第14章

Thisledinsomebranches，wherethescaleofproductionpermitted，totheconcentrationoftheentireproductionofthatbranchofindustryinonebigjoint-stockcompanyundersinglemanagement。ThishasbeenrepeatedlyeffectedinAmerica；inEuropethebiggestexamplesofaristheUnitedAlkaliTrust，whichhasbroughtallBritishalkaliproductionintothehandsofasinglebusinessfirm。Theformerownersofthemorethanthirtyindividualplantshavereceivedsharesfortheappraisedvalueoftheirentireestablishments，totallingabout£；5million，whichrepresentthefixedcapitalofthetrust。Thetechnicalmanagementremainsinthesamehandsasbefore，butbusinesscontrolisconcentratedinthehandsofthegeneralmanagement。Thefloatingcapital，totallingabout£；1

million，wasofferedtothepublicforsubscription。Thetotalcapitalis，therefore，£；6million。Thus，inthisbranch，whichformsthebasisofthewholechemicalindustry，competitionhasbeenreplacedbymonopolyinEngland，andtheroadhasbeenpaved，mostgratifyingly，forfutureexpropriationbythewholeofsociety，thenation——F。E。]

Thisistheabolitionofthecapitalistmodeofproductionwithinthecapitalistmodeofproductionitself，andhenceaself-dissolvingcontradiction，whichprimafacierepresentsamerephaseoftransitiontoanewformofproduction。Itmanifestsitselfassuchacontradictioninitseffects。Itestablishesamonopolyincertainspheresandtherebyrequiresstateinterference。Itreproducesanewfinancialaristocracy，anewvarietyofparasitesintheshapeofpromoters，speculatorsandsimplynominaldirectors；awholesystemofswindlingandcheatingbymeansofcorporationpromotion，stockissuance，andstockspeculation。Itisprivateproductionwithoutthecontrolofprivateproperty。

IV。Asidefromthestock-companybusiness，whichrepresentstheabolitionofcapitalistprivateindustryonthebasisofthecapitalistsystemitselfanddestroysprivateindustryasitexpandsandinvadesnewspheresofproduction，creditofferstotheindividualcapitalist；ortoonewhoisregardedacapitalist，absolutecontrolwithincertainlimitsoverthecapitalandpropertyofothers，andtherebyoverthelabourofothers。[3]Thecontroloversocialcapital，nottheindividualcapitalofhisown，giveshimcontrolofsociallabour。Thecapitalitself，whichamanreallyownsorissupposedtoownintheopinionofthepublic，becomespurelyabasisforthesuperstructureofcredit。Thisisparticularlytrueofwholesalecommerce，throughwhichthegreatestportionofthesocialproductpasses。Allstandardsofmeasurement，allexcusesmoreorlessstilljustifiedundercapitalistproduction，disappearhere。Whatthespeculatingwholesalemerchantrisksissocialproperty，nothisown。Equallysordidbecomesthephraserelatingtheoriginofcapitaltosavings，forwhathedemandsisthatothersshouldsaveforhim。JustasallFrancerecentlysaveduponeandahalfbillionfrancsforthePanamaCanalswindlers。

Infact，adescriptionoftheentirePanamaswindleisherecorrectlyanticipated，fullytwentyyearsbeforeitoccurred——F。E。]Theotherphraseconcerningabstentionissquarelyrefutedbyhisluxury，whichisnowitselfameansofcredit。Conceptionswhichhavesomemeaningonalessdevelopedstageofcapitalistproduction，becomequitemeaninglesshere。Successandfailurebothleadheretoacentralisationofcapital，andthustoexpropriationonthemostenormousscale。Expropriationextendsherefromthedirectproducerstothesmallerandthemedium-sizedcapitaliststhemselves。

Itisthepointofdepartureforthecapitalistmodeofproduction；itsaccomplishmentisthegoalofthisproduction。Inthelastinstance，itaimsattheexpropriationofthemeansofproductionfromallindividuals。

Withthedevelopmentofsocialproductionthemeansofproductionceasetobemeansofprivateproductionandproductsofprivateproduction，andcanthereafterbeonlymeansofproductioninthehandsofassociatedproducers，i。e。，thelatter’ssocialproperty，muchastheyaretheirsocialproducts。However，thisexpropriationappearswithinthecapitalistsysteminacontradictoryform，asappropriationofsocialpropertybyafew；

andcreditlendsthelattermoreandmoretheaspectofpureadventurers。

Sincepropertyhereexistsintheformofstock，itsmovementandtransferbecomepurelyaresultofgamblingonthestockexchange，wherethelittlefishareswallowedbythesharksandthelambsbythestock-exchangewolves，Thereisantagonismagainsttheoldforminthestockcompanies，inwhichsocialmeansofproductionappearasprivateproperty；buttheconversiontotheformofstockstillremainsensnaredinthetrammelsofcapitalism；

hence，insteadofovercomingtheantithesisbetweenthecharacterofwealthassocialandasprivatewealth，thestockcompaniesmerelydevelopitinanewform。

Theco-operativefactoriesofthelabourersthemselvesrepresentwithintheoldformthefirstsproutsofthenew，althoughtheynaturallyreproduce，andmustreproduce，everywhereintheiractualorganisationalltheshortcomingsoftheprevailingsystem。Buttheantithesisbetweencapitalandlabourisovercomewithinthem，ifatfirstonlybywayofmakingtheassociatedlabourersintotheirowncapitalist，i。e。，byenablingthemtousethemeansofproductionfortheemploymentoftheirownlabour。Theyshowhowanewmodeofproductionnaturallygrowsoutofanoldone，whenthedevelopmentofthematerialforcesofproductionandofthecorrespondingformsofsocialproductionhavereachedaparticularstage。Withoutthefactorysystemarisingoutofthecapitalistmodeofproductiontherecouldhavebeennoco-operativefactories。Norcouldthesehavedevelopedwithoutthecreditsystemarisingoutofthesamemodeofproduction。Thecreditsystemisnotonlytheprincipalbasisforthegradualtransformationofcapitalistprivateenterprises。intocapitaliststockcompanies，butequallyoffersthemeansforthegradualextensionofco-operativeenterprisesonamoreorlessnationalscale。Thecapitaliststockcompanies，asmuchastheco-operativefactories，shouldbeconsideredastransitionalformsfromthecapitalistmodeofproductiontotheassociatedone，withtheonlydistinctionthattheantagonismisresolvednegativelyintheoneandpositivelyintheother。

Sofarwehaveconsideredthedevelopmentofthecreditsystem——andtheimplicitlatentabolitionofcapitalistproperty——mainlywithreferencetoindustrialcapital。Inthefollowingchaptersweshallconsidercreditwithreferencetointerest-bearingcapitalassuch，andtoitseffectonthiscapital，andtheformittherebyassumes；andtherearegenerallyafewmorespecificallyeconomicremarksstilltobemade。

Butfirstthis:

Thecreditsystemappearsasthemainleverofover-productionandover-speculationincommercesolelybecausethereproductionprocess，whichiselasticbynature，ishereforcedtoitsextremelimits，andissoforcedbecausealargepartofthesocialcapitalisemployedbypeoplewhodonotownitandwhoconsequentlytacklethingsquitedifferentlythantheowner，whoanxiouslyweighsthelimitationsofhisprivatecapitalinsofarashehandlesithimself。Thissimplydemonstratesthefactthattheself-expansionofcapitalbasedonthecontradictorynatureofcapitalistproductionpermitsanactualfreedevelopmentonlyuptoacertainpoint，sothatinfactitconstitutesanimmanentfetterandbarriertoproduction，whicharecontinuallybrokenthroughbythecreditsystem。[4]Hence，thecreditsystemacceleratesthematerialdevelopmentoftheproductiveforcesandtheestablishmentoftheworld-market。Itisthehistoricalmissionofthecapitalistsystemofproductiontoraisethesematerialfoundationsofthenewmodeofproductiontoacertaindegreeofperfection。

Atthesametimecreditacceleratestheviolenteruptionsofthiscontradiction——crises——andtherebytheelementsofdisintegrationoftheoldmodeofproduction。

Thetwocharacteristicsimmanentinthecreditsystemare，ontheonehand，todeveloptheincentiveofcapitalistproduction，enrichmentthroughexploitationofthelabourofothers，tothepurestandmostcolossalformofgamblingandswindling，andtoreducemoreandmorethenumberofthefewwhoexploitthesocialwealth；ontheotherhand，toconstitutetheformoftransitiontoanewmodeofproduction。Itisthisambiguousnature，whichendowstheprincipalspokesmenofcreditfromLawtoIsaacPereirewiththepleasantcharactermixtureofswindlerandprophet。

FOOTNOTES[1]”Theaverageofnotesincirculationduringtheyearwas，in1812，106，538，000

francs；in1818，101，205，000francs；whereasthemovementofthecurrency，ortheannualaggregateofdisbursementsanduponallaccounts，was，in1812，2，837，712，000francs；in1818，9，665，03francs。TheactivityofthecurrencyinFrance，therefore，duringtheyear1818，ascomparedwithitsactivityin1812，wasintheproportionofthreetoone。Thegreatregulatorofthevelocityofcirculationiscredit……Thisexplains，whyaseverepressureuponthemoney-marketisgenerallycoincidentwithafullcirculation。”

(TheCurrencyTheoryReviewed，etc。，p。65)——”BetweenSeptember1833andSeptember1843nearly300bankswereaddedtothevariousissuersofnotesthroughouttheUnitedKingdom；theresultwasareductioninthecirculationtotheextentoftwomillionandahalf；itwas£；36，035，244

atthecloseofSeptember1833，and£；33，518，554atthecloseofSeptember1843。”(L。c。，p。53)——”TheprodigiousactivityofScottishcirculationenablesit，with£；100，toeffectthesamequantityofmonetarytransactions，whichinEnglanditrequires£；420toaccomplish。”(L。c。，p。55。

Thislastrefersonlytothetechnicalsideoftheoperation。)

[2]Beforetheestablishmentofthebanks……theamountofcapitalwithdrawnforthepurposesofcurrencywasgreater，atalltimes，thantheactualcirculationofcommoditiesrequired。”(Economist，1845，p。238。)

[3]See，forinstance，intheTimesthelistofbusinessbankruptciesinacrisisyearsuchas1857andcomparetheprivatepropertyofthosebankruptwiththeamountoftheirdebts。”Thetruthisthatthepowerofpurchasebypersonshavingcapitalandcreditismuchbeyondanythingthatthosewhoareunacquaintedpracticallywithspeculativemarketshaveanyideaof。”(Tooke，InquiryintotheCurrencyPrinciple，p。79。)”A

personhavingthereputationofcapitalenoughforhisregularbusiness，andenjoyinggoodcreditinhistrade，ifhetakesasanguineviewoftheprospectofariseofpriceofthearticleinwhichhedeals，andisfavouredbycircumstancesintheoutsetandprogressofhisspeculation，mayeffectpurchasestoanextentperfectlyenormouscomparedwithhiscapital”(Ibid。，p。136)。”Merchants，manufacturers，etc。，carryonoperationsmuchbeyondthosewhichtheuseoftheirowncapitalalonewouldenablethemtodo……CapitalIsratherthefoundationuponwhichagoodcreditisbuiltthanthelimitofthetransactionsofanycommercialestablishment。”(Economist，1847，p。333。)

[4]Th。Chalmers[OnPoliticalEconomy，etc。，Glasgow，1832——Ed。]。

Capital，Vol。3，Chapter28KarlMarxCAPITALVol。III

THEPROCESSOF

CAPITALISTPRODUCTIONASAWHOLEPartV

DIVISIONOFPROFITINTOINTERESTANDPROFIT

OFENTERPRISE。

INTEREST-BEARINGCAPITALCHAPTER28

MediumofCirculationandCapital；

ViewsofTookeandFullartonThedistinctionbetweencurrencyandcapital，asTooke，Wilson，andothersdrawit，wherebythedifferencesbetweenmediumofcirculationasmoney，asmoney-capitalgenerally，andasinterest-bearingcapital(moneyedcapitalintheEnglishsense)arethrowntogetherpell-mell，comesdowntotwothings。[1]

Currencycirculatesontheonehandascoin(money)，sofarasitpromotestheexpenditureofrevenue，hencethetrafficbetweentheindividualconsumersandtheretailmerchants，towhichcategorybelongallmerchantswhoselltotheconsumers——totheindividualconsumersasdistinctfromproductiveconsumersorproducers。Heremoneycirculatesinthefunctionofcoin，althoughitcontinuallyreplacescapital。Acertainportionofmoneyinaparticularcountryiscontinuallydevotedtothisfunction，althoughthisportionconsistsofperpetuallychangingindividualcoins。Insofarasmoneypromotesthetransferofcapital，however，eitherasameansofpurchase(mediumofcirculation)orasameansofpayment，itiscapital。Itis，therefore，neitheritsfunctionasameansofpurchase，northatasameansofpayment，whichdistinguishesitfromcoin，foritmayalsoactasameansofpurchasebetweenonedealerandanothersofarastheybuyfromoneanotherinhardcash，andalsoasameansofpaymentbetweendealerandconsumersofarascreditisgivenandtherevenueconsumedbeforeitispaid。Thedifferenceis，therefore，thatinthesecondcasethismoneynotonlyreplacesthecapitalforoneside，theseller，butisexpended，advanced。，bytheotherside，thebuyer，ascapital。Thedifference，then，isinfactthatbetweenthemoney-formofrevenueandthemoney-formofcapital，butnotthatbetweencurrencyandcapital，foracertainquantityofmoneycirculatesinthetransactionsbetweendealersaswellasinthetransactionsbetweenconsumersanddealers……Itis，therefore，equallycurrencyinbothfunctions。Tooke’sconceptionintroducesconfusionintothisquestioninvariousways:

1)Byconfusingthefunctionaldistinctions；

2)Byintroducingthequestionofthequantityofmoneycirculatingtogetherinbothfunctions；

3)Byintroducingthequestionoftherelativeproportionsofthequantitiesofcurrencycirculatinginthetwofunctionsandthusinthetwospheresoftheprocessofreproduction。

Ad1)Confusingthefunctionaldistinctionsthatmoneyinoneformiscurrency，andcapitalintheother。Insofarasmoneyservesinoneoranotherfunction，beittorealiserevenueortransfercapital，itfunctionsinbuyingandselling，orinpaying，asameansofpurchaseorameansofpayment，and，inthewidersenseoftheword，ascurrency。Thefurtherpurposewhichithasinthecalculationsofitsspenderorrecipient，ofbeingcapitalorrevenueforhim，altersabsolutelynothing，andthisisdoublydemonstrated。Althoughthekindsofmoneycirculatinginthetwospheresaredifferent，thesamepieceofmoney，forinstanceafive-poundnote，passesfromonesphereintotheotherandalternatelyperformsbothfunctions；whichisinevitable，ifonlybecausetheretailmerchantcangivehiscapitaltheformofmoneyonlyintheshapeofthecoinwhichhereceivesfromhiscustomers。Itmaybeassumedthattheactualsmallchangehasitscirculationcentreofgravityinthedomainofretailtrade；

theretaildealerneedsitcontinuallytomakechangeandreceivesitbackcontinuallyinpaymentfromhiscustomers。Buthealsoreceivesmoney，i。e。，coin，inthatmetalwhichservesasastandardofvalue，henceinEnglandone-poundcoins，orevenbank-notes，particularlynotesofsmalldenominations，suchasfive-andten-poundnotes。Thesegoldcoinsandnotes，withwhateversmallchangehehastospare，aredepositedbytheretaildealereveryday，oreveryweek，inhisbank，andhepaysforhispurchasesbydrawingchequesonhisbankdeposit。Butthesamegoldcoinsandhank-notesarejustassteadilywithdrawnfromthebank，directlyorindirectly(forinstance，smallchangebymanufacturersforthepaymentofwages)，asthemoney-formofitsrevenuebytheentirepublicinitscapacityofconsumer，andflowcontinuallybacktotheretaildealers，forwhomtheythusagainrealiseaportionoftheircapital，butatthesametimealsoaportionoftheirrevenue。Thislastcircumstanceisimportant，andiswhollyoverlookedbyTooke。Onlywheremoneyisexpendedasmoney-capital，earlyinthereproductionprocess(BookII，Part1)，doescapital-valueexistpurelyassuch。Fortheproducedcommoditiescontainnotmerelycapital，butalsosurplus-value；

theyarenotonlycapitalinthem-selves，butalreadycapitalrealisedascapital，capitalwiththesourceofrevenueincorporatedinit。Whattheretaildealergivesawayforthemoneyreturningtohim，hiscommodities，therefore，isforhimcapitalplusprofit，capitalplusrevenue。

Furthermore，inreturningtotheretailer，circulatingmoneyrestoresthemoney-formofhiscapital。

Toreducethedifferencebetweencirculationascirculationofrevenueandcirculationofcapitalintoadifferencebetweencurrencyandcapitalis，therefore，altogetherwrong。ThismodeofexpressionisinTooke’scaseduetohissimplyassumingthestandpointofabankerissuinghisownbank-notes。Thoseofhisnoteswhicharecontinuallyinthepublic’shands(evenifconsistingofeverdifferentnotes)andservingascurrencycosthimnothing，savethecostofthepaperandtheprinting。Theyarecirculatingcertificatesofindebtedness(billsofexchange)madeoutinhisownname，buttheybringhimmoneyandthusserveasameansofexpandinghiscapital。Theydifferfromhiscapital，however，whetheritbehisownorborrowed。Thatiswhythereisaspecialdistinctionforhimbetweencurrencyandcapital，which，however，hasnothingtodowiththedefinitionofthesetermsassuch，leastofallwiththatmadebyTooke。

Thedistinctattribute——whetheritservesasthemoney-formofrevenueorofcapital——changesnothinginthecharacterofmoneyasamediumofcirculation；itretainsthischaracternomatterwhichofthetwofunctionsitperforms。True，moneyservesmoreasanactualmediumofcirculation(coin，meansofpurchase)whenactingasthemoney-formofrevenue，duetothedispersionofpurchasesandsales，andbecausethemajorityofdisbursersofrevenue，thelabourers，canbuyrelativelylittleoncredit；whereasinthetrafficofthebusinessworld，wherethemediumofcirculationisthemoney-formofcapital，moneyservesmainlyasameansofpayment，partlyonaccountoftheconcentration，andpartlyonaccountoftheprevailingcreditsystem。Butthedistinctionbetweenmoneyasameansofpaymentandmoneyasameansofpurchase(meansofcirculation)isadistinctionthatreferstothemoneyitself。Itisnotadistinctionbetweenmoneyandcapital。Morecopperandsilvercirculateintheretailbusiness，andmoregoldinthewholesalebusiness。Yetthedistinctionbetweensilverandcopperontheonehand，andgoldontheother，isnotthedistinctionbetweencirculationandcapital。

Ad2)Introducingthequestionofthequantityofmoneycirculatingtogetherinbothfunctions:Sofarasmoneycirculates，beitasameansofpurchaseorasameansofpayment——nomatterinwhichofthetwospheresandindependentlyofitsfunctionofrealisingrevenueorcapital——thequantityofitscirculatingmasscomesunderthelawsdevelopedpreviouslyindiscussingthesimplecirculationofcommodities(Vol。I，Ch。III，2，b)。Thevelocityofcirculation，hencethenumberofrepetitionsofthesamefunctionasmeansofpurchaseandmeansofpaymentbythesamepiecesofmoneyinagiventerm，themassofsimultaneouspurchasesandsales，orpayments，thesumofthepricesofthecirculatingcommodities，andfinallythebalancesofpaymentstobesettledinthesameperiod，determineineithercasethemassofcirculatingmoney，ofcurrency。Whethermoneysoemployedrepresentscapitalorrevenueforthepayerorreceiver，isimmaterial，andinnowayaltersthematter。Itsmassissimplydeterminedbyitsfunctionasamediumofpurchaseandpayment。

Ad3)Onthequestionoftherelativeproportionsoftheamountsofcurrencycirculatinginbothfunctionsandthusinbothspheresofthereproductionprocess。Bothspheresofcirculationareconnectedinternally，for，ontheonehand，themassofrevenuestobespentexpressesthevolumeofconsumption，and，ontheother，themagnitudeofthemassesofcapitalcirculatinginproductionandcommerceexpressesthevolumeandvelocityofthereproductionprocess。Nevertheless，thesamecircumstanceshaveadifferenteffect，workingeveninoppositedirections，uponthequantitiesofmoneycirculatinginbothfunctionsorspheres，orontheamountofcurrency，astheEnglishputitinbankingparlance。AndthisgivesnewcauseforTooke’svulgardistinctionbetweencapitalandcurrency。ThefactthatthegentlemenoftheCurrencyTheoryconfusetwodifferentthingsisnoreasontopresentthemastwodifferentconcepts。

Intimesofprosperity，intenseexpansion，accelerationandvigourofthereproductionprocess，labourersarefullyemployed。Generally，thereisalsoariseinwageswhichmakesupinsomemeasurefortheirfallbelowaverageduringotherperiodsofthebusinesscycle。Atthesametime，therevenuesofthecapitalistsgrowconsiderably。Consumptionincreasesgenerally。

Commodity-pricesalsoriseregularly，atleastinthevariousvitalbranchesofbusiness。Consequently，thequantityofcirculatingmoneygrowsatleastwithindefinitelimits，sincethegreatervelocityofcirculation，inturn，setsupcertainbarrierstothegrowthoftheamountofcurrency。Sincethatportionofthesocialrevenuewhichconsistsofwagesisoriginallyadvancedbytheindustrialcapitalistintheformofvariablecapital，andalwaysinmoney-form，itrequiresmoremoneyforitscirculationintimesofprosperity。Butwemustnotcountthistwice——firstasmoneyrequiredforthecirculationofvariablecapital，andthenasmoneyrequiredforthecirculationofthelabourers’revenue。Themoneypaidtothelabourersaswagesisspentinretailtradeandreturnsaboutonceaweektothebanksastheretailers’deposits，afternegotiatingmiscellaneousintermediarytransactionsinsmallercycles。Intimesofprosperitytherefluxofmoneyproceedssmoothlyfortheindustrialcapitalists，andthustheneedformoneyaccommodationdoesnotincreasebecausemorewageshavetobepaidandmoremoneyisrequiredforthecirculationoftheirvariablecapital。

Thetotalresultisthatthemassofcirculatingmediaservingtheexpenditureofrevenuegrowsdecidedlyinperiodsofprosperity。

Asconcernsthecirculationrequiredforthetransferofcapital，hencerequiredexclusivelybetweencapitalists，aperiodofbriskbusinessissimultaneouslyaperiodofthemostelasticandeasycredit。Thevelocityofcirculationbetweencapitalistandcapitalistisregulateddirectlybycredit，andthemassofcirculatingmediumrequiredtosettlepayments，andevenincashpurchases，decreasesaccordingly。Itmayincreaseinabsoluteterms，butdecreasesrelativelyunderallcircumstancescomparedtotheexpansionofthereproductionprocess。Ontheonehand，greatermasspaymentsaresettledwithoutthemediationofmoney；ontheother，owingtothevigouroftheprocess，thereisaquickermovementofthesameamountsofmoney，bothasmeansofpurchaseandofpayment。Thesamequantityofmoneypromotestherefluxofagreaternumberofindividualcapitals。

Onthewhole，thecurrencyofmoneyinsuchperiodsappearsfull，althoughitsDepartmentII(transferofcapital)is，atleastrelatively，contracted，whileitsDepartmentI(expenditureofrevenue)expandsinabsoluteterms。

Therefluxesexpressthereconversionofcommodity-capitalintomoney，M——C——M’，aswehaveseeninthediscussionofthereproductionprocess，BookII，PartI。Creditrenderstherefluxinmoney-formindependentofthetimeofactualrefluxbothfortheindustrialcapitalistandthemerchant。

Bothofthemselloncredit；theircommoditiesarethusalienatedbeforetheyarereconvertedintomoneyforthem，hencebeforetheyflowbacktotheminmoney-form。Ontheotherhand，theybuyoncredit，andinthiswaythevalueoftheircommoditiesisreconverted，beitintoproductivecapitalorcommodity-capital，evenbeforethisvaluehasreallybeentransformedintomoney，i。e。，beforethecommodity-priceisdueandpaidfor。

Insuchtimesofprosperitytherefluxpassesoffsmoothlyandeasily。

Theretailersecurelypaysthewholesaler，thewholesalerpaysthemanufacturer，themanufacturerpaystheimporterofrawmaterials，etc。TheappearanceofrapidandreliablerefluxesalwayskeepsupforalongerperiodaftertheyareoverInrealitybyvirtueofthecreditthatisunderway，sincecreditrefluxestaketheplaceoftherealones。Thebanksscentdangerassoonastheirclientsdepositmorebillsofexchangethanmoney。SeethetestimonyoftheLiverpoolbankdirector，p。398。[Presentedition:

Ch。XXV——Ed。]

ToinsertwhatIhavenotedearlier:”Inperiodsofpredominantcredit，thevelocityofthecirculationofmoneyincreasesfasterthancommodity-prices，whereasintimesofdecliningcreditcommodity-pricesdropslowerthanthevelocityofcirculation。”(ZurKritikderpolitischenOekonomie，1859，S。83，84。)

Thereverseistrueinaperiodofcrisis。CirculationNo。Icontracts，pricesfall，similarlywages；thenumberofemployedlabourersisreduced，themassoftransactionsdecreases。Onthecontrary，theneedformoneyaccommodationincreasesincirculationNo。IIwiththecontractionofcredit。

Weshallexaminethispointingreaterdetailimmediately。

Thereisnodoubtthatwiththedecreaseofcreditwhichgoeshandinhandwithstagnationinthereproductionprocess，thecirculationmassrequiredforNo。I，theexpenditureofrevenue，contracts，whilethatrequiredforNo。II，thetransferofcapital，expands。ButtowhatextentthisstatementcoincideswithwhatismaintainedbyFullartonandothersstillremainstoheanalysed:”Ademandforcapitalonloanandademandforadditionalcirculationarequitedistinctthings，andnotoftenfoundassociated。”

(Fullarton，1。c。，p。82，titleofChapter5。)[2]

Inthefirstplaceitisevidentthatinthefirstofthetwocasesmentionedabove，duringtimesofprosperity，whenthemassofthecirculatingmediummustincrease，thedemandforitincreases。Butitislikewiseevidentthat，whenamanufacturerdrawsmoreorlessofhisdepositoutofabankingoldorbank-notesbecausehehastoexpendmorecapitalintheformofmoney，hisdemandforcapitaldoesnottherebyincrease。Whatincreasesismerelyhisdemandforthisparticularforminwhichheexpendshiscapital。

Thedemandrefersonlytothetechnicalform，inwhichhethrowshiscapitalintocirculation。Justasinthecaseofadifferentdevelopmentofthecreditsystem，thesamevariablecapital，forexample，orthesamequantityofwages，requiresagreatermassofmeansofcirculationinonecountrythaninanother；inEnglandmorethaninScotland，forinstance，andinGermanymorethaninEngland。Likewiseinagriculture，thesamecapitalactiveinthereproductionprocessrequiresdifferentquantitiesofmoneyindifferentseasonsfortheperformanceofitsfunction。

ButthecontrastdrawnbyFullartonisnotcorrect。Itisbynomeansthestrongdemandforloansashesays，whichdistinguishestheperiodofdepressionfromthatofprosperity，buttheeasewithwhichthisdemandissatisfiedinperiodsofprosperity，andthedifficultieswhichitmeetsinperiodsofdepression。Itispreciselytheenormousdevelopmentofthecreditsystemduringaprosperityperiod，hencealsotheenormousincreaseinthedemandforloancapitalandthereadinesswithwhichthesupplymeetsitinsuchperiods，whichbringsaboutashortageofcreditduringaperiodofdepression。Itisnot，therefore，thedifferenceinvolumeofdemandforloanswhichcharacterisesbothperiods。

Aswehavepreviouslyremarked，bothperiodsareprimarilydistinguishedbythefactthatthedemandforcurrencybetweenconsumersanddealerspredominatesinperiodsofprosperity，andthedemandforcurrencybetweencapitalistspredominatesinperiodsofdepression。Duringadepressiontheformerdecreases，andthelatterincreases。

WhatstrikesFullartonandothersasdecisivelyimportantisthephenomenonthatinsuchperiodswhensecuritiesinpossessionoftheBankofEnglandareontheincrease，itscirculationofnotesdecreases，andviceversa。

Thelevelofthesecurities，however，expressesthevolumeofthepecuniaryaccommodation，thevolumeofdiscountedbillsofexchangeandofadvancesmadeagainstmarketablecollateral。ThusFullartonsaysintheabovepassagethatthesecuritiesinthehandsoftheBankofEnglandfluctuatemostlyinanoppositedirectiontoitscirculation，andthiscorroboratestheviewlongheldbyprivatebanksthatnobankcanincreaseitsissueofbank-notesbeyondacertainpointdeterminedbytheneedsofitspublic；

butifabankwantstomakeadvancesbeyondthislimit，itmustmakethemoutofitscapital，henceitmusteitherrealiseonsecuritiesorutilisedepositswhichitwouldotherwisehaveinvestedinsecurities。This，however，revealsalsowhatFullartonmeansbycapital。Whatdoescapitalsignifyhere？ThattheBankcannolongermakeadvanceswithitsownbank-notes，orpromissorynotes，which，ofcourse，costitnothing。Butwhatdoesitmakeadvanceswithinthatcase？Withthesumsrealisedfromthesaleofsecuritiesheldinreserve，i。e。，governmentbonds，stocks，andotherinterest-bearingpaper。Andwhatdoesitgetinpaymentforthesaleofsuchpaper？Money-goldorbank-notes，sofarasthelatterarelegaltender，suchasthoseoftheBankofEngland。Whatthebankadvances，therefore，isunderallcircumstancesmoney。Thismoney，however，nowconstitutesapartofitscapital。Ifitadvancesgold，thisisunderstandable。Ifitadvancesnotes，thenthesenotesrepresentcapital，becauseithasgivenupsomeactualvalueforthem，suchasinterest-bearingpaper。Inthecaseofprivatebanksthenotessecuredbythemthroughthesaleofsecuritiescannotbeanythingelse，inthemain，butBankofEnglandnotesortheirownnotes，sinceotherswouldhardlybetakeninpaymentforsecurities。

IfitistheBankofEnglanditself，thenitsownnotes，whichitreceivesinreturn，costitcapital，thatis，interest-bearingpaper。Besides，ittherebywithdrawsitsownnotesfromcirculation。Shoulditreissuethesenotes，orissuenewnotesintheirsteadtothesameamount，theynowrepresentcapital。Andtheydosoequallywell，whenusedforadvancestocapitalists，orwhenusedlater，whenthedemandforsuchpecuniaryaccommodationdecreases，forreinvestmentinsecurities。Inallthesecasesthetermcapitalisemployedonlyfromthebanker’spointofview，andmeansthatthebankeriscompelledtoloanmorethanhismerecredit。

Asisknown，theBankofEnglandmakesallitsadvancesinitsownnotes。

Now，ifdespitethis，asarule，thebank-notecirculationoftheBankdecreasesinproportionasthediscountedbillsofexchangeandcollateralinitshands，andthusitsadvancesincrease——whatbecomesofthenotesthrownintocirculation？HowdotheyreturntotheBank？

Tobeginwith，ifthedemandformoneyaccommodationarisesfromanunfavourablenationalbalanceofpaymentsandtherebyimpliesadrainofgold，thematterisverysimple。Thebillsofexchangearediscountedinbank-notes。Thebank-notesareexchangedforgoldbytheBankitself，initsissuedepartment，andthisgoldisexported。ItisasthoughtheBankpaidoutgolddirectly，withoutthemediationofnotes，ondiscountingbills。Suchanincreaseddemand，whichmayincertaincasesbe£；7

to£；10million，naturallydoesnotaddasinglefive-poundnotetothecountry’sdomesticcirculation。IfitisnowsaidthattheBankadvancescapital，andnotcurrency，thismeanstwothings。First，thatitdoesnotadvancecredit，butactualvalues，apartofitsowncapitalorofcapitaldepositedwithit。Secondly，thatitdoesnotadvancemoneyforinland，butforinternationalcirculation，thatitadvancesworld-money；andforthispurposemoneymustalwaysexistinitsformofahoard，initsmetallicstate；intheforminwhichitisnotmerelyaformofvalue，butvalueitself，whosemoney-formitis。Althoughthisgoldnowrepresentscapital，bothfortheBankandtheexportinggold-dealer，i。e。，bankingorcommercialcapital，thedemandforitisnotforcapital，butfortheabsoluteformofmoney-capital。ThisdemandarisespreciselyatthemomentwhenforeignmarketsareovercrowdedwithunsaleableEnglishcommodity-capital。

Whatiswanted，therefore，iscapital，notascapital，butcapitalasmoney，intheforminwhichmoneyservesasauniversalworld-marketcommodity；andthisisitsoriginalformofpreciousmetal。Thedrainofgoldisnot，therefore，asFullarton，Tooke，etc。，claim，”amerequestionofcapital。”Rather，itisa”questionofmoney，”evenifinaspecificfunction。ThefactthatitisnotaquestionofinlandcirculationastheadvocatesoftheCurrencyTheorymaintain，doesnotproveatall，asFullartonandothersthink，thatitismerelyaquestionofcapital。

Itisaquestionofmoneyintheforminwhichmoneyisaninternationalmeansofpayment。”Whetherthatcapital”(thepurchasepriceforthemillionofquartersofforeignwheatafteracropfailureinthehomecountry)”istransmittedinmerchandiseorinspecie，isapointwhichinnowayaffectsthenatureofthetransaction。”(Fullarton，1。c。，p。131。)Butitsignificantlyaffectsthequestion，whetherthereisadrainofgold，ornot。Capitalistransferredintheformofpreciousmetal，becauseiteithercannotbetransferredatall，oronlyatagreatlossintheshapeofcommodities。Thefearwhichthemodernbankingsystemhasofgolddrainexceedsanythingeverimaginedbythemonetarysystem，whichconsideredpreciousmetalsastheonlytruewealth。Take，forinstance，thefollowingevidenceoftheGovernoroftheBankofEngland，Morris，beforetheParliamentaryCommitteeonthecrisisof1847-48:(3846。Question:)”WhenIspokeofthedepreciationofstocksandfixedcapital，areyounotawarethatallpropertyinvestedinstocksandproduceofeverydescriptionwasdepreciatedinthesameway；thatrawcotton，rawsilk，andunmanufacturedwoolweresenttothecontinentatthesamedepreciatedprice，andthatsugar，coffeeandteaweresacrificedasatforcedsales？——Itwasinevitablethatthecountryshouldmakeaconsiderablesacrificeforthepurposeofmeetingtheeffluxofbullionwhichhadtakenplaceinconsequenceofthelargeimportationoffood。”——”3848。Donotyouthinkitwouldhavebeenbettertotrenchuponthe£；8millionlyinginthecoffersoftheBank，thantohaveendeavouredtogetthegoldbackagainatsuchasacrifice？——No，Idonot。”——Itisgoldwhichherestandsfortheonlytruewealth。

FullartonquotesthediscoverybyTookethat”withonlyoneortwoexceptions，andthoseadmittingofsatisfactoryexplanation，everyremarkablefallofexchange，followedbyadrainofgold，thathasoccurredduringthelasthalf-century，hasbeencoincidentthroughoutwithacomparativelylowstateofthecirculatingmedium，andviceversa。”(Fullarton，p。121。)

Thisdiscoveryprovesthatsuchdrainsofgoldoccurgenerallyafteraperiodofanimationandspeculation，as”thesignalofacollapsealreadycommencedanindicationofoverstockedmarkets，ofacessationoftheforeigndemandforourproductions，ofdelayedreturns，and，asthenecessarysequelofallthese，ofcommercialdiscredit，manufactoriesshutup，artisansstarving，andageneralstagnationofindustryandenterprise”(p。129)。

This，naturally，isatoncethebestrefutationoftheclaimoftheadvocatesoftheCurrencyTheory，that”afullcirculationdrivesoutbullionandalowcirculationattractsit。”Onthecontrary，whiletheBankofEnglandgenerallycarriesastronggoldreserveduringaperiodofprosperity，thishoardisgenerallyformedduringtheslackperiod，whichfollowsafterastorm。

Allthissagacityconcerningthedrainofgold，then，amountstosayingthatthedemandforinternationalmediaofcirculationandpaymentdiffersfromthedemandforinternalmediaofcirculationandpayment(anditgoeswithoutsaying，therefore，that”theexistenceofadraindoesnotnecessarilyimplyanydiminutionoftheinternaldemandforcirculation，”

asFullartonhasitonpage112ofhiswork)andthattheexportofpreciousmetalanditsbeingthrownintointernationalcirculationisnotthesameasthrowingnotesorspecieintointernalcirculation。Asfortherest，Ihaveshownonapreviousoccasion[Englishedition:Vol。1——Ed。]

thatthemovementsofahoardconcentratedasareservefundforinternationalpaymentshaveassuchnothingtodowiththemovementsofmoneyasamediumofcirculation。Atanyrate，thequestion。iscomplicatedbythefactthatthedifferentfunctionsofahoard，whichIhavedevelopedfromthenatureofmoney-suchasitsfunctionasareservefundofmeansofpaymenttocoverduebillsindomesticbusiness；thefunctionofareservefundofcurrency；andfinally，thefunctionofareservefundofworld-money-arehereattributedtoonesolereservefund。ItalsofollowsfromthisthatundercertaincircumstancesadrainofgoldfromtheBanktothehomemarketmaycombinewithadrainabroad。Thequestionisfurthercomplicatedhoweverbythefactthatthishoardisarbitrarilyburdenedwiththeadditionalfunctionofservingasafundguaranteeingtheconvertibilityofbank-notesincountries，inwhichthecreditsystemandcredit-moneyaredeveloped。

Andinadditiontoallthiscomes1)theconcentrationofthenationalreservefundinonesinglecentralbank，and2)itsreductiontothesmallestpossibleminimum。Hence，also，Fullarton’scomplaint(p。143):”Onecannotcontemplatetheperfectsilenceandfacilitywithwhichvariationsoftheexchangeusuallypassoffincontinentalcountries，comparedwiththestateoffeverishdisquietandalarmalwaysproducedinEnglandwheneverthetreasureattheBankseemstobeatallapproachingtoexhaustion，withoutbeingstruckwiththegreatadvantageinthisrespectwhichametalliccurrencypossesses。”

However，ifwenowleaveasidethedrainofgold，howcanabankthatissuesnotes，liketheBankofEngland，increasetheamountofmoneyaccommodationgrantedbyitwithoutincreasingitsissueofbank-notes？

Sofarasthebankitselfisconcerned，allthenotesoutsideitswalls，whethercirculatingorinprivatehoards，areincirculation，i。e。，areoutofitshands。Hence，ifthebankextendsitsdiscountingandmoney-lendingbusiness，itsadvancesonsecurities，allthebank-notesissuedbyitforthatpurposemustreturn，forotherwisetheywouldincreasethevolumeofcirculation，somethingwhichisnotsupposedtohappen。Thisreturnmaytakeplaceintwoways。

First:ThebankpaysAnotesagainstsecurities；AusesthemtopayforbillsofexchangeduetoB，andBdepositsnotesoncemoreinthebank。Thisbringstoaclosethecirculationofthesenotes，buttheloanremains。(”Theloanremains，andthecurrency，ifnotwanted，findsitswaybacktotheissuer。”Fullarton，p。97。)Thenotes，whichthebankadvancedtoA，havenowreturnedtoit；butitisthecreditorofA，orwhoevermayhavebeenthedrawerofthebilldiscountedbyA，andthedebtorofBfortheamountofvalueexpressedinthesenotes，andBthusdisposesofacorrespondingportionofthecapitalofthebank。

Secondly:ApaystoB，andBhimself，orC，towhomhepaysthenotes，usesthesenotestopaybillsduetothebank，directlyorindirectly。

Inthatcasethebankispaidinitsownnotes。Thisconcludesthetransaction(pendingA’sreturnpaymenttothebank)。

Towhatextent，now，shallthebank’sadvancetoAberegardedasanadvanceofcapital，orasamereadvanceofmeansofpayment？[3]

[Thisdependsonthenatureoftheloanitself。Threecasesmustbedistinguished。

Firstcase——Areceivesfromthebankamountsloanedonhisownpersonalcredit，withoutgivinganysecurityforthem。Inthiscasehedoesnotmerelyreceivemeansofpayment，butalsounquestionablyanewcapital，whichhemayemployinhisbusinessandrealiseasanadditionalcapitaluntilthematuritydate。

Secondcase——Ahasgiventothebanksecurities，nationalbonds，orstocksascollateral，andreceivedforthem，say，uptotwo-thirdsoftheirmomentaryvalueasacashloan。Inthiscasehehasreceivedthemeansofpaymentheneeded，butnoadditionalcapital，forheentrustedtothebankalargercapital-valuethanhereceivedfromit。Butthislargercapital-valuewas，ontheonehand，unavailableforhismomentaryneeds(meansofpayment)，becauseinvestedinaparticularinterest-bearingform；

ontheotherhand，Ahadhisownreasonsfornotwantingtoconvertthiscapital-valuedirectlyintomeansofpaymentbysellingit。Hissecuritiesserved，amongotherthings，asareservecapital，andhesettheminmotionassuch。ThetransactionbetweenAandthebank，therefore，consistsinatemporarymutualtransferofcapital，sothatAdoesnotreceiveanyadditionalcapital(quitethecontrary！)althoughhereceivesthedesiredmeansofpayment。Forthebank，ontheotherhand，thistransactionconstitutesatemporarylodgementofmoney-capitalintheformofaloan，aconversionofmoney-capitalfromoneformintoanother，andthisconversionispreciselytheessentialfunctionofthebankingbusiness。

Thirdcase——Ahadthebankdiscountabillofexchangeandreceiveditsvalueincashafterthedeductionofdiscount。Inthiscasehesoldanon-convertiblemoney-capitaltothebankfortheamountofvalueinconvertibleform。Hesoldhisstillrunningbillforcashmoney。Thebillisnowthepropertyofthebank。ItdoesnotalterthematterthatAaslastendorserofthebillisresponsibleforittothebankindefaultofpayment。Hesharesthisresponsibilitywiththeotherendorsersandwiththedrawerofthebill，allofwhomaredulyresponsibletohim。Inthiscase，therefore，wedonothavealoan，butonlyanordinarypurchaseandsale。Forthisreason，Ahasnothingtopaybacktothebank。Itreimbursesitselfbycashingthebillwhenitbecomesdue。Here，too，atransferofcapitalhastakenplacebetweenAandthebank，andinexactlythesamemannerasinthesaleandpurchaseofanyothercommodity，andforthisveryreasonAdidnotreceiveanyadditionalcapital。Whatheneededandreceivedweremeansofpayment，andhereceivedthembyhavingthebankconvertoneformofhismoney-capital——hisbill——intoanother——money。

Itisthereforeonlyinthefirstcasethatthereisanyquestionofarealadvanceofcapital；inthesecondandthirdcases，themattercanbesoregardedonlyinthesensethateveryinvestmentofcapitalimpliesan”advanceofcapital。”Inthissensethebankadvancesmoney-capitaltoA；butforAitismoney-capitalatbestinthesensethatitisaportionofhiscapitalingeneral。Andlierequiresitandusesitnotspecificallyascapital，butratherasspecificallyameansofpayment。

Otherwise，everyordinarysaleofcommoditiesbywhichmeansofpaymentaresecuredmightbeconsideredasreceivinganadvanceofcapital——F。E。]

Inthecaseofprivatebankswhichissuetheirownnoteswehavethisdifference，thatiftheirnotesremainneitherinlocalcirculation，norreturntothemintheformofdeposits，orinpaymentforduebillsofexchange，theyfallintothehandsofpersonswhocompeltheprivatebanktocashthesenotesingoldorinnotesoftheBankofEngland。Inthisevent，therefore，itsloaninfact；representsanadvanceofnotesoftheBankofEngland，or，whatamountstothesamethingfortheprivatebank，ofgold，henceaportionofitsbankcapital。ThesameholdsgoodincasetheBankofEnglanditself，orsomeotherbank，whichhasafixedlegalmaximumforitsissueofnotes，mustsellsecuritiestowith-drawitsownnotesfromcirculationandthenissuethemoncemoreintheshapeofadvances；

inthatcase，thebank’sownnotesrepresentaportionofitsmobilisedbankcapital。

Evenifthecirculationwerepurelymetallic，itwouldbepossible1)

foradrainofgold[Marxevidentlyrefersheretoadrainofgoldthatwould，atleastpartially，goabroad——F。E。]toemptythetreasury，and2)sincegoldwouldbechieflywantedbythebanktomakepayments(insettlementoferstwhiletransactions)，theadvanceagainstcollateralcouldgrowconsiderably，butwouldflowbacktoitintheformofdepositsorinpaymentofduebillsofexchange；sothat，ononeside，thetotaltreasureofthebankwoulddecreasewithanincreaseofthesecuritiesinitshands，whileontheother，itwouldnowbeholdingthesameamount，whichitpossessedformerlyasowner，asdebtorofitsdepositors，andfinallythetotalquantityofcurrencywoulddecrease。

Ourassumptionsofarhasbeenthattheloansaremadeinnotes，sothattheycarrywiththematleastafleeting，evenifinstantlydisappearing，increaseintheissueofnotesButthisisnotnecessary。Insteadofapapernote，thebankmayopenacreditaccountforA，inwhichcasethisA，thebank’sdebtor，becomesitsimaginarydepositor。Hepayshiscreditorswithchequesonthebank，andtherecipientofthesechequespassesthemontohisownbanker，whoexchangesthemforthechequesoutstandingagainsthimintheclearinghouse。Inthiscasenomediationofnotestakesplaceatall，andtheentiretransactionisconfinedtothefactthatthebanksettlesitsowndebtwithachequedrawnonitself，anditsactualrecompenseconsistsinitsclaimonA。Inthiscasethebankhasloanedaportionofitsownbankcapital，becauseitsowndebtclaim，toA。

Insofarasthisdemandforpecuniaryaccommodationisademandforcapital，itissoonlyformoney-capital。Itiscapitalonlyfromthestandpointofthebanker，namelygold(inthecaseofgoldexportsabroad)ornotesoftheNationalBank，whichaprivatebankcanobtainonlybypurchaseagainstanequivalent，andwhich，therefore，representcapitalforit。

Or，again，itisacaseofinterest-bearingpapers，governmentbonds，stocks，etc。，whichmustbesoldinordertoobtaingoldorbank-notes。Suchpapers，however，ifingovernmentbonds，arecapitalonlyforthebuyer，forwhomtheyrepresentthepurchaseprice，thecapitalheinvestedinthem。Inthemselvestheyarenotcapital，butmerelydebtclaims。Ifmortgages，theyaremeretitlesonfutureground-rent。Andiftheyaresharesofstock，theyaremeretitlesofownership，whichentitletheholdertoashareinfuturesurplus-value。Allofthesearenotrealcapital。Theydonotformconstituentpartsofcapital，noraretheyvaluesinthemselves。Bywayofsimilartransactionsmoneybelongingtothebankmaybetransformedintodeposits，sothatthebankbecomesthedebtorinsteadofownerofthismoney，andholdsitunderadifferenttitleofownership。Howeverimportantthismaybetothebank，italtersnothinginthemassofreservecapital，orevenofmoney-capitalavailableinaparticularcountry。Capital，therefore，representshereonlymoney-capital，and，ifnotavailableintheactualformofmoney，itrepresentsameretitleoncapital。Thisisveryimportant，sinceascarcityof，andpressingdemandfor，bankingcapitalisconfoundedwithadecreaseofactualcapital，whichconverselyisinsuchcasesratherabundantintheformofmeansofproductionandproducts，andswampsthemarkets。

Itis，therefore，easytoexplainhowthemassofsecuritiesheldbyabankascollateralincreases，hencehowthegrowingdemandforpecuniaryaccommodationcanbesatisfiedbythebank，whilethetotalmassofcurrencyremainsthesameordecreases。Thistotalmassisheldincheckduringsuchperiodsofmoneystringencyintwoways:1)byadrainofgold；2)

byademandformoneyinitscapacityasameremeansofpayment，whentheissuedbank-notesreturnimmediately；orwhenthetransactionstakeplacewithoutthemediationofnotesbymeansofbookcredit；when，therefore，paymentsaremadesimplythroughacredittransaction，thesettlementofthesepaymentsbeingthesolepurposeoftheoperation。Itisapeculiarityofmoney，whenitservesmerelytosettleaccounts(andintimesofcrisesloansaretakenuptopay，ratherthantobuy；towindupprevioustransactions，nottoinitiatenewones)，thatitscirculationisnomorethanfleeting，evenwherebalancesarenotsettledbymerecreditoperations，withoutthemediationofmoney，sothat，whenthereisastrongdemandforpecuniaryaccommodation，anenormousquantityofsuchtransactionscantakeplacewithoutexpandingthecirculation。ButthemerefactthatthecirculationoftheBankofEnglandremainsstableorevendecreasessimultaneouslywithanextensiveaccommodationofmoneyonitspart，doesnotprimafacieprove，asFullarton，Tookeandothersassume(owingtotheirerroneousnotionthatpecuniaryaccommodationisidenticalwithreceivingcapitalonloanasadditionalcapital)，thatthecirculationofmoney(ofbank-notes)initsfunctionasameansofpaymentisnotincreasedandextended。Sincethecirculationofnotesasmeansofpurchasedecreasesduringabusinessdepression，whensuchextensiveaccommodationisnecessary，theircirculationasmeansofpaymentmayincrease，andtheaggregateamountofthecirculation，thesumofnotesfunctioningasmeansofpurchaseandpayment，mayremainstableormayevendecrease。Thecirculationasameansofpaymentofbank-notesimmediatelyreturningtothebankthatissuesthemissimplynotcirculationintheeyesofthoseeconomists。

Shouldcirculationasameansofpaymentincreaseatahigherratethanitdecreasesasameansofpurchase，theaggregatecirculationwouldincrease，althoughthemoneyservingasameansofpurchasewoulddecreaseconsiderablyinquantity。Andthisactuallyoccursincertainperiodsofcrisis，namely，whencreditcollapsescompletelyandwhennotonlycommoditiesandsecuritiesareunsaleablebutbillsofexchangeareundiscountableandnothingcountsanymorebutmoneypayment，or，asthemerchantputsit，cash。SinceFullartonetal。donotunderstandthatthecirculationofnotesasmeansofpaymentisthecharacteristicfeatureofsuchperiodsofmoneyshortage，theytreatthisphenomenonasaccidental。”Withrespectagaintothoseexamplesofeagercompetitionforthepossessionofbank-notes，whichcharacteriseseasonsofpanicandwhichmaysometimes，asatthecloseof1825，leadtoasudden，thoughonlytemporary，enlargementoftheissues，evenwhiletheeffluxofbullionisstillgoingon，these，Iapprehend，arenottoberegardedasamongthenaturalornecessaryconcomitantsofalowexchange；

thedemandinsuchcasesisnotforcirculation”(readcirculationasameansofpurchase)，”butforhoarding，ademandonthepartofalarmedbankersandcapitalistswhicharisesgenerallyinthelastactofthecrisis”

(hence，forareserveofmeansofpayment)，”afteralongcontinuationofthedrain，andistheprecursorofitstermination。”(Fullarton，p。

130。)

Inthediscussionofmoneyasameansofpayment(Vol。I，Ch。III，3，b)wehavealreadyexplained，inwhatmanner，whenthechainofpaymentsissuddenlyinterrupted，moneyturnsfromitsidealformintoamaterialand，atthesametime，absoluteformofvaluevis-à；-visthecommodities。

Thiswasillustratedbysomeexamples(footnotes100and101)。Thisinterruptionitselfispartlyaneffect，partlyacauseoftheinstabilityofcreditandofthecircumstancesaccompanyingit，suchasoverstockingofmarkets，depreciationofcommodities，interruptionofproduction，etc。

Itisevident，however，thatFullartontransformsthedistinctionbetweenmoneyasameansofpurchaseandmoneyasameansofpaymentintoafalsedistinctionbetweencurrencyandcapital。Thisisagainduetothenarrow-mindedbanker’sconceptionofcirculation。

Itmightyetbeasked:whichisit，capitalormoneyinitsspecificfunctionasameansofpaymentthatisinshortsupplyinsuchperiodsofstringency？Andthisisawell-knowncontroversy。

Inthefirstplace，sofarasthestringencyismarkedbyadrainofgold，itisevidentlyinternationalmeansofpaymentthataredemanded。

Butmoneyinitsspecificcapacityofinternationalmeansofpaymentisgoldinitsmetallicactuality，asavaluablesubstanceinitself，asaquantityofvalue。Itisatthesametimecapital，notcapitalascommodity-capital，butasmoney-capital，capitalnotintheformofcommoditiesbutintheformofmoney(and，atthat，ofmoneyintheeminentsenseoftheword，inwhichitexistsasuniversalworld-marketcommodity)。Itisnotacontradictionherebetweenademandformoneyasameansofpaymentandademandforcapital。Thecontradictionisratherbetweencapitalinitsmoney-formandcapitalinitscommodity-form；andtheformwhichisheredemandedandinwhichaloneitcanfunction，isitsmoney-form。

Asidefromthisdemandforgold(orsilver)itcannotbesaidthatthereisanydearthwhateverofcapitalinsuchperiodsofcrisis。Underextraordinarycircumstances，suchasriseinthepriceofcorn，oracottonfamine，etc。，thismaybethecase；butthesephenomenaarenotnecessaryorregularaccompanimentsofsuchperiods；andtheexistenceofsuchalackofcapitalcannotbeassumedbeforehandwithoutfurtheradofromthemerefactthatthereisaheavydemandforpecuniaryaccommodation。Onthecontrary。Themarketsareoverstocked，swampedwithcommodity-capital。Hence，itisnot，inanycase，alackofcommodity-capitalwhichcausesthestringency。

Weshallreturntothisquestionlater。

FOOTNOTES[1]WeheregivetherelatedpassagefromTookeintheoriginal，whichwascitedinGermanonp。390[presentedition:Ch。XXV:]”Thebusinessofbankers，settingasidetheissueofpromissorynotespayableondemand，maybedividedintotwobranches，correspondingwiththedistinctionpointedoutbyDr。(Adam)Smithofthetransactionsbetweendealersanddealers，andbetweendealersandconsumers。Onebranchofthebankers’businessistocollectcapitalfromthosewhohavenotimmediateemploymentforit，andtodistributeortransferittothesewhohave。Theotherbranchistoreceivedepositsoftheincomesoftheircustomers，andtopayouttheamount，asitiswantedforexpenditurebythelatterintheobjectsoftheirconsumption……theformerbeingacirculationofcapital，thelatterofcurrency。”(Tooke，InquiryintotheCurrencyPrinciple，London，p。36。)Thefirstis”theconcentrationofcapitalontheonehandandthedistributionofitontheother”；thelatteris”administeringthecirculationforlocalpurposesofthedistrict。”(Ibid。，p。37。)AfarmorecorrectconceptionisoutlinedinthefollowingpassagebyKinnear:”Money……isemployedtoperformtwooperationsessentiallydistinct……Asamediumofexchangebetweendealersanddealers，itistheinstrumentbywhichtransfersofcapitalareeffected；thatis，theexchangeofacertainamountofcapitalinmoneyforanequalamountofcapitalincommodities。Butmoneyemployedinthepaymentofwagesandinpurchaseandsalebetweendealersandconsumersisnotcapital，butincome；thatportionoftheincomesofthecommunity，whichisdevotedtodailyexpenditure。Itcirculatesinconstantdailyuse，andisthatalonewhichcan，withstrictpropriety，betermedcurrency。AdvancesofcapitaldependentirelyonthewilloftheBankandotherpossessorsofcapital，forborrowersarealwaystobefound；buttheamountofthecurrencydependsonthewantsofthecommunity，amongwhomthemoneycirculates，forthepurposesofdailyexpenditure。”(J。G。Kinnear，TheCrisisandtheCurrency，London，1847[pp。3-4]。)

[2]”Itisagreaterror，indeed，toimaginethatthedemandforpecuniaryaccommodation”(thatis，fortheloanofcapital)”isidenticalwithademandforadditionalmeansofcirculation，oreventhatthetwoarefrequentlyassociated。Eachdemandoriginatesincircumstancespeculiarlyaffectingitself，andverydistinctfromeachother。Itiswheneverythinglooksprosperous，whenwagesarehigh，pricesontherise，andfactoriesbusy，thatanadditionalsupplyofcurrencyisusuallyrequiredtoperformtheadditionalfunctionsinseparablefromthenecessityofmakinglargerandmorenumerouspayments；whereasitischieflyinamoreadvancedstageofthecommercialcycle，whendifficultiesbegintopresentthemselves，whenmarketsareoverstocked，andreturnsdelayed，thatinterestrises，andapressurecomesupontheBankforadvancesofcapital。ItistruethatthereisnomediumthroughwhichtheBankisaccustomedtoadvancecapitalexceptthatofitspromissorynotes；andthattorefusethenotes，therefore，istorefusetheaccommodation。Buttheaccommodationoncegranted，everythingadjustsitselfinconformitywiththenecessitiesofthemarket；

theloanremains，andthecurrency，ifnotwanted，findsitswayhacktotheissuer。Accordingly，averyslightexaminationoftheParliamentaryReturnsmayconvinceanyone，thatthesecuritiesinthehandsoftheBankofEnglandfluctuatemorefrequentlyinanoppositedirectiontoitscirculationthaninconcertwithit，andthattheexample，therefore，ofthatgreatestablishmentfurnishesnoexceptiontothedoctrinesostronglypressedbythecountrybankers，totheeffectthatnohankcanenlargeitscirculation，ifthatcirculationhealreadyadequatetothepurposestowhichabank-notecurrencyiscommonlyapplied；butthateveryadditiontoitsadvances，afterthatlimitispassed，musthemadefromitscapital，andsuppliedbythesaleofsomeofitssecuritiesinreserve，orbyabstinencefromfurtherinvestmentinsuchsecurities。ThetablecompiledfromtheParliamentaryReturnsfortheintervalbetween1833and1840，towhichIhavereferredinaprecedingpage，furnishescontinuedexamplesofthistruth；buttwoofthesearesoremarkablethatitwillbequiteunnecessaryformetogobeyondthem。Onthe3rdofJanuary，1837，whentheresourcesoftheBankwerestrainedtotheuttermosttosustaincreditandmeetthedifficultiesofthemoney-market，wefinditsadvancesonloananddiscountcarriedtotheenormoussumof£；17，022，000，anamountscarcelyknownsincethewar，andalmostequaltotheentireaggregateissueswhich，inthemeanwhile，remainunmovedatsolowapointas£；17，076，000！Ontheotherhand，wehaveonthe4thofJune，1833，acirculationof£；18，892，000，withareturnofprivatesecuritiesinhand，nearly，ifnottheverylowestonrecordforthelasthalf-century，amountingtonomorethan£；972，000！”

(Fullarton，1。c。，pp。97，98。)Thatademandforpecuniaryaccommodationneednotbeidenticalbyanymeanswithademandforgold(whatWilson，Tookeandotherscallcapital)isseenfromthefollowingtestimonyofMr。Weguelin，GovernoroftheBankofEngland:”Thediscountingofbillstothatextent”(onemilliondailyforthreesuccessivedays)”wouldnotreducethereserve”(ofbank-notes)，”unlessthepublicdemandedagreateramountofactivecirculation。Thenotesissuedonthediscountofbillswouldbereturnedthroughthemediumofthebankersandthroughdeposits。

Unlessthesetransactionswereforthepurposeofexportingbullion，andunlesstherewereanamountofinternalpanicwhichinducedpeopletolockuptheirnotes，andnottopaythemintothehandsofthebankers……thereservewouldnotbeaffectedbythemagnitudeofthetransactions。”——”TheBankmaydiscountamillionandahalfaday，andthatisdoneconstantly，withoutitsreservebeingintheslightestdegreeaffected，thenotescomingbackagainasdeposits，andnootheralterationtakingplacethanthemeretransferfromoneaccounttoanother。”(ReportonBankActs，1857，EvidenceNos。241，500。)Thenotesthereforeserveheremerelyasmeansoftransferringcredits。

[3]Thepassagethatfollowsintheoriginalisunintelligibleinthiscontextandhasbeenrewrittenbytheeditortotheendofthebrackets。InanothercontextthispointhasalreadybeentoucheduponinChapterXXVI——F。

E

Capital，Vol。3，Chapter29KarlMarxCAPITALVol。III

THEPROCESSOF

CAPITALISTPRODUCTIONASAWHOLEPartV

DIVISIONOFPROFITINTOINTERESTANDPROFIT

OFENTERPRISE。

INTEREST-BEARINGCAPITALCHAPTER29

ComponentPartsofBankCapitalItisnownecessarytoexaminethecomponentpartsofbankcapitalingreaterdetail。

WehavejustseenthatFullartonandotherstransformthedistinctionbetweenmoneyasamediumofcirculationandmoneyasameansofpayment——alsouniversalmoneyinsofarasitconcernsadrainofgold——intoadistinctionbetweencurrencyandcapital。

Thepeculiarroleplayedbycapitalinthisinstanceisthereasonwhybankers’economicsteachesthatmoneyisindeedcapitalparexcellenceasinsistentlyasenlightenedeconomicstaughtthatmoneyisnotcapital。

Insubsequentanalyses，weshalldemonstratethatmoney-capitalisbeingconfusedherewithmoneyedcapitalinthesenseofinterest-bearingcapital，whileintheformersense，money-capitalisalwaysmerelyatransientformofcapital——incontradistinctiontotheotherformsofcapital，namely，commodity-capitalandproductivecapital。

Bankcapitalconsistsof1)cashmoney，goldornotes；2)securities。

Thelattercanbesubdividedintotwoparts:commercialpaperorbillsofexchange，whichrunforaperiod，becomeduefromtimetotime，andwhosediscountingconstitutestheessentialbusinessofthebanker；andpublicsecurities，suchasgovernmentbonds，treasurynotes，stocksofallkinds，inshort，interest-bearingpaperwhichishoweversignificantlydifferentfrombillsofexchange。Mortgagesmayalsobeincludedhere。

Thecapitalcomposedofthesetangiblecomponentpartscanagainbedividedintothebanker’sinvestedcapitalandintodeposits，whichconstitutehisbankingcapital，orborrowedcapital。Inthecaseofbankswhichissuenotes，thesemustbeincluded。WeshallleavethedepositsandnotesoutofconsiderationforthepresentItisevidentatanyratethattheactualcomponentpartsofthebanker’scapital(money，hillsofexchange，depositcurrency)remainunaffectedwhetherthevariouselementsrepresentthebanker’sowncapitalordeposits，i。e。，thecapitalofotherpeople。

Thesamedivisionwouldremain，whetherheweretocarryonhisbusinesswithonlyhisowncapitaloronlywithdepositedcapital。

Theformofinterest-bearingcapitalisresponsibleforthefactthateverydefiniteandregularmoneyrevenueappearsasinterestonsomecapital，whetheritarisesfromsomecapitalornot。Themoneyincomeisfirstconvertedintointerest，andfromtheinterestonecandeterminethecapitalfromwhichitarises。Inlikemanner，inthecaseofinterest-bearingcapital，everysumofvalueappearsascapitalaslongasitisnotexpendedasrevenue；thatis，itappearsasprincipalincontrasttopossibleoractualinterestwhichitmayyield。

Thematterissimple。Lettheaveragerateofinterestbe5%annually。

Asumof£；500wouldthenyield£；25annuallyifconvertedintointerest-bearingcapital。Everyfixedannualincomeof£；25maythenbeconsideredasinterestonacapitalof£；500。This，however，isandremainsapurelyillusoryconception，exceptinthecasewherethesourceofthe£；25，whetheritbeameretitleofownershiporclaim，oranactualelementofproductionsuchasrealestate，isdirectlytransferableorassumesaforminwhichitbecomestransferable。Letustakethenationaldebtandwagesasillustrations。

Thestatehastoannuallypayitscreditorsacertainamountofinterestforthecapitalborrowedfromthem。Inthiscase，thecreditorcannotrecallhisinvestmentfromhisdebtor，butcanonlysellhisclaim，orhistitleofownership。Thecapitalitselfhasbeenconsumed，i。e。，expendedbythestate。Itnolongerexists。Whatthecreditorofthestatepossessesis1)thestate’spromissorynote，amountingto，say，£；100；2)thispromissorynotegivesthecreditoraclaimupontheannualrevenueofthestate，thatis，theannualtaxproceeds，foracertainamount，e。g。，£；5or5%；3)thecreditorcansellthispromissorynoteof£；100

athisdiscretiontosomeotherperson。Iftherateofinterestis5%，andthesecuritygivenbythestateisgood，theownerAcansellthispromissorynote，asarule，toBfor£；100；foritisthesametoBwhetherhelends£；100at5%annually，orwhetherhesecuresforhimselfbythepaymentof£；100anannualtributefromthestateamountingto£；5。Butinallthesecases，thecapital，aswhoseoffshoot(interest)

statepaymentsareconsidered，isillusory，fictitiouscapital。Notonlythattheamountloanedtothestatenolongerexists，butitwasneverintendedthatitbeexpendedascapital，andonlybyinvestmentascapitalcouldithavebeentransformedintoaself-preservingvalue。TotheoriginalcreditorA，theshareofannualtaxesaccruingtohimrepresentsinterestonhiscapital，justastheshareofthespendthrift’sfortuneaccruingtotheusurerappearstothelatter，althoughinbothcasestheloanedamountwasnotinvestedascapital。Thepossibilityofsellingthestate’spromissorynoterepresentsforAthepotentialmeansofregaininghisprincipal。

AsforB，hiscapitalisinvested，fromhisindividualpointofview，asinterest-bearingcapital。Sofarasthetransactionisconcerned，BhassimplytakentheplaceofAbybuyingthelatter’sclaimonthestate’srevenue。Nomatterhowoftenthistransactionisrepeated，thecapitalofthestatedebtremainspurelyfictitious，and，assoonasthepromissorynotesbecomeunsaleable，theillusionofthiscapitaldisappears。Nevertheless，thisfictitiouscapitalhasitsownlawsofmotion，asweshallpresentlysee。

Weshallnowconsiderlabour-powerincontrasttothecapitalofthenationaldebt，whereanegativequantityappearsascapital-justasinterest-bearingcapital，ingeneral，isthefountainheadofallmannerofinsaneforms，sothatdebts，forinstance，canappeartothebankerascommodities。Wagesareconceivedhereasinterest，andthereforelabour-powerasthecapitalyieldingthisinterest。Forexample，ifthewageforoneyearamountsto£；50andtherateofinterestis5%，theannuallabour-powerisequaltoacapitalof£；1，000。Theinsanityofthecapitalistmodeofconceptionreachesitsclimaxhere，forinsteadofexplainingtheexpansionofcapitalonthebasisoftheexploitationoflabour-power，thematterisreversedandtheproductivityoflabourpowerisexplainedbyattributingthismysticalqualityofinterest-bearingcapitaltolabour-poweritself。Inthesecondhalfofthe17thcentury，thisusedtobeafavouriteconception(forexample，ofPetty)，butitisusedevennowadaysinallseriousnessbysomevulgareconomistsandmoreparticularlybysomeGermanstatisticians。[1]Unfortunatelytwodisagreeablyfrustratingfactsmarthisthoughtlessconception。

Inthefirstplace，thelabourermustworkinordertoobtainthisinterest。

Inthesecondplace，hecannottransformthecapital-valueofhislabour-powerintocashbytransferringit。Rather，theannualvalueofhislabour-powerisequaltohisaverageannualwage，andwhathehastogivethebuyerinreturnthroughhislabouristhissamevalueplusasurplus-value，i。e。，theincrementaddedbyhislabour。Inaslavesociety，thelabourerhasacapital-value，namely，hispurchaseprice。Andwhenheishiredout，thehirermustpay，inthefirstplace，theinterestonthispurchaseprice，and，inaddition，replacetheannualwearandtearonthecapital。

Theformationofafictitiouscapitaliscalledcapitalisation。Everyperiodicincomeiscapitalisedbycalculatingitonthebasisoftheaveragerateofinterest，asanincomewhichwouldberealisedbyacapitalloanedatthisrateofinterest。Forexample，iftheannualincomeis£；400

andtherateofinterest5%，thenthe£；100wouldrepresenttheannualintereston£；2，000，andthe£；2，000isregardedasthecapital-valueofthelegaltitleofownershiponthe£；100annually。Forthepersonwhobuysthistitleofownership，theannualincomeof£；100representsindeedtheinterestonhiscapitalinvestedat5%。Allconnectionwiththeactualexpansionprocessofcapitalisthuscompletelylost，andtheconceptionofcapitalassomethingwithautomaticself-expansionpropertiesistherebystrengthened。

Evenwhenthepromissorynote——thesecurity——doesnotrepresentapurelyfictitiouscapital，asitdoesinthecaseofstatedebts，thecapital-valueofsuchpaperisneverthelesswhollyillusory。Wehavepreviouslyseeninwhatmannerthecreditsystemcreatesassociatedcapital。Thepaperservesastitleofownershipwhichrepresentsthiscapital。Thestocksofrailways，mines，navigationcompanies，andthelike，representactualcapital，namely，thecapitalinvestedandfunctioninginsuchenterprises，ortheamountofmoneyadvancedbythestockholdersforthepurposeofbeingusedascapitalinsuchenterprises。Thisdoesnotprecludethepossibilitythatthesemayrepresentpureswindle。Butthiscapitaldoesnotexisttwice，onceasthecapital-valueoftitlesofownership(stocks)ontheonehandandontheotherhandastheactualcapitalinvested，ortobeinvested，inthoseenterprises。Itexistsonlyinthelatterform，andashareofstockismerelyatitleofownershiptoacorrespondingportionofthesurplus-valuetoberealisedbyit。AmaysellthistitletoB，andBmaysellittoC。Thesetransactionsdonotalteranythinginthenatureoftheproblem。AorBthenhashistitleintheformofcapital，butChastransformedhiscapitalintoameretitleofownershiptotheanticipatedsurplus-valuefromthestockcapital。

Theindependentmovementofthevalueofthesetitlesofownership，notonlyofgovernmentbondsbutalsoofstocks，addsweighttotheillusionthattheyconstituterealcapitalalongsideofthecapitalorclaimtowhichtheymayhavetitle。Fortheybecomecommodities，whosepricehasitsowncharacteristicmovementsandisestablishedinitsownway。Theirmarket-valueisdetermineddifferentlyfromtheirnominalvalue，withoutanychangeinthevalue(eventhoughtheexpansionmaychange)oftheactualcapital。Ontheonehand，theirmarket-valuefluctuateswiththeamountandreliabilityoftheproceedstowhichtheyaffordlegaltitle。Ifthenominalvalueofashareofstock，thatis，theinvestedsumoriginallyrepresentedbythisshare，is£；100，andtheenterprisepays10%insteadof5%，thenitsmarket-value，everythingelseremainingequal，risesto£；200，aslongastherateofinterestis5%，forwhencapitalisedat5%，itnowrepresentsafictitiouscapitalof£；200。Whoeverbuysitfor£；200receivesarevenueof5%onthisinvestmentofcapital。