contrary, goods are ordered, let us say, for a certain date in the
future when they are to be delivered and paid for. In that case the
sale is ideal, i. e. it is legally accomplished without the actual
presence of the goods and money. Both forms of money, those of a medium
of circulation and of a means of payment still coincide here, since
in the first place, commodity and money change places simultaneously,
and secondly, the money does not buy the commodity, but realizes the
price of the commodity purchased before. In the second place, the
nature of a great many use-values makes the simultaneous alienation
and delivery of the goods impossible, and delivery has to be postponed
for a certain time; e. g., when the use of a house is sold for one
month, the use-value of the house is delivered only at the expiration
of the month, although it changes hands at the beginning of the month.
Since the actual transfer of the use-value and its virtual alienation
are separated here in point of time, the realization of its price
occurs also after its change of place. Finally, the difference in
the seasons and in the length of time required for the production of
various commodities brings about a situation where one tries to sell
his goods, while the other is not ready to buy; and with the repeated
purchases and sales between the same commodity owners the two ends
of sale fall apart according to the conditions of production of the
respective commodities. Thus arises a relation of creditor and debtor
between the owners of commodities which, though constituting the
natural foundation of the credit system, may be fully developed before
the latter comes into existence. It is clear that with the extension
of the credit system, and, consequently, with the development of the
capitalist system of production in general, the function of money as a
means of payment will extend at the expense of its function as a means
of purchase and, still more, as an element of hoarding. In England, e.
g., money as coin has been almost completely banished into the sphere
of retail and petty trade between producers and consumers, while it
dominates the sphere of large commercial transactions as a means of
payment.[105]
As the universal means of payment money becomes the _universal
commodity_ of all contracts, at first only in the sphere of
circulation of commodities.[106] But with the development of this
function of money, all other forms of payment are gradually converted
into money payments. The extent to which money is developed as the
exclusive means of payment indicates the degree to which exchange value
has taken hold of production in its depth and breadth.[107]
The volume of money in circulation, as a means of payment, is
determined in the first place, by the amount of payments, i. e. by the
sum total of the prices of the commodities alienated, but not about to
be alienated, as in the case of the simple circulation of money. The
quantity thus determined is subject, however, to two modifications.
The first modification is due to the rapidity with which the same
piece of money repeats the same function, i. e. with which the several
payments succeed one another. A pays B, whereupon B pays C, and so
forth. The rapidity with which the same coin repeats its function
as a means of payment, depends first, upon the continuity of the
relation of creditor and debtor among the owners of commodities, the
same commodity owner being the creditor of one person and the debtor
of another, etc., and secondly, upon the interval which separates the
times of various payments. This chain of payments or of supplementary
first metamorphoses of commodities is qualitatively different from the
chain of metamorphoses which is formed by the circulation of money as a
circulating medium. The latter not only makes its appearance gradually,
but is even formed in that manner. A commodity is first converted
into money, then again into a commodity, thereby enabling another
commodity to become money, etc.; or, seller becomes buyer, whereby
another commodity owner turns seller. This successive connection is
accidentally formed in the very process of the exchange of commodities.
But when the money which A has paid to B is passed on from B to C,
from C to D, etc., and that, too, at intervals rapidly succeeding one
another, then this external connection reveals but an already existing
social connection. The same money passes through different hands not
because it appears as a means of payment; it passes as a means of
payment because the different hands have already clasped each other.
The rapidity with which money circulates as a means of payment thus
shows that individuals have been drawn into the process of circulation
much deeper than would be indicated by the same rapidity of the
circulation of money as coin or as a means of purchase.
The sum total of prices made up by all the purchases and sales taking
place at the same time, and, therefore, side by side, constitutes the
limit for the substitution of the volume of coin by the rapidity of its
circulation. If the payments that are to be made simultaneously are
concentrated at one place―which naturally arises at first at points
where the circulation of commodities is largest―the payments balance
each other as negative and positive quantities: A is under obligations
to pay B, while he has to be paid by C. etc. The quantity of money
required as a means of payment will, therefore, be determined not by
the total amount of payments which have to be made simultaneously, but
by the greater or less concentration of the same and by the magnitude
of the balance remaining after their mutual neutralization as negative
and positive quantities. Special arrangements are made for settlements
of this kind even where the credit system is not developed at all,
as was the case e. g. in ancient Rome. The consideration of these
arrangements, however, as well as that of the general time limits of
payment, which are everywhere established among certain elements in the
community, does not belong here. We may add that the specific influence
which these time settlements exert on the periodic fluctuations in the
quantity of money in circulation, has been scientifically investigated
but lately.
In so far as the payments mutually balance as positive and negative
quantities, no money actually appears on the scene. It figures here
only in its capacity of a measure of value: first, in the prices of
commodities, and second, in the magnitude of mutual obligations. Aside
from its ideal form, exchange value does not exist here independently,
not even in the form of a token of value; that is to say, money plays
here only the part of ideal money of account. The function of money
as a means of payment thus implies a contradiction. On the one hand,
in so far as payments balance, it serves only ideally as a measure of
value. On the other hand, in so far as a payment has actually to be
made, money enters circulation not as a transient circulating medium,
but as the final resting form of the universal equivalent, as the
absolute commodity, in a word, as money. Therefore, whenever such a
thing as a chain of payments and an artificial system of settling them,
is developed, money suddenly changes its visionary nebulous shape as a
measure of value, turning into hard cash or means of payment, as soon
as some shock causes a violent interruption of the flow of payments and
disturbs the mechanism of their settlement. Thus, under conditions of
fully developed capitalist production, where the commodity owner has
long become a capitalist, knows his Adam Smith, and condescendingly
laughs at the superstition that gold and silver alone constitute money
or that money differs at all from other commodities as the absolute
commodity, money suddenly reappears not as a medium of circulation,
but as the only adequate form of exchange value, as the only form of
wealth, exactly as it is looked upon by the hoarder. In its capacity
of such an exclusive form of wealth, it reveals itself, unlike under
the monetary system, not in mere imaginary, but in actual depreciation
and worthlessness of all material wealth. That is what constitutes
the particular phase of crises of the world market which is known as
a money crisis. The _summum bonum_ for which everybody is crying at
such times as for the only form of wealth, is cash, hard cash; and by
the side of it all other commodities just because they are use-values,
appear useless like so many trifles and toys, or, as our Dr. Martin
Luther says, as mere objects of ornament and gluttony. This sudden
reversion from a system of credit to a system of hard cash heaps
theoretical fright on top of the practical panic; and the dealers by
whose agency circulation is affected shudder before the impenetrable
mystery in which their own economical relations are involved.[108]
Payments, in their turn, require the formation of reserve funds,
the accumulation of money as a means of payment. The building up of
reserve funds appears no longer as a practice carried on outside of
the sphere of circulation, as in the case of hoarding; nor as a mere
technical accumulation of coin, as in the case of coin reserves; on the
contrary, money must now be gradually accumulated to be available on
certain future dates when payments become due. While hoarding, in its
abstract form as a means of enrichment, declines with the development
of the capitalist system of production, that species of hoarding which
is directly called for by the process of production, increases; or, to
put it differently, a part of the treasure which is generally formed
in the sphere of circulation of commodities, is absorbed as a reserve
fund of means of payment. The more developed the capitalist system of
production, the more these reserve funds are limited to the necessary
minimum. Locke, in his work “On the Lowering of Interest”[109]
furnishes interesting data with reference to the size of these reserve
funds in his time. They show what a considerable part of the total
money in circulation the reservoirs for means of payment absorbed in
England just at the time when banking began to develop.
The law as to quantity of money in circulation, as it has been
formulated in the analysis of the simple circulation of money, receives
an essential modification when the circulation of the means of payment
is taken into account. The rapidity of the circulation of money whether
as circulating medium or as means of payment―being given, the total
amount of money in circulation at a given time will be determined by
the sum total of the prices of commodities to be realized, _plus_ the
total amount of payments falling due at the same time, _minus_ the
amount of payments balancing each other. The general law that the
volume of money in circulation depends on the prices of commodities is
not affected by this in the least, since the extent of the payments
is itself determined by the prices stipulated in contracts. What is,
however, strikingly demonstrated, is that even if the rapidity of
circulation and the economy of payments be assumed to remain the same,
the sum total of the prices of the commodities circulating in a given
period of time, say one day, and the volume of money in circulation on
the same day are by no means equal, because there is a large number
of commodities in circulation whose prices have yet to be realized in
money at a future date, and there is a quantity of money in circulation
which constitutes the payment for commodities which have long gone out
of circulation. The latter amount will depend on the sum of payments
falling due on the same day although contracted for at entirely
different periods.
We have seen that a change in the values of gold and silver does not
affect their function as measures of value or money of account. But
this change is of decisive importance for money as a hoard, since
with the rise or fall of value of gold and silver, the total value
of a gold or silver hoard will also rise or fall. Of still greater
importance is the effect of this change on money as a means of payment.
The payment takes place after the sale of the commodity, or the money
serves in two different capacities at two different periods; first, as
a measure of value, then as a means of payment corresponding to the
measurement. If, during this interval, the value of the precious metals
or the labor-time necessary for their production undergoes a change,
the same quantity of gold or silver will be worth more or less when
it appears as a means of payment than what it was when it served as a
measure of value, i. e., when the contract was concluded. The function
of a particular commodity, like gold or silver, to serve as money or
independent exchange value comes here in conflict with the nature of
the particular commodity whose magnitude of value depends on changes in
the cost of its production. The great social revolution which caused
the fall in value of the precious metals in Europe, is as well known as
the revolution of an opposite character which had been brought about
at an early period in the history of the ancient Roman republic by the
rise in value of copper in terms of which the debts of the plebeians
had been contracted. Without attempting here to follow any further
the fluctuations of value of the precious metals and their effect on
the system of bourgeois political economy, it is at once apparent
that a fall in the value of the precious metals favors the debtors at
the expense of the creditors, while a rise in their value favors the
creditors at the expense of the debtors.
c. WORLD MONEY.
Gold becomes money as distinguished from coin only after it is
withdrawn from circulation in the shape of a hoard; it then enters
circulation as a non-medium of circulation, and finally breaks through
the barriers of home circulation to assume the part of a universal
equivalent in the world of commodities. It becomes _world money_.
While the general measures of weight of the precious metals served as
their original measures of value, the reverse process takes place now
in the world market, and the reckoning names of money are turned back
into corresponding weight names. In the same way, while shapeless crude
metal (aes rude) was the original form of the medium of circulation
and the coin form constituted but the official stamp certifying that a
given piece of metal was of a certain weight, now the precious metal
in its capacity of a world coin throws off its stamp and shape and
reassumes the indistinguishable bullion form; and even if national
coins, such as Russian imperials, Mexican dollars, and English
sovereigns, do circulate abroad, their name is of no importance,
and only their contents count. Finally, as international money, the
precious metals come again to perform their original function of
mediums of exchange, which, like the exchange of commodities, arose
first not within the various primitive communities, but at their points
of contact with one another. As world money, money thus reassumes its
primitive form. On leaving the sphere of home circulation, it strips
off the particular forms which it has acquired in the course of the
development of the process of exchange within that particular national
sphere, those local garbs of standard of price, of coin, of auxiliary
coin, and of token of value.
We have seen that in the home circulation of a country, only one
commodity serves as a measure of value. Since, however, that function
is performed by gold in some countries and by silver in others, there
is a double standard of value in the world market and money assumes
two forms in all its other functions. The translation of the values
of commodities from gold prices into silver prices and vice versa
depends in each case upon the relative value of the two metals, which
is constantly changing and, therefore, appears to be constantly in the
process of determination. Commodity owners in every national sphere
of circulation have to use gold and silver alternately for foreign
circulation and thus to exchange the metal which is accepted as money
at home for the metal which they happen to need as money abroad. Every
nation is, therefore, utilizing both metals, gold and silver, as world
money.
In the international circulation of commodities, gold and silver appear
not as mediums of circulation, but as universal mediums of exchange.
The universal medium of exchange performs its function only under its
two developed forms of a means of purchase and of a means of payment,
whose mutual relation in the world market is the very reverse of what
it is at home. In the sphere of home circulation, money in the form of
coin, played exclusively the part of a means of purchase, either as the
intermediary in the dynamic unity C―M―C or as the representative of the
transient form of exchange value in the unceasing change of positions
by commodities. In the world market it is just the contrary. Gold and
silver appear here as a means of purchase when the exchange of matter
is but one-sided, and purchase and sale do not coincide. The frontier
trade at Kiachta e. g. is both actually and according to treaty, one
of barter, in which silver plays only the part of a measure of value.
The war of 1857-58 compelled the Chinese to sell without buying. Silver
suddenly appeared now as a means of purchase. Out of regard to the
letter of the treaty, the Russians made up the French five frank coins
into crude silver commodities, which were made to serve as a means
of exchange. Silver has always served as a means of purchase between
Europe and America on one side and Asia on the other, where it settles
down in the form of hoards. Furthermore, the precious metals serve
as international means of purchase whenever the ordinary balance of
exchange of matter between two nations is suddenly upset, as e. g. when
a failure of crops forces one of them to buy on an extraordinary scale.
Finally, the precious metals are international means of purchase in
the hands of gold and silver producing countries, in which case they
directly constitute a product and commodity and not merely a converted
form of a commodity. The more the exchange of commodities between
different national spheres of circulation is developed, the more
important becomes the function of world money to serve as a _means of
payment_ for the settlement of international balances.
Like home circulation, international circulation requires a constantly
changing quantity of gold and silver. A part of the accumulated hoards
serves therefore, in each country as a reserve fund of world money,
which now declines, now rises, according to the fluctuations of the
exchange of commodities.[110] Besides the special movements which take
place between national spheres of circulation, world-money possesses
a universal movement, whose starting points are at the sources of
production from which gold and silver streams spread out in different
directions all over the world market. Here gold and silver enter the
world circulation as commodities and are exchanged for commodity
equivalents in proportion to the labor-time contained in them, before
they penetrate national spheres of circulation. In the latter, they
appear now with a given magnitude of value. Every fall or rise in the
cost of their production equally affects, therefore, their relative
value throughout the world market; on the other hand, that value is
entirely independent of the extent to which the different national
spheres of circulation absorb gold or silver. The part of the metal
stream which is caught up by every separate sphere in the world of
commodities, partly enters directly the home circulation of money
to make up for worn out coin; partly is dammed up in the different
reservoirs containing hoards of coin, means of payment and world-money;
partly is turned into articles of luxury, while the rest simply forms
a treasure. At an advanced stage of development of the capitalist
system of production the formation of hoards is reduced to the minimum
required by the various processes of circulation for the free play
of their mechanism. The hoard as such becomes idle wealth, unless it
appears as a temporary form of a surplus resulting from a favorable
balance of payments or as the result of an interrupted exchange of
matter, i. e. as the solidification of a commodity in its first
metamorphosis.
Gold and silver, in their capacity of money, being by conception
universal commodities, assume in their capacity of world money the
form adapted to a universal commodity. To the extent to which all
commodities are exchanged for them, they become the transformed
impersonation of all commodities and, therefore, universally alienable
commodities. Their function of serving as the embodiment of universal
labor-time is realized more and more as the interchange of matter
produced by concrete labor embraces increasing parts of the world.
They become universal equivalents to the extent to which the series
of particular equivalents which constitute their spheres of exchange,
increases. Since in the sphere of world circulation commodities unfold
their own exchange value on a universal scale, they assume the form
of world money when transformed into gold and silver. As commodity
owning nations are thus turning gold into money by their diversified
industry and universal trade, industry and trade appear to them only as
a means of getting money out of the world market in the shape of gold
and silver. Gold and silver, as world money, are, therefore, as much
products of the universal circulation of commodities as they are means
of widening its sphere. Like chemistry which grew up behind the backs
of the alchemists who tried to find a way of making gold, so do the
sources of world industry and world trade spring up behind the backs
of the owners of commodities, while they are hunting for the commodity
in its magic form. Gold and silver help to create the world market by
anticipating its existence in their conception of money. That this
magic effect of the precious metals is by no means confined to the
period of infancy of capitalist society but is a necessary outgrowth
of the perverse conception which the representatives of the commodity
world have of their own work in society, is shown by the extraordinary
influence exerted in the middle of the nineteenth century by the
discovery of new gold fields.
Just as money develops into world-money, so the commodity owner
develops into a cosmopolitan. The cosmopolitan relation of men is
originally only a relation of commodity owners. The commodity as such
rises above all religious, political, national, and language barriers.
Price is its universal language and money, its common form. But with
the development of world-money as distinguished from national coin,
there develops the cosmopolitanism of the commodity owner as the faith
of practical reason opposed to traditional, religious, national and
other prejudices which hinder the interchange of matter among mankind.
As the identical gold that lands in England in the form of American
eagles, turns there into sovereigns and three days later circulates in
Paris in the form of Napoleons, only to emerge in Venice in a few weeks
as so many ducats, retaining all the while the same value, it becomes
clear to the commodity owner that nationality “is but the guinea’s
stamp.” The lofty idea which he conceives of the entire world is that
of a market, the _world market_.[111]
4. THE PRECIOUS METALS.
The process of capitalist production first of all takes hold of the
metallic circulation as of a ready, transmitted organ which, though
undergoing a gradual transformation, always retains its fundamental
structure. The question as to why gold and silver and not other
commodities serve as money material falls outside the limits of the
capitalist system. We shall, therefore, confine ourselves to summing
up the most essential points.
Since universal labor-time admits of quantitative differences only,
the object which is to serve as its specific incarnation must be
capable of representing purely quantitative differences, i. e., it
must be homogeneous and uniform in quality throughout. That is the
first condition a commodity must satisfy to perform the function of
a measure of value. If commodities were estimated in oxen, hides,
grain, etc., they would really have to be estimated in an ideal average
ox, or average hide, since there are qualitative differences between
an ox and an ox, grain and grain, hide and hide. On the contrary,
gold and silver, as elementary substances, are always the same,
and equal quantities of them represent, therefore, values of equal
magnitude.[112] The other condition which a commodity that is to serve
as a universal equivalent must satisfy and which follows directly from
its function of representing purely quantitative differences, is that
it must be capable of being divided and re-united at will, so that
money of account may be represented materially as well. Gold and
silver possess these properties to a superior degree.
As mediums of circulation, gold and silver have this advantage over
other commodities, that their high specific gravity which condenses
much weight in little space, corresponds to their economic specific
gravity which condenses relatively much labor-time, i. e. a great
quantity of exchange value in a small volume. This insures facility
of transport, of transition from hand to hand and from one country to
another, the ability to appear as rapidly as to disappear, in short,
that material mobility which constitutes the _sine qua non_ of the
commodity that is to serve as the _perpetuum mobile_ of the process of
circulation.
The high specific value of the precious metals, their durability,
comparative indestructibility, insusceptibility of oxidation through
the action of the air, in the case of gold insolubility in acids
except in aqua regia,―all these natural properties make the precious
metals the natural material for hoarding. Peter Martyr who seems to
have been a great lover of chocolate, remarks, therefore, of the
cacao-bags which formed a species of Mexican gold: “O felicem monetam,
quae suavem utilemque praebet humano generi potum, et a tartarea peste
avaritiae suos immunes servat possessores, quod suffodi aut diu servari
nequeat.”[113]
The great importance of metals in general in the direct process of
production is due to the part they play as instruments of production.
Apart from their scarcity, the great softness of gold and silver as
compared with iron and even copper (in the hardened state in which it
was used by the ancients), makes them unfit for that application and
deprives them, therefore, to a great extent, of that property on which
the use-value of metals is generally based. Useless as they are in the
direct process of production, they are easily dispensed with as means
of existence, as articles of consumption. For that reason any desired
quantity of them may be absorbed by the social process of circulation
without disturbing the processes of direct production and consumption.
Their individual use-value does not come in conflict with their
economic function. Furthermore, gold and silver are not only negatively
superfluous, i. e. dispensable articles, but their aesthetic properties
make them the natural material of luxury, ornamentation, splendor,
festive occasions, in short, the positive form of abundance and wealth.
They appear, in a way, as spontaneous light brought out from the
underground world, since silver reflects all rays of light in their
original combination, and gold only the color of highest intensity,
viz. red light. The sensation of color is, generally speaking, the most
popular form of aesthetic sense. The etymological connection between
the names of the precious metals, and the relations of colors, in the
different Indo-Germanic languages has been established by Jacob Grimm
(see his History of the German Language).
Finally, the susceptibility of gold and silver of being turned from
coin into bullion, from bullion into articles of luxury and vice versa,
i. e. the advantage they possess as against other commodities in not
being tied down to a definite, exclusive form in which they can be
used, makes them the natural material of money, which must constantly
change from one form to another.
Nature no more produces money than it does bankers or discount
rates. But since the capitalist system of production requires the
crystallization of wealth as a fetich in the form of a single article,
gold and silver appear as its appropriate incarnation. Gold and silver
are not money by nature, but money is by nature gold and silver. In the
first place, the silver or gold money crystal is not only the product
of the process of circulation, but in fact its only final product. In
the second place, gold and silver are ready and direct products of
nature, not distinguished by any difference of form. The universal
product of the social process or the social process itself as a product
is a peculiar natural product, a metal hidden in the bowels of the
earth and extracted therefrom.[114]
We have seen that gold and silver are unable to fulfill the
requirements which they are expected to meet in their capacity of
money, viz. to remain values of unvarying magnitude. Still, as
Aristotle had already observed, they possess a more constant value than
the average of other commodities. Apart from the universal effect of an
appreciation or depreciation of the precious metals, the fluctuations
in the ratio between the values of gold and silver has a special
importance, since both serve side by side in the world market as money
material. The purely economic causes of this change of value must be
traced to the change in the labor-time required for the production of
these metals; conquests and other political upheavals which exercised
a great influence on the value of metals in the ancient world, have
nowadays only a local and transitory effect. The labor-time required
for the production of the metals will depend on the degree of their
natural scarcity, as well as on the greater or less difficulty with
which they can be obtained in a purely metallic state. As a matter of
fact, gold is the first metal discovered by man. This is due to the
fact that nature itself furnishes it partly in pure crystalline form,
individualized, free from chemical combination with other substances,
or, as the alchemists used to say, in a virgin state; and so far as
it does not appear in that state, nature does the technical work in
the great gold washeries of rivers. Only the crudest kind of labor is
thus required of man in the extraction of gold, either from rivers or
from alluvial deposits; while the extraction of silver presupposes the
development of mining and a comparatively high degree of technical
skill generally. For that reason the value of silver is originally
greater than that of gold in spite of the lesser absolute scarcity of
the former. Strabo’s assertion that a certain Arabian tribe gave ten
pounds of gold for one pound of iron and two pounds of gold for one
pound of silver, seems by no means incredible. But as the productive
powers of labor in society are developed and the product of unskilled
labor rises in value as compared with the product of skilled labor;
as the earth’s crust is more thoroughly broken up and the original
superficial sources of gold supply give out, the value of silver begins
to fall in proportion to that of gold. At a given stage of development
of engineering and of the means of communication, the discovery of
new gold or silver fields become the decisive factor. In ancient Asia
the ratio of gold to silver was 6 to 1 or 8 to 1; the latter ratio
prevailed in China and Japan as late as the beginning of the nineteenth
century; 10 to 1, the ratio in Xenophon’s time, may be considered as
the average ratio of the middle period of antiquity. The exploitation
of the Spanish silver mines by Carthage and later by Rome had about the
same effect in antiquity, as the discovery of the American mines in
modern Europe. For the period of the Roman empire 15 or 16 to 1 may be
assumed as a rough average, although we frequently find cases of still
greater depreciation of silver in Rome. The same movement beginning
with the relative depreciation of gold and concluding with the fall
in the value of silver, is repeated in the following epoch which has
lasted from the Middle Ages to the present time. As in Xenophon’s times
the average ratio in the Middle Ages was 10 to 1, changing to 16 or
15 to 1 in consequence of the discovery of the American mines. The
discovery of the Australian, Californian and Columbian gold sources
makes a new fall in the value of gold probable.[115]
C. THEORIES OF THE MEDIUM OF CIRCULATION AND OF MONEY.
As the universal thirst for gold prompted nations and princes in the
sixteenth and seventeenth centuries, the period of infancy of modern
bourgeois society, to crusades beyond the sea in search of the golden
grail,[116] the first interpreters of the modern world, the founders
of the monetary system, of which the mercantile system is but a
variation, proclaimed gold and silver, i. e. money, as the only thing
that constitutes wealth. They were quite right when, from the point
of view of the simple circulation of commodities, they declared that
the mission of bourgeois society was to make money, i. e. to build up
everlasting treasures which neither moth nor rust could eat. It is
no argument with the monetary system to say that a ton of iron whose
price is £3 constitutes a value of the same magnitude as £3 worth
of gold. The point here is not the magnitude of the exchange value,
but as to what constitutes its adequate form. If the monetary and
mercantile systems single out international trade and the particular
branches of national industry directly connected with that trade as
the only true sources of wealth or money, it must be borne in mind,
that in that period the greater part of national production was still
carried on under forms of feudalism and was the source from which
producers drew directly their means of subsistence. Products, as a
rule, were not turned into commodities nor, therefore, into money;
they did not enter into the general social interchange of matter; did
not, therefore, appear as embodiments of universal abstract labor;
and did not, in fact, constitute bourgeois wealth. Money as the end
and object of circulation is exchange value or abstract wealth, but
it is no material element of wealth and does not form the directing
goal and impelling motive of production. True to the conditions as
they prevailed in that primitive stage of bourgeois production, those
unrecognized prophets held fast to the pure, tangible, and resplendent
form of exchange value, to its form of a universal commodity as against
all special commodities. The proper bourgeois economic sphere of that
period was the sphere of the circulation of commodities. Hence, they
judged the entire complex process of bourgeois production from the
point of view of that elementary sphere and confounded money with
capital. The unceasing war of modern economists against the monetary
and mercantile system is mostly due to the fact that this system blabs
out in brutally naive fashion, the secret of bourgeois production, viz.
its subjection to the domination of exchange value. Ricardo, though
wrong in the application he makes of it, remarks somewhere that even in
times of famine, grain is imported not because the nation is starving,
but because the grain dealer is making money. In its criticism of the
monetary and mercantile system, political economy, by attacking that
system as a mere illusion and as a false theory, fails to recognize in
it the barbaric form of its own fundamental principles. Furthermore,
this system has not only an historic justification, but within
certain spheres of modern economy retains until now the full rights
of citizenship. At all stages of the bourgeois system of production
in which wealth assumes the elementary form of a commodity, exchange
value assumes the elementary form of money and in all phases of the
process of production wealth reassumes for a moment the universal
elementary commodity form. Even at the most advanced stage of bourgeois
economy, the specific functions of gold and silver to serve as money,
in contradistinction to their function of mediums of circulation―a
function which distinguishes them from all other commodities―is not
done away with, but only limited, hence the monetary and mercantile
system retains its right of citizenship. The Catholic fact that gold
and silver are contrasted with other profane commodities as the direct
incarnation of social labor, that is as the expression of abstract
wealth, naturally offends the Protestant point d’honneur of bourgeois
economy, and out of fear of the prejudices of the monetary system
it had lost for a long time its grasp of the phenomena of money
circulation, as will be shown presently.
It was quite natural that, contrary to the monetary and mercantile
system which knew money only in its form of a crystallized product
of circulation, classical political economy should have conceived
money first of all in its fluent form of exchange value arising and
disappearing within the process of the metamorphosis of commodities.
And since the circulation of commodities is regarded exclusively in the
form of C―M―C and the latter in its turn, exclusively in its aspect of
a dynamic unity of sale and purchase, money comes to be regarded in
its capacity of a medium of circulation as opposed to its capacity of
money. And when that medium of circulation is isolated in its function
of coin, it turns, as we have seen, into a token of value. But since
classical political economy had to deal with metallic circulation as
the prevailing form of circulation, it defined metallic money as coin,
and metallic coin as a mere token of value. In accordance with the
law governing the circulation of tokens of value, the proposition was
advanced that the prices of commodities depend on the quantity of money
in circulation instead of the opposite principle that the quantity of
money in circulation depends on the prices of commodities. We find
this view more or less clearly expressed by the Italian economists of
the seventeenth century; LOCKE now asserts, now denies that principle;
it is clearly elaborated in the “Spectator” (of October 19, 1711)
by MONTESQUIEU AND HUME. Since Hume was by far the most important
representative of this theory in the eighteenth century, we shall
commence our review with him.
Under certain assumptions, an increase or decrease in the quantity
either of the metallic money in circulation, or of the tokens of value
in circulation seems to affect _uniformly_ the prices of commodities.
With each fall or rise of the _value_ of gold or silver in which the
exchange values of commodities are estimated as prices, there is a rise
or fall of prices, because of the change in their measure of value; as
a result of the rise or fall of prices, a greater or smaller quantity
of gold and silver is circulating as coin. But the apparent phenomenon
is the fall in prices―the exchange value of commodities remaining the
same―accompanied by an increased or diminished quantity of the medium
of circulation. On the other hand, if the quantity of tokens of value
rises above or falls below its required level, it is forcibly reduced
to the latter by a fall or rise of prices. In either case the same
effect seems to be brought about by the same cause, and Hume holds fast
to this semblance.
Every scientific inquiry into the relation between the volume of the
circulating medium and the movement of prices must assume the value
of the money material as given. Hume, on the contrary, considers
exclusively periods of revolution in the value of the precious metals,
i. e. revolutions in the measure of value. The rise of prices which
occurred simultaneously with the increase of metallic money after the
discovery of the American mines forms the historical background of his
theory, while his polemic against the monetary and mercantile system
furnishes its practical motive. The importation of precious metals can
naturally increase while their cost of production remains the same.
On the other hand, a decrease in their value, i. e. in the labor-time
required for their production will reveal itself first of all in
their increased imports. Hence, said the later followers of Hume, a
decrease in the value of the precious metals, reveals itself in an
increased volume of the circulating medium, and the increased volume
of the latter is shown in the rise of prices. As a matter of fact,
however, the rise in price affects only exported commodities, which
are exchanged for gold and silver as commodities and not as mediums
of circulation. Thus, the prices of these commodities, which are now
estimated in gold and silver of lower value, rise as compared with
the prices of all other commodities whose exchange value continues
to be estimated in gold or silver according to the standard of their
old cost of production. This twofold appraisement of the exchange
values of commodities in the same country can naturally be only
temporary, and the gold and silver prices must become equalized in
the proportions determined by the exchange values themselves, so that
finally the exchange values of all commodities come to be estimated
according to the new value of the money material. The development of
this process, as well as the ways and means in which the exchange value
of commodities asserts itself within the limits of the fluctuations
of market prices, do not fall within the scope of this work. But that
this equalization takes place but gradually in the early periods of
development of bourgeois production and extends over long periods of
time, never keeping pace with the increase of cash in circulation,
has been strikingly demonstrated by new critical investigations of
the movement of prices of commodities in the sixteenth century.[117]
The favorite references of Hume’s followers to the rise of prices
in ancient Rome in consequence of the conquests of Macedonia, Egypt
and Asia Minor, are quite irrelevant. The characteristic method of
antiquity of suddenly transferring hoarded treasures from one country
to another, which was accomplished by violence and thus brought about
a temporary reduction of the cost of production of precious metals
in a certain country by the simple process of plunder, affects just
as little the intrinsic laws of money circulation, as the gratuitous
distribution of Egyptian and Sicilian grain in Rome affected the
universal law governing the price of grain. Hume, as well as all
other writers of the eighteenth century, was not in possession of the
material necessary for the detailed observation of the circulation
of money. This material, which first becomes available with the full
development of banking, includes in the first place a critical history
of prices of commodities, and in the second, official and current
statistics relating to the expansion and contraction of the circulating
medium, the imports and exports of the precious metals, etc. Hume’s
theory of circulation may be summed up in the following propositions:
1. The prices of commodities in a country are determined by the
quantity of money existing there (real or symbolic money); 2. The
money current in a country represents all the commodities to be found
there. In proportion “as there is more or less of this representation,”
i. e. of money, “there goes a greater or less quantity of the thing
represented to the same quantity of it”; 3. If commodities increase
in quantity, their price falls or the value of money rises. If money
increases in quantity, then, on the contrary, the price of commodities
rises and the value of money declines.[118]
“The dearness of everything,” says Hume, “from plenty of money, is a
disadvantage, which attends an established commerce, and sets bounds
to it in every country, by enabling the poorer states to undersell
the richer in all foreign markets.”[119] “Where coin is in greater
plenty; as a greater quantity of it is required to represent the same
quantity of goods; it can have no effect, either good or bad, taking
a nation within itself; any more than it would make an alteration on
a merchant’s books, if, instead of the Arabian method of notation,
which requires few characters, he should make use of the Roman, which
requires a great many. Nay, the greater quantity of money, like the
Roman characters, is rather inconvenient, and requires greater trouble
both to keep and transport it.”[120] In order to prove anything, Hume
should have shown that under a _given_ system of notation the quantity
of characters used does not depend on the magnitude of the numbers,
but that on the contrary, the magnitude of the numbers depends on
the quantity of the characters used. It is perfectly true that there
is no advantage in estimating or “counting” values of commodities
in depreciated gold and silver, and that is the reason why nations
have always found it more convenient with the growth of the value
of the commodities in circulation to count in silver in preference
to copper, and in gold rather than in silver. In proportion as the
nations became richer, they converted the less valuable metals into
subsidiary coin and the more valuable ones into money. Furthermore,
Hume forgets that in order to count values in gold and silver, it is
not necessary that either gold or silver should be “on hand.” Money of
account and the medium of circulation are identical with him and both
are “coin.” Hume concludes that a rise or fall of prices depends on
the quantity of money in circulation, because a change in the value
of the measure of value, i. e. of the precious metals which serve as
money of account, causes a rise or fall of prices and, consequently,
also a change in the amount of money in circulation, the rapidity of
the latter remaining the same. That not only the quantity of gold and
silver increased in the sixteenth and seventeenth centuries, but that
the cost of their production had declined at the same time, Hume could
know from the closing up of the European mines. In the sixteenth and
seventeenth centuries the prices of commodities increased in Europe
with the influx of the mass of American gold and silver; hence the
prices of commodities in every land are determined by the mass of
gold and silver to be found there. This was Hume’s first “necessary
consequence.”[121] In the sixteenth and seventeenth centuries prices
had not risen uniformly with the increase of the quantity of precious
metals; more than half a century passed before _any_ change in
prices became perceptible, and even then it took a long time before
the exchange values of commodities came to be generally estimated
according to the depreciated value of gold and silver, i. e. before the
revolution affected the general price level. Hence, concludes Hume,
who, quite contrary to the principles of his philosophy, generalizes
indiscriminately from imperfectly observed facts, prices of commodities
or the value of money depend not on the total amount of money to be
found in the country, but rather on the quantity of gold and silver
which is actually in circulation; but in the long run all the gold
and silver in the country must be absorbed by circulation in the
form of coin.[122] It is clear that if gold and silver have a value
of their own, then, apart from all other laws of circulation, only a
definite quantity of gold and silver can circulate as the equivalent
of commodities of a given value. If, therefore, every quantity of gold
and silver which happens to be in a country must enter the sphere of
exchange of commodities as a medium of circulation without regard
to the total value of the commodities, then gold and silver have no
intrinsic value and are in fact no real commodities. That is Hume’s
third “necessary consequence.” He makes commodities enter the process
of circulation without price and gold and silver without value. That
is the reason why he never speaks of the value of commodities and of
gold, but only of their relative quantities. Locke had already said
that gold and silver had merely an imaginary or conventional value; the
first brutal expression of opposition to the assertion of the monetary
“system” that gold and silver alone have true value. That gold and
silver owe their character of money to the function they perform in
the social process of exchange is interpreted to the effect that they
owe their own value and therefore the magnitude of their value to a
social function.[123] Gold and silver are thus worthless things, which,
however, acquire a fictitious value within the sphere of circulation
_as representatives of commodities_. They are converted by the process
of circulation not into money, but into value. This value of theirs is
determined by the proportion between their own volume and that of the
commodities, since the two must balance each other. Thus, Hume makes
gold and silver enter the world of commodities as non-commodities;
but as soon as they appear in the form of coin, he turns them, on
the contrary, into mere commodities, which must be exchanged for
other commodities by simple barter. In that manner, if the world of
commodities consisted of but one commodity, say one million quarters
of grain, the idea would work itself out very simply; viz., one
quarter of grain would be exchanged for two ounces of gold if there
were altogether two million ounces of gold, and for twenty ounces of
gold, if there were a total of twenty million ounces, the price of the
commodity and the value of money rising or falling in inverse ratio to
the quantity of gold in existence.[124] But the world of commodities
consists of an endless variety of use-values, whose relative values are
by no means determined by their relative quantities. How, then, does
Hume conceive this exchange of the volume of commodities for the volume
of gold? He contents himself with the meaningless, hollow idea that
every commodity is exchanged as an aliquot part of the entire volume of
commodities for a corresponding aliquot part of the volume of gold. The
process of the movement of commodities due to the antagonism between
exchange value and use-value which commodities bear within themselves,
and which manifests itself in the circulation of money, becoming
crystallized in different forms of the latter, is thus done away with,
giving place to the imaginary mechanical equalization process between
the quantity of precious metals to be found in a country and the volume
of commodities existing there at the same time.
SIR JAMES STEUART opens his inquiry into the nature of coin and
money with an elaborate criticism of Hume and Montesquieu.[125] He
is really the first to ask this question: is the quantity of current
money determined by the prices of commodities, or are the prices of
commodities determined by the quantity of current money? Although his
analysis is obscured by his fantastic conception of the measure of
value, his vacillating view of exchange value and by reminiscences
of the mercantile system, he discovers the essential forms of money
and the general laws of the circulation of money, because he makes
no attempt at a mechanical separation of commodities from money, but
proceeds to develop its different functions from the different aspects
of the exchange of commodities. Money is used, he says, for two
principal purposes: for the payment of debts and for the purchase of
what one needs; the two together form “ready money demands.” The state
of trade and industry, the mode of living, the customary expenditures
of the people, taken all together regulate and determine the volume
of “ready money demands,” i. e. the number of “alienations.” In order
to effect this multitude of payments, a certain proportion of money
is required. This proportion may increase or decrease according to
circumstances, even while the number of alienations remains the same.
At any rate, the circulation of a country can absorb only a definite
quantity of money.[126] “It is the complicated operations of demand
and competition which determines the standard price of everything”;
the latter “does not in the least depend on the quantity of gold and
silver in the country.”[127] What then will become of the gold and
silver that is not required as coin? They are hoarded or used in the
manufacture of articles of luxury. If the quantity of gold and silver
fall below the level required for circulation, symbolic money or other
substitutes take its place. If a favorable rate of exchange brings
about a surplus of money in the country and cuts off at the same time
the demand for its shipment abroad, it will accumulate in strong-boxes,
where the “riches will remain without producing more effect than if
they had remained in the mine.”
The second law discovered by Steuart is that of the reflux of credit
circulation to its starting point. Finally, he works out the effects
which the disparity of the rates of interest in different countries
produces upon the international export and import of precious
metals. The last two points we mention here only for the sake of
completeness, since they have but a remote bearing on the subject of
our discussion.[128] Symbolic money or credit money―Steuart does not
as yet distinguish between the two forms of money―may take the place
of precious metals as a means of purchase or means of payment in the
sphere of home circulation, but never in the world market. Paper notes
are therefore “money of the society,” while gold and silver are “money
of the world.”[129]
It is characteristic of nations with an “historical” development, in
the sense in which the term is used by the historical school of law,
to keep forgetting their own history. Although the controversy as to
the relation of prices of commodities to the volume of the circulating
medium has been continually agitating Parliament for the last half a
century, and has precipitated in England thousands of pamphlets, large
and small, Steuart has remained even more of a “dead dog” than Spinoza
seemed to be to Moses Mendelson in Lessing’s time. Even the latest
writer on the history of “currency,” Maclaren, makes Adam Smith the
original author of Steuart’s theory, and Ricardo of Hume’s theory.[130]
While Ricardo elaborated Hume’s theory, Adam Smith registered the
results of Steuart’s investigations as dead facts. Adam Smith applied
the Scotch saying that “mony mickles mak a muckle” even to his
spiritual wealth, and therefore concealed with petty care the sources
to which he owed the little out of which he tried to make so much.
More than once he prefers to break off the point of the discussion,
whenever he feels that an attempt on his part clearly to formulate the
question would compel him to settle his accounts with his predecessors.
So in the case of the money theory. He tacitly adopts Steuart’s theory
when he says that the gold and silver existing in a country is partly
utilized as coin; partly accumulated in the form of reserve funds for
merchants in countries without banks, or of bank reserves in countries
with a credit currency; partly serves as a hoard for the settling of
international payments; partly is turned into articles of luxury. He
passes over without remark the question as to the quantity of coin in
circulation, treating money quite wrongly as a mere commodity.[131]
His vulgarizer, the dull J. B. Say, whom the French have proclaimed
_prince de la science_―like Johann Christoph Gottsched, who proclaimed
his Schönaich a Homer and himself a Pietro Aretino to the _terror
principum and lux mundi_―has with great pomp raised this not altogether
innocent oversight of Adam Smith to a dogma.[132] It must be said,
however, that his hostile attitude to the illusions of the mercantile
system prevented Adam Smith from taking an objective view of the
phenomena of metallic circulation, while his views on credit money are
original and deep. As in the eighteenth century petrification theories
there is always felt the presence of an undercurrent which springs from
either a critical or apologetic attitude toward the biblical tradition
of the flood, so there is concealed behind all the money theories of
the eighteenth century a secret struggle with the monetary system, the
ghost which had stood guard over the cradle of bourgeois economy and
continued to throw its shadow over legislation.