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payable on demand, 357,715 Gold, 9,427

Country Notes, 9,627 Silver and Copper, . . . 1,484

Bank of England Notes, 68,554

Gold, 28,089

Silver and Copper, . . 1.484

Post Office Orders, . . 933



Total, . . 1,000,000 Total, . . .1,000,000

"Report from the Select Committee on the Bank Acts, July, 1858,"
p. Ixxi.

2 "The course of trade being thus turned, from exchanging of goods for
goods, or delivering and taking, to selling and paying, all the bargains ...
are now stated upon the foot of a Price in money." ("An Essay upon Publick
Credit." 3rd Ed. Lond., 1710, p. 8.)

8 "L'argent ... est devenu le bourreau de toutes choses." Finance is
the "alambic, qui a fait evaporer une quantite effroyable de biens et de den-
rees pour faire ce fatal precis." "L'argent declare la guerre a tout le genre



MONEY, OR THE CIRCULATION OP COMMODITIES 141

depends on conditions of production that are reproduced with
the regularity of natural phenomena. And this mode of payment
tends in its turn to maintain the ancient form of production. It
is one of the secrets of the conservation of the Ottoman Empire.
If the foreign trade, forced upon Japan by Europeans, should
lead to the substitution of money rents for rents in kind, it will
be all up with the exemplary agriculture of that country. The
narrow economic conditions under which that agriculture is
carried on, will be swept away.

In every country, certain days of the year become by habit
recognised settling days for various large and recurrent payments.
These dates depend, apart from other revolutions in the wheel
of reproduction, on conditions closely connected with the seasons.
They also regulate the dates for payments that have no direct
connexion with the circulation of commodities such as taxes,
rents, and so on. The quantity of money requisite to make the
payments, falling due on those dates all over the country, causes
periodical, though merely superficial, perturbations in the economy
of the medium of payment. l

From the law of the rapidity of currency of the means of
payment, it follows that the quantity of the means of payment
required for all periodical payments, whatever their source, is
in inverse proportion to the length of their periods. 2



humain." (Boisguillebert: "Dissertation sur la nature des richesses, de I'ar-
gent et des tributs." Edit. Daire. Economistes financiers. Paris, 1843,
t.i., pp. 413, 419, 417.)

1 "On Whitsuntide, 1824," says Mr. Craig before the Commons' Com-
mittee of 1826, "there was such an immense demand for notes upon the banks
of Edinburgh, that by 11 o'clock they had not a note left in their custody.
They sent round to all the different banks to borrow, but could not get them,
and many of the transactions were adjusted by slips of paper only; yet by
three o'clock the whole of the notes were returned into the banks from which
they had issued! It was a mere transfer from hand to hand." Although I ho
average effective circulation of bank-notes in Scotland is less than throe
millions sterling, yet on certain pay days in the year, every single note in
the possession of the bankers, amounting in the whole to about 7,000,000,
is called into activity. On these occasions the notes have a single and speci I'-
ic function to perform, and so soon as they have performed it, they flow back
into the various banks from which they issued. (See John Fullarton, "Regu-
lation of Currencies." Lond. 1845, p. 86, note.) In explanation it should he
stated, that in Scotland, at the dateof Fullarton'swork, notes and not cheques
were used to withdraw deposits.

2 To the question, "II there were occasion to raise 40 millions p. a.,
whether the same 6 millions (gold)... would suffice for such revolutions and
circulations thereof, as trade requires," Petty replies in his usual masterly
manner, "I answer yes: for the expense being 40 millions, if the revolutions



142 CAPITALIST PRODUCTION



The development of money into a medium of payment makes
it necessary to accumulate money against the dates fixed for
the payment of the sums owing. While hoarding, as a distinct
mode of acquiring riches, vanishes with the progress of civil so-
ciety, the formation of reserves of the means of payment grows
with that progress.

c. Universal Money

When money leaves the home sphere of circulation, it strips
off the local garbs which it there assumes, of a standard of prices,
of coin, of tokens, and of a symbol of value, and returns to its
original form of bullion. In the trade between the markets of the
world, the value of commodities is expressed so as to be univer-
sally recognised. Hence their independent value-form also, in
these cases, confronts them under the shape of universal money.
It is only in the markets of the world that money acquires to the
full extent the character of the commodity whose bodily form is
also the immediate social incarnation of human labour in the
abstract. Its real mode of existence in this sphere adequately
corresponds to its ideal concept.

Within the sphere of home circulation, there can be but one
commodity which, by serving as a measure of value, becomes
money. In the markets of the world a double measure of value
holds sway, gold and silver. x



were in such short circles, viz., weekly, as happens among poor artisans
and labourers, who receive and pay every Saturday, then -^ parts of 1 mil-
lion of money would answer these ends; but if the circles be quarterly, ac-
cording to our custom of paying rent, and gathering taxes, then 10 millions
were requisite. Wherefore, supposing payments in general to be of a mixed

circle between one week and 13, then add 10 millions to r^, the half of which

*-i

will be 5-7j-, so as if we have 5-y millions we have enough." (William Petty:

"Political Anatomy of Ireland." 1672. Edit.: Lond. 1691, pp. 13, 14.)

1 Hence the absurdity of every law prescribing that the banks of a
country shall form reserves of that precious metal alone which circulates
at home. The "pleasant difficulties" thus self-created by the Bank
of England, are well known. On the subject of the great epochs in
the history of the changes in the relative value of gold and silver,
see Karl Marx, 1. c., p. 136 sq. Sir Robert Peel, by his Bank Act of 1844.
sought to tide over the difficulty, by allowing the Bank of England
to issue notes against silver bullion, on condition that the reserve of silver
should never exceed more than one-fourth of the reserve of gold. The value
of silver being for that purpose estimated at its price in the London market.



MONEY, OR THE CIRCULATION OF COMMODITIES 143

Money of the world serves as the universal medium of pay-
ment, as the universal means of purchasing, and as the univer-
sally recognised embodiment of all wealth. Its function as a means
of payment in the settling of international balances is its chief
one. Hence the watchword of the mercantilists, balance of
trade. * Gold and silver serve as international means of purchasing

[Added in the 4th German edition. We find ourselves once more in a period
of serious change in the relative values of gold and silver. About 25 years

ago the ratio expressing the relative value of gold and silver was 154-:1;

LJ

now it is approximately 22:1, and silver is still constantly falling as against
gold. This is essentially the result of a revolution in the mode of production
of both metals. Formerly gold was obtained almost exclusively by washing
it out from gold-bearing alluvial deposits, products of the weathering of au-
riferous rocks. Now this method has become inadequate and has been forced
into the background by the processing of the quartz lodes themselves,
a \vay of extraction which formerly was only of secondary importance, al-
though well known to the ancients (Diodorus, III, 12-14) (Diodor's v.
Sicillen "Historische Bibliothek," book III, 12-14. Stuttgart 1828, pp. 258-
261). Moreover, not only were new huge silver deposits discovered in North
America, in the Western part of the Rocky Mountains, but these and the
Mexican silver mines were really opened up by the laying of railways, which
made possible the shipment of modern machinery and fuel and in consequence
the mining of silver on a very large scale at a low cost. However, there is a great
difference in the way the two metals occur in the quartz lodes. The gold is most-
ly native, but disseminated throughout the quartz in minute quantities. The
whole mass of the vein must therefore be crushed and the gold either washed
out or extracted by means of mercury. Often 1,000,000 grammes of quartz
barely yield 1-3 and very seldom 30-60 grammes of gold. Silver is seldom
found native; however it occurs in special quartz that is separated from the
lode with comparative ease and contains mostly 40-90% silver; or it is
contained, in smaller quantities, in copper, lead and other ores which in
themselves are worthwhile working. From this alone it is apparent that the
labour expended on the production of gold is rather increasing while that
expended on silver production has decidedly decreased, which quite natu-
rally explains the drop in the value of the latter. This fall in value would
express itself in a still greater fall in price if the price of silver were not
pegged even to-day by artificial means. But America's rich silver deposits
have so far barely been tapped, and thus the prospects are that the value of
this metal will keep on dropping for rather a long time to come. A still great-
er contributing factor here is the relative decrease in the requirement of
silver for articles of general use and for luxuries, that is its replacement by
plated goods, aluminium, etc. One may thus gauge the utopianism of the
bimetallist idea that compulsory international quotation will raise silver

again to the old value ratio of 1:15-^-. It is more likely that silver will for-
feit its money function more and more in the markets of the world. F. E.}
1 The opponents, themselves, of the mercantile system, a system which
considered the settlement of surplus trade balances in gold and silver as the
aim of international trade, entirely misconceived the functions of money of
the world. I have shown by the example of Ricardo in what way their false
conception of the laws that regulate the quantity of the circulating medium,



144 CAPITALIST PRODUCTION



chiefly and necessarily in those periods when the customary equi-
librium in the interchange of products between different nations
is suddenly disturbed. And lastly, it serves as the universally
recognised embodiment of social wealth, whenever the question
is not of buying or paying, but of transferring wealth from one
country to another, and whenever this transference in the form
of commodities is rendered impossible, either by special conjunc-
tures in the markets, or by the purpose itself that is intended. l
Just as every country needs a reserve of money for its home
circulation, so, too, it requires one for external circulation in
the markets of the world. The functions of hoards, therefore,
arise in part out of the function of money, as the medium of the
home circulation and home payments, and in part out of its
function of money of the world. 2 For this latter function, the
genuine money-commodity, actual gold and silver, is necessary.
On that account, Sir James Steuart, in order to distinguish them
from their purely local substitutes, calls gold and silver "money
of the world."

is reflected in their equally false conception of the international movement
of the precious metals (1. c., pp. 150 sq.)- His erroneous dogma: "An unfa-
vourable balance of trade never arises but from a redundant currency.... The
exportation of the coin is caused by its cheapness, and is not the effect, but
the cause of an unfavourable balance," already occurs in Barbon: "The Bal-
ance of Trade, if there be one, is not the cause of sending away the money
out of a nation; but that proceeds from the difference of the value of bullion
in every country." (N. Barbon; L c., pp. 59, 60.) MacCulloch in "The Litera-
ture of Political Economy, a classified catalogue, Lond. 1845," praises Bar-
bon for this anticipation, but prudently passes over the nai've forms, in which
Barbon clothes the absurd supposition on which the "currency principle" is
based. The absence of real criticism and even of honesty, in that catalogue
culminates in the sections devoted to the history of the theory of money;
the reason is that MacCulloch in this part of the work is flattering Lord Over-
stone whom he calls "facile princeps argentariorum."

1 For instance, in subsidies, money loans for carrying on wars or for
enabling banks to resume cash payments, &c., it is the money-form, and no
other, of value that may be wanted.

! "I would desire, indeed, no more convincing evidence of the compe-
tency of the machinery of the hoards in specie-paying countries to perform
every necessary office of international adjustment, without any sensible
aid from the general circulation, than the facility with which France, when
but just recovering from the shock of a destructive foreign invasion, complet-
ed within the space of 27 months the payment of her forced contribution
of nearly 20 millions to the allied powers, and a considerable proportion
of the sum in specie, without any perceptible contraction or derangement of
her domestic currency, or even any alarming fluctuation of her exchanges."
(Fullarton, J. c., p. 141.) [Added in the 4th German edition. We have a
still more striking example in the facility with which the same France was
able in 1871-73 to pay off within 30 months a forced contribution more than
ten times as great, a considerable part of it likewise in specie. F. E.\



MONEY, OR THE CIRCULATION OP COMMODITIES 145

The current of the stream of gold and silver is a double one.
On the one hand, it spreads itself from its sources over all the
markets of the world, in order to become absorbed, to various
extents, into the different national spheres of circulation, to
fill the conduits of currency, to replace abraded gold and silver
coins, to supply the material of articles of luxury, and to petrify
into hoards. 1 This first current is started by the countries that
exchange their labour, realised in commodities, for the labour
embodied in the precious metals by gold and silver-producing
countries. On the other hand, there is a continual flowing back-
wards and forwards of gold and silver between the different nation-
al spheres of circulation, a current whose motion depends on the
ceaseless fluctuations in the course of exchange. 2

Countries in which the bourgeois form of production is de-
veloped to a certain extent, limit the hoards concentrated in
the strong rooms of the banks to the minimum required for the
proper performance of their peculiar functions. 3 Whenever these
hoards are strikingly above their average level, it is, with some
exceptions, an indication of stagnation in the circulation of com-
modities, of an interruption in the even flow of their metamor-
phoses. 4



1 "L'argent se partage entre les nations relativement au besoin qu'elles
en ont ... etant toujours attire par les productions." (Le Trosne, 1. c., p. 916.)
"The mines which are continually giving gold and silver, do give sufficient
to supply such a needful balance to every nation." (J. Vanderlint, 1. c., p. 40.)

2 "Exchanges rise and fall every week, and at some particular times
in the year run high against a nation, and at other times run as high on the
contrary." (N. Barbon, 1. c., p. 39.)

3 These various functions are liable to come into dangerous conflict
with one another whenever gold and silver have also to serve as a fund for
the conversion of bank-notes.

4 "What money is more than of absolute necessity for a Home irade,
is dead stock ... and brings no profit to that country it's kept in, but as it
is transported in trade, as well as imported." (John Bellers, "Essays," p. 13.)
"What if we have too much coin? We may melt down the heaviest and turn
it into the splendour of plate, vessels or utensils of gold or silver; or send
it out as a commodity, where the same is wanted or desired; or let it out at
interest, where interest is high." (W. Petty: "Quantulumcunque,' p.
"Money is but the fat of the Body Politick, whereof too much doth as olten
hinder its agility, as too little makes it sick ... as fat lubricates the motion
of the muscles, feeds in want of victuals, fills up the uneven cavities and
beautifies the body; so doth money in the state quicken its action, teeds
abroad in time of dearth at home; evens accounts ... and beautifies the whole;
altho more especially the particular persons that have it in plenty. "(W. Pet
ty, "Political Anatomy of Ireland," p. 14.)



146



PART II



THE TRANSFORMATION OF MONEY INTO

CAPITAL



CHAPTER IV
THE GENERAL FORMULA FOR CAPITAL

The circulation of commodities is the starting-point of capital.
The production of commodities, their circulation, and that more
developed form of their circulation called commerce, these form
the historical ground-work from which it rises. The modern
history of capital dates from the creation in the 16th century of
a world-embracing commerce and a world-embracing market.

If we abstract from the material substance of the circulation
of commodities, that is, from the exchange of the various use-
values, and consider only the economic forms produced by this
process of circulation, we find its final result to be money: this
final product of the circulation of commodities is the first form
in which capital appears.

As a matter of history, capital, as opposed to landed property,
invariably takes the form at first of money; it appears as moneyed
wealth, as the capital of the merchant and of the usurer. 1 But
we have no need to refer to the origin of capital in order to dis-
cover that the first form of appearance of capital is money. We
can see it daily under our very eyes. All new capital, to commence
with, comes on the stage, that is, on the market, whether of com-
modities, labour, or money, even in our days, in the shape of
money that by a definite process has to be transformed into capital.

The first distinction we notice between money that is money
only, and money that is capital, is nothing more than a differ-
ence in their form of circulation.

The simplest form of the circulation of commodities is C
M G, the transformation of commodities into money, and the



1 The contrast between the power, based on the personal relations of
dominion and servitude, that is conferred by landed property, and the imper-
sonal power that is given by money, is well expressed by the two French
proverbs, "Nulle terre sans seigneur," and "L'argent n'a pas de maitre."



THE GENERAL FORMULA FOR CAPITAL 147

change of the money back again into commodities; or selling in
order to buy. But alongside of this form we find another specifi-
cally different form: M G M, the transformation of money
into commodities, and the change of commodities back again
into money; or buying in order to sell. Money that circulates in
the latter manner is thereby transformed into, becomes capital,
and is already potentially capital.

Now let us examine the circuit M C M a little closer. It
consists, like the other, of two antithetical phases. In the first
phase, M C, or the purchase, the money is changed into a com-
modity. In the second phase, C M, or the sale, the commodity
is changed back again into money. The combination of these two
phases constitutes the single movement whereby money is ex-
changed for a commodity, and the same commodity is again
exchanged for money; whereby a commodity is bought in order
to be sold, or, neglecting the distinction in form between buying
and selling, whereby a commodity is bought with money, and
then money is bought with a commodity. 1 The result, in which
the phases of the process vanish, is the exchange of money for
money, M M. If I purchase 2,000 Ibs. of cotton for 100, and
resell the 2,000 Ibs. of cotton for 110, I have, in fact, exchanged
100 for 110, money for money.

Now it is evident that the circuit M C M would be absurd
and without meaning if the intention were to exchange by this
means two equal sums of money, 100 for 100. The miser's plan
would be far simpler and surer; he sticks to his 100 instead of
exposing it to the dangers of circulation. And yet, whether the
merchant who has paid 100 for his cotton sells it for 110, or
lets it go for 100, or even 50, his money has, at all events, gone
through a characteristic and original movement, quite different
in kind from that which it goes through in the hands of the peas-
ant who sells corn, and with the money thus set free buys clothes.
We have therefore to examine first the distinguishing characteris-
tics of the forms of the circuits M G M and C M C, and in
doing this the real difference that underlies the mere difference
of form will reveal itself.

Let us see, in the first place, what the two forms have in
common.

Both circuits are resolvable into the same two antithetical
phases, G M, a sale, and M C, a purchase. In each of these phases

1 "Avec de 1'argent on achete des marchandises et avec des marchan-
dises on achete de 1'argent." (Mercier de la Riviere: "L'ordre naturel et es-
sentiel des societes politiques," p. 543.)



148 CAPITALIST PRODUCTION

the same material elements a commodity, and money, and
the same economic dramatis personse, a buyer and a sellercon-
front one another. Each circuit is the unity of the same two an-
tithetical phases, and in each case this unity is brought about by
the intervention of three contracting parties, of whom one only
sells, another only buys, while the third both buys and sells.

What, however, first and foremost distinguishes the circuit
C M G from the circuit M G M, is the inverted order of
succession of the two phases. The simple circulation of commodities
begins with a sale and ends with a purchase, while the circulation
of money as capital begins with a purchase and ends with a sale.
In the one case both the starting-point and the goal are commodi-
ties, in the other they are money. In the first form the movement
is brought about by the intervention of money, in the second by
that of a commodity.

In the circulation G M G, the money is in the end con-
verted into a commodity, that serves as a use-value; it is spent
once for all. In the inverted form, M G M, on the contrary,
the buyer lays out money in order that, as a seller, he may recover
money. By the purchase of his commodity he throws money into
circulation, in order to withdraw it again by the sale of the same
commodity. He lets the money go, but only with the sly inten-
tion of getting it back again. The money, therefore, is not spent,
it is merely advanced. 1

In the circuit G M C, the same piece of money changes
its place twice. The seller gets it from the buyer and pays it away
to another seller. The complete circulation, which begins with
the receipt, concludes with the payment, of money for commodi-
ties. It is the very contrarv in the circuit M C M. Here it is

/ /

not the piece of money that changes its place twice, but the com-
modity. The buyer takes it from the hands of the seller and passes
it into the hands of another buyer. Just as in the simple circu-
lation of commodities the double change of place of the same
piece of money effects its passage from one hand into another,
so here the double change of place of the same commodity brings
about the reflux of the money to its point of departure.

Such reflux is not dependent on the commodity being sold
for more than was paid for it. This circumstance influences only
the amount of the money that comes back. The reflux itself takes



"When a thing is bought in order to be sold again, the sum employed
is called money advanced; when it is bought not to be sold, it may be said
to be expended." (James Steuart: "Works," &c. Edited by Gen. Sir James
Steuart, his son. Lond., 1805, V. I., p. 274.)



THE GENERAL FORMULA FOR CAPITAL 14g

place, so soon as the purchased commodity is resold, in other
words, so soon as the circuit M G M is completed. We have
here, therefore, a palpable difference between the circulation of
money as capital, and its circulation as mere money.

The circuit G M G comes completely to an end, so soon
as the money brought in by the sale of one commodity is abstract-
ed again by the purchase of another.

If, nevertheless, there follows a reflux of money to its starting-
point, this can only happen through a renewal or repetition
of the operation. If I sell a quarter of corn for 3, and with this



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