Attracts the commodity from its position in the hand
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of the seller into that of the buyer. As soon as the
term of the contract expires, money enters circula-
tion, since it changes its position by passing from the
hands of the former buyer into those of the former
seller. But ft does not enter circulation as a circu-
lating medium or as a means of purchase. It per-
formed 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 ca-
pacity of a means of payment money appears as the
absolute commodity, but within the sphere of circu-
lation 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.'
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, en-
tirely apart from his individual wants, the movement
of the circulation process makes selling a social neces-
sity with every owner of commodities. As a former
"The difference between the means of purchase and the
means of payment is emphasized hy (Luther.
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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 pay-
ment, 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 mo-
tive and essence of sale for the sake of payment be-
comes 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 meta-
morphosis has taken place, i. e., before the com-
modity has been turned into money. The first meta-
morphosis thus takes place after the second in point
of time ; and thereby, money i. e. the form of the com-
modity 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, re-
quires no elaborate proof. In the first place, the de-
velopment of circulation leads to a continual repeti-
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tion 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 pay-
ment still coincide here, since in the first place, com-
modity and money change places simultaneously, and
secondly, the money does not buy the commodity, but
realizes the price of the commodity purchased be-
fore. In the second place, the nature of a great many
use-values makes the simultaneous alienation and de-
livery 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
atfer 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 pur-
chases and sales between the same commodity owners
the two ends of sale fall apart according to the con-
ditions of production of the respective commodities.
Thus arises a relation of creditor and debtor between
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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 func-
tion 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 Eng-
land, e. g., money as coin has been almost completely
banished into the sphere of retail and petty trade be-
tween producers and consumers, while it dominates
the sphere of large commercial transactions as a
means of payment. 1
As the universal means of payment money becomes
the universal commodity of all contracts, at first only in
'Mr. MacLeod, in spite of his doctrinaire conceit about defi-
nitions, fails so utterly to grasp the most elementary econom-
ic relations that he tries to deduce the very origin of money
from its crowning form, viz., that of a means of payment. He
says among other things that since people do not always need
each other's services at the same time, and not to the same
extent, "there would remain over a certain difference or
amount of service due from the first to the second— debt."
The owner of this debt needs the services of a third person,
who does not directly need those of the second, and ''transfers
to the third the debt dut to him from the first. Evidence of
debts changes so hands—currency. . . . When a person
received an obligation expressed by metallic currency, he is
able to command the services not only of the original debtor,
but of the whole of the industrious community." (MacLeod,
"Theory and Practice of Banking/ 9 etc, London, 1855, v. L,
ch. I.)
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194
the sphere of circulation of commodities. 1 But with the
development of this function of money, all other forms
of payment are gradually converted into money pay*
mente. The extent to which money is developed as the
exclusive means of payment indicates the degree tot
which exchange value has taken hold of production in
its depth and breadth. 1
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
*Bailey, 1. c, p. 3. "Money is the general commodity of
contracts, or that in which the majority of bargains about
property, to be completed at a future time, are made."
'Says Senior (in his Lectures, published by Gomte Arriva-
bene, 1. c, p. 117) : "Since the value of everything changes
within a certain period of time, people select as a means of pay-
ment an article whose value changes least and which retains
longest a given average ability to buy things. Thus, money be-
comes the expression or representative of values." On the con-
trary: just because gold, silver, etc, have become money, i. e.,
the embodiment of independently existing exchange value, they
become the universal means of payment. When the considera-
tion as to the stability of the value of money mentioned by Mr.
Senior comes into play, i. e., in periods when money asserts it-
self as the universal means of payment through the force of
circumstances, then is just the time when fluctuations in the
value of money are discovered. Such was the time of Elizabeth
in England, when Lord Burleigh and Sir Thomas Smith, in
view of the manifest depreciation of the precious metals, put
through an act of parliament which obliged the universities of
Oxford and Cambridge to stipulate the payment of one-third elf
their ground rents in wheat and malt.
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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 pay-
ments 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 commodi-
ties, 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 metamor-
phoses 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 accident-
ally 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 pay-
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mcnt because the different hands have already
clasped each other. The rapidity with which money
circulates as a means of payment thus shows that in-
dividuals have been drawn into the process of circu-
lation 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 pur-
chases 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 sim-
ultaneously, but by the greater or less concentration
of the same and by the magnitude of the balance re-
maining 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 estab-
lished among certain elements in the community, does
not belong here. We may add that the specific in-
fluence which these time settlements exert on the
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periodic fluctuations in the quantity of money in cir-
culation, has been scientifically investigated but lately.
In so far as the payments mutually balance as posi-
tive and negative quantities, no money actually ap-
pears on the scene. It figures here only in its ca-
pacity 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 meas-
ure of value. On the other hand, in so far as a pay-
ment has actually to be made, money enters circula-
tion 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. There-
fore, 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 dis-
turbs the mechanism of their settlement. Thus, under
conditions of fully developed capitalist production,
where the commodity owner has long become a capit-
alist, 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
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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 faioney crisis.
The sumtnum 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 cir-
culation is affected shudder before the impenetrable
mystery in which their own economical relations are
involved. 1
Payments, in their turn, require the formation of
'Bo&sguillebert, who would stem the development of bour-
geois relations of production and violently attacks the bour-
geois personally, has a soft heart for those forms oi money in
which it appears only ideally or transiently. Thus he speaks
first of the medium of circulation and next of the means of
payment. What he does not see is the direct transition of
money from its ideal to the material form, since the hard
cash is latently present in the ideal measure of value. That
money is but another form of commodities, he says, is shown
by wholesale trade, in which exchange takes place without
the intervention of money, after "les marchandises sont ap-
preetee." ("Le Detail de la France," 1, c* p. Q1Q.)
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reserve funds, the accumulation of money as a means
of payment The building up of reserve funds ap-
pears 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 cas« of coin reserves; on the contrary, money
must now be gradually accumylated 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 hoard-
ing which is directly called for by the process of pro-
duction, 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 re-
serve fund of means of payment. The more de-
veloped the capitalist system of production, the more
these reserve funds are limited to the necessary mini-
mum. Locke, in his work "On the Lowering of In-
terest" 1 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 ab-
sorbed in England just at the time when banking be-
gan 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 modifica-
tion 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
1 Locke, 1. c, p. 17. 18. .
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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 com-
modities 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 dif-
ferent 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
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place after the sale of the commodity, or the money
serves in two different capacities at two different pe-
riods; 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 un-
dergoes 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 con-
cluded. 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 produc-
tion. 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
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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 equiv-
alent 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 re-
verse process takes place now in the world market, and
the reckoning names of money are turned back into cor-
responding 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 throwB off its stamp
and shape and reassumes the indistinguishable bullion
form; and even if national coins, such as Russian im-
perials, Mexican dollars, and English sovereigns, do cir-
culate 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 ex*
change 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 forma
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.
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We have seen that ill the home circulation of a coun-
try, 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 as-
sumes two forms in all its other functions. The transla-
tion of the values of commodities f roip 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 sil-
ver appear here as a means of purchase when the ex-
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change of matter k 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