sell without buying. Silver suddenly appeared now a&
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 when-
ever 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 pro-
ducing 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 com-
modities between different national spheres of circula-
tion is developed, the more important becomes the func-
tion of world money to serve as a means of payment
for the settlement of international balances.
like home circulation, international circulation re-
quires 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
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the exchange of commodities. 1 Besides the special move-
ments which take place between national spheres of
circulation, world-money possesses a universal move-
ment, whose starting points are at the sources of produc-
tion 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 commodi-
ties 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 en-
tirely 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 differ-
ent reservoirs containing hoards of coin, means of pay-
ment and world-money; partly is turned into articles of
*"I1 danaro ammassato supplisce a quella aomma, che per
essere attualmente in circolazione, per l'eventuale promiscuita
de' commerci si allontana e wrte delta sfera deUa oircolaeione
mede*ima. w ("The accumulated money supplements that
amount which, in order to be actually in circulation and to
meet all possible perturbations of trade, retires from that
gphere of circulation/' (6. R. Carli, note to Berri's "Medi-
tazioni sulla Economia Polities," p. 196, t. XV. of Custodi's
1. c.)
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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 circula-
tion for the free play of their mechanism. The hoard
as such becomes idle wealth, unless it appears as a tem-
porary form of a surplus resulting from a favorable bal-
ance of payments or as the result of an interrupted ex-
change of matter, i. e. as the solidification of a com-
modity 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 em-
braces increasing parts of the world. They become uni-
versal equivalents to the extent to which the series of par-
ticular equivalents which constitute their spheres of ex-
change, increases. Since in the sphere of world circula-
tion 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.
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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 hunt-
ing for the commodity in its magic form. Gold and sil-
ver 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 neces-
sary outgrowth of the perverse conception which the
representatives of the commodity world have of their
own work in society, is shown by the extraordinary in-
fluence exerted in the middle of the nineteenth century
by the discovery of new gold fields.
Just as money develops into world-money, so the com-
modity owner develops into a cosmopolitan. The cos-
mopolitan relation of men is originally only a relation
of commodity owners. The commodity as such rises
above all religious, political, national, and language bar-
riers. Price is its universal language and money, its
common form. But with the development of world-
money as distinguished from national coin, there de-
velops the cosmopolitanism of the commodity owner as
the faith of practical reason opposed to traditional, re-
ligious, national and other prejudices which hinder the
interchange of matter among mankind. As the iden-
tical gold that lands in England in the form of American
eagles, turns there into sovereigns and three days later
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circulates in Park 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 1 ,
4. THE PRECIOUS METALS.
The process of capitalist production first of all takes
hold of the metallic circulation as of a ready, trans-
mitted organ which, though undergoing a gradual trans-
formation, always retains fits 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,
' Montanari, "Delia Moneta," 1683, 1. c, p. 40. "K coei
f attamente diffusa per tutto il globo terrestre la eonununica-
zione de' populi insieme, che puo quasi dirsi eater il mondo
tutto divmuto una sola citta in eui si f a perpetna nera d'ogni
mercansia, e dove ogni uomo di tutto do che la terra, gii
animali e Fumana industria altrove prodncono, puo mediante
il danaro stando in sua casa provedersi e godere. Maravigli-
osa invenzione." ("The communication of nations among
themselves is so widely extended all over the globe that it
may be almost said that the entire world has become one city
in which a perpetual fair of merchandise is held and where
every man may by means of money acquire and enjoy, while
staying at home, all that the earth, the animals and human
industry produce elsewhere. Marvelous invention!")
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confine ourselves to summing up the most essential
points.
Since universal labor-time admits of quantitative dif-
ferences only, the object which is to serve as its specific
incarnation must be capable of representing purely quan-
titative differences, L e., it must be homogeneous and uni-
form 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 betwen 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, there-
fore, values of equal magnitude. 1 The other condition
which a commodity that is to serve as a universal equiva-
lent 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
1 1 metalli haa questo di proprio e singulare che in essi soli
tutte le ragiotti si riducono ad una che e la lor© quantitft, non
avendo ricevuto delle nature diversa qualita ne neU'interna
!oro constitution* ne ncll'externa forma e fattura." (Galiani,
1. c, p. 130.) ("Metals have this singular property, that
everything in them is reduced to one consideration, vis., that
of quantity, since they are not endowed by nature with any
differences in quality either in their internal structure or in
their external form and shape.")
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materially as well. Gold and silver possess these prop-
erties to a superior degree.
As mediums of circulation, gold and silver have this
advantage over other commodities, that their high speci-
fic gravity which condenses much Weight in little space,
corresponds to their economic specific gravity which con-
denses 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 mobil-
ity which constitutes the sine qua non of the com-
modity 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: "0 felicem monetam, quae suavem
utilemque praebet humano generi potum, et a tartarea
peste avaritiae suos immunes servat possessores, quod
suffodi aut diu servari nequeat." *
*J>e Orbe Novo. "O, happy coin, which furnishes mankind
with a pleasant and useful beverage and keeps its possessors
immune from the hell-born pest of avarice, since it can not be
either buried or preserved long."
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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 com-
pared 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 dis-
pensed with as means of existence, as articles of con-
sumption. 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. Further-
more, gold and silver are not only negatively super-
fluous, 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).
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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 con*
stantly 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 circula-
tion, 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. *
We have seen that gold and silver are unable to fulfill
1 In 760 a multitude of poor people emigrated to the south
of Prague to wash the gold sand found there, and three men
were able to extract three marks of gold a day. As a result
of that the run on the "diggings" and the number of hands
taken away from agriculture became so great that the country
was visited by a famine the following year. See M. G. K5rner,
"Abhandlung von dem Alterthum des Btfhmischen Bergwerks,"
Sehneeberg, 1758.
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the requirements which they are expected to meet in
their capacity of monejr, viz. to remain values of unvary-
ing 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 mate-
rial 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 pre-
supposes the development of mining and a comparatively
high degree of technical skill generally. For that
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reason the value of silver is originally greater than that
of gold in spite of the lesser absolute scarcity of the
former. Strata'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 develop-
ment of engineering and of the means of communica-
tion, 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 nine-
teenth 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 Borne 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 move-
ment 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
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of the American mines. The discovery of the Aus-
tralian, Californian and Columbian gold sources makes
a new fall in the value of gold probable. 1
a THEORIES OP THE MEDIUM OP CIBCULA-
TTON AND OP 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 cru-
*So far the Australian and other discoveries have not af-
fected the ratio of the values of gold and silver. The assertions
to the contrary of Michel Chevalier are worth as much as the
Socialism of this ex-St. Simonist. The quotations of silver on
the London market prove, however, that the average gold
price of silver during 1850-1858 is not quite 3 per cent, higher
than the price during 1830-1850. But this rise in price is
accounted for simply by the Asiatic demand for silver. In the
course of the years 1852-1858 the price of silver was chang-
ing in certain years and months only with a change in this
demand, and in no case with the importation of gold from the
newly discovered sources. The following is a summary of the
gold prices of silver on the London market.
PRICE OF SILVER PER OUNCE.
Year— March. July. November.
1852 60% pence 60% pence 61% pence
1853 61% pence 61% pence 61% pence
1854 61% pence 61% pence 61% pence
1855 60% pence 61% pence 60% pence
1856 60 pence 61% pence 62% pence
1857 61% pence 61% pence 61% pence
1858 61% pence
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sades beyond the sea in search of the golden grail/ 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 ample
circulation of commodities, they declared that the mis-
sion 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 con-
stitutes a value of the same magnitude as £3 worth of
goldyThe point here is not the magnitude of the ex-
change 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,
'"Gold is a wonderful thing! Whoever possesses it, is mas-
ter of all that he desires. By means of gold even admission to
Heaven may be gained for souls." (Columbus in a letter from
Jamaica in 1503).
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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 commod-
ities. The proper bourgeois economic sphere of that
period was the sphere of the circulation of commodities.
Hence, they judged the entire complex process of bour-
geois production from the point of view of that ele-
mentary 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. Eicardo, though
wrong in the application he makes of it, remarks some-
where 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 mone-
tary and mercantile system, political economy, by at-
tacking 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 ele-
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mentary 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 re*
tains its right of citizenship. The Catholic fact that
gold and silver are contrasted with other profane com-
modities as the direct incarnation of social labor, that
is as the expression of abstract wealth, naturally offends
the Protestant point dTionneur 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 dis-