第16章

1。TRANSFORMATIONOFMONEYINTOLOANCAPITAL

Wehavealreadyseenthatalargebuild-uporsurplusofloancapitalcanoccur，whichisconnectedwithproductiveaccumulationonlytotheextentthatitisinverselyproportionaltoit。Thisisthecaseintwophasesoftheindustrialcycle，namely，first，whenindustrialcapitalinbothitsformsofproductiveandcommodity-capitaliscontracted，i。e。，atthebeginningofthecycleafterthecrisis；and，secondly，whentheimprovementbegins，butwhencommercialcreditstilldoesnotusebankcredittoagreatextent。Inthefirstcase，money-capital，whichwasformerlyemployedinproductionandcommerce，appearsasidleloancapital；inthesecondcase，itappearsusedtoanincreasingextent，butataverylowrateofinterest，becausetheindustrialandcommercialcapitalistsnowprescribetermstothemoney-capitalist。Thesurplusofloancapitalexpresses，inthefirstcase，astagnationofindustrialcapital，andinthesecond，arelativeindependenceofcommercialcreditfrombankingcredit-basedonthefluidityofthereturns，short-termcredit，andapreponderanceofoperationswithone’sowncapital。Thespeculators，whocountonthecreditcapitalofotherpeople，havenotyetappearedonthefield；thepeoplewhoworkwiththeirowncapitalarestillfarremovedfromapproximatelypurecreditoperations。Intheformerphase，thesurplusofloancapitalisdirectlyoppositetoexpressingactualaccumulation。Inthesecondphase，itcoincideswitharenewedexpansionofthereproductionprocess-itaccompaniesit，butisnotitscause。Thesurplusofloancapitalisalreadydecreasing，i。e。，itisstillonlyrelativecomparedtothedemand。Inbothcases，theexpansionoftheactualprocessofaccumulationispromotedbythefactthatthelowinterest-whichcoincidesinthefirstcasewithlowpricesandinthesecond，withslowlyrisingprices-increasesthatportionoftheprofitwhichistransformedintoprofitofenterprise。Thistakesplacetoanevengreaterextentwheninterestrisestoitsaveragelevelduringtheheightoftheperiodofprosperity，whenithasindeedgrown，butnotrelativetoprofit。

Wehaveseen，ontheotherhand，thatanaccumulationofloancapitalcantakeplacewithoutanyactualaccumulation，i。e。，bymeretechnicalmeanssuchasanexpansionandconcentrationofthebankingsystem；andasavinginthecirculationreserve，orinthereservefundofprivatemeansofpayment，whicharethenalwaystransformedintoloancapitalforashorttime。Althoughthisloancapital，which，forthisreason，isalsocalledfloatingcapital，alwaysretainstheformofloancapitalonlyforshortperiodsoftime(andshouldindeedalsobeusedfordiscountingonlyforshortperiodsoftime)，thereisacontinualebbandflowofit。Ifonedrawssomeaway，anotheraddstoit。Themassofloanablemoney-capitalthusgrowsquiteindependentlyoftheactualaccumulation(wearenotspeakinghereatallaboutloansforanumberofyearsbutonlyofshort-termonesonbillsofexchangeanddeposits)。

BankCommittee，1857。Question501。”Whatdoyoumeanby’floatingcapital’？”-[AnswerofMr。Weguelin，GovernoroftheBankofEngland:]”Itiscapitalapplicabletoloansofmoneyforshortperiods……(502)TheBankofEnglandnotes……

thecountrybankscirculation，andtheamountofcoinwhichisinthecountry。”-

[Question:]”ItdoesnotappearfromthereturnsbeforetheCommittee，ifbyfloatingcapitalyoumeantheactivecirculation”[ofthenotesoftheBankofEngland]，”thatthereisanyverygreatvariationintheactivecirculation？”[Butthereisaverygreatdifferencewhetherthisactivecirculationisadvancedbythemoney-lenderorbythereproductivecapitalisthimself。Weguelin’sanswer:]”Iincludeinfloatingcapitalthereservesofthebankers，inwhichthereisaconsiderablefluctuation。”-Thatistosay，thereisconsiderablefluctuationinthatportionofthedepositswhichthebankershavenotloanedoutagain，butwhichfiguresastheirreserveandforthegreaterpartalsoasthereserveoftheBankofEngland，wheretheyaredeposited。Finally，thesamegentlemansays:floatingcapitalmaybebullion，thatis，barandcoin(503)-Itistrulywonderfulhowinthiscreditgibberishofthemoney-marketallcategoriesofpoliticaleconomyreceiveadifferentmeaningandadifferentform。Floatingcapitalistheexpressionthereforcirculatingcapital，whichis，ofcourse，somethingquitedifferent，andmoneyiscapital，andbullioniscapital，andbank-notesarecirculation，andcapitalisacommodity，anddebtsarecommodities，andfixedcapitalismoneyinvestedinhard-to-sellpaper！”Thejoint-stockbanksofLondon……haveincreasedtheirdepositsfrom£；8，850，774in1847to£；43，100，724in1857……TheevidencegiventoyourCommitteeleadstotheinferencethatofthisvastamount，alargeparthasbeenderivedfromsourcesnotheretoforemadeavailableforthispurpose；andthatthepracticeofopeningaccountsanddepositingmoneywithbankershasextendedtonumerousclasseswhodidnotformerlyemploytheircapital(！)inthatway。ItisstatedbyMr。Rodwell，theChairmanoftheAssociationofthePrivateCountryBankers”[distinguishedfromjoint-stockbanks]，”anddelegatedbythemtogiveevidencetoyourCommittee，thatintheneighbourhoodofIpswichthispracticehaslatelyincreasedfour-foldamongthefarmersandshopkeepersofthatdistrict；

thatalmosteveryfarmer，eventhosepayingonly£；50perannumrent，nowkeepsdepositswithbankers。Theaggregateofthesedepositsofcoursefindsitswaytotheemploymentsoftrade，andespeciallygravitatestoLondon，thecentreofcommercialactivity，whereitisemployedfirstinthediscountofbills，orinotheradvancestothecustomersoftheLondonbankers。Thatlargeportion，however，forwhichthebankersthemselveshavenoimmediatedemandpassesintothehandsofthebill-brokers，whogivetothebankerinreturncommercialbillsalreadydiscountedbythemforpersonsinLondonandindifferentpartsofthecountry，asasecurityforthesumadvancedbythebanker。”(BankCommittee，1858，p。V。)

Bymakingadvancestothebill-brokeronbillsofexchangewhichthisbrokerhasalreadydiscountedonce，thebankerdoes，infact，rediscountthem；butinreality，verymanyofthesebillshavealreadybeenrediscountedbythebill-broker，andwiththesamemoneythatthebankerusestorediscountthebillsofthebill-broker，thelatterrediscountsnewbills。Whatthisleadstoisshownbythefollowing:”Extensivefictitiouscreditshavebeencreatedbymeansofaccommodationbills，andopencredits，greatfacilitiesforwhichhavebeenaffordedbythepracticeofjoint-stockcountrybanksdiscountingsuchbills，andrediscountingthemwiththebill-brokersintheLondonmarket，uponthecreditofthebankalone，withoutreferencetothequalityofthebillsotherwise”(loc。cit。，p。XXI)。

Concerningthisrediscountingandtheassistancewhichthispurelytechnicalincreaseofloanablemoney-capitalgivestocreditswindles，thefollowingextractfromtheEconomistisofinterest:”Forsomeyearspastcapital”[namely，loanablemoney-capital]”hasaccumulatedinsomedistrictsofthecountrymorerapidlythanitcouldbeused，while，inothers，themeansofemployingcapitalhaveincreasedmorerapidlythanthecapitalitself。Whilethebankersinthepurelyagriculturaldistrictsthroughoutthekingdomfoundnosufficientmeansofprofitablyandsafelyemployingtheirdepositsintheirowndistricts，thoseinthelargemercantiletowns，andinthemanufacturingandminingdistricts，havefoundalargerdemandforcapitalthantheirownmeanscouldsupply。Theeffectofthisrelativestateofdifferentdistrictshasled，oflateyears，totheestablishmentandrapidextensionofanewclassofhousesinthedistributionofcapital，who，thoughusuallycalledbill-brokers，areinrealitybankersuponanimmensescale。Thebusinessofthesehouseshasbeentoreceive，forsuchperiods，andatsuchratesofinterestaswereagreedupon，thesurplus-capitalofbankersinthosedistrictswhereitcouldnotbeemployed，aswellasthetemporaryunemployedmoneysofpubliccompaniesandextensivemercantileestablishments，andadvancethemathigherratesofinteresttobankerinthosedistrictswherecapitalwasmoreindemand，generallybyrediscountingthebillstakenfromtheircustomers……andinthiswayLombardStreethasbecomethegreatcentreinwhichthetransferofsparecapitalhasbeenmadefromonepartofthecountry，whereitcouldnotbeprofitablyemployed，toanother，whereademandexistedforit，aswellasbetweenindividualssimilarlycircumstanced。Atfirstthesetransactionswereconfinedalmostexclusivelytoborrowingandlendingonbankingsecurities。Butasthecapitalofthecountryrapidlyaccumulated，andbecamemoreeconomisedbytheestablishmentofbanks，thefundsatthedisposalofthese’discounthouses’becamesolargethattheywereinducedtomakeadvancesfirstondockwarrantsofmerchandise(storagebillsoncommoditiesindocks)，andnextonbillsoflading，representingproducenotevenarrivedinthiscountry，thoughsometimes，ifnotgenerally，securedbybillsdrawnbythemerchantuponhisbroker。ThispracticerapidlychangedthewholecharacterofEnglishcommerce。ThefacilitiesthusaffordedinLombardStreetgaveextensivepowerstothebrokersinMincingLane，whoontheirpart……offeredthefulladvantageofthemtotheimportingmerchant；whosofartookadvantageofthem，that，whereas25yearsago，thefactthatamerchantreceivedadvancesonhisbillsoflading，orevenhisdockwarrants，wouldhavebeenfataltohiscredit，thepracticehasbecomesocommonoflateyearsthatitmaybesaidtobenowthegeneralrule，andnottherareexception，asitwas25yearsago。Nay，somuchfurtherhasthissystembeencarried，thatlargesumshavebeenraisedinLombardStreetonbillsdrawnagainsttheforthcomingcropsofdistantcolonies。Theconsequenceofsuchfacilitiesbeingthusgrantedtotheimportingmerchantsledthemtoextendtheirtransactionsabroad，andtoinvesttheirfloatingcapitalwithwhichtheirbusinesshashithertobeenconducted，inthemostobjectionableofallfixedsecurities-foreignplantations-overwhichtheycouldexerciselittleornocontrol。Andthusweseethedirectchangeofcreditthroughwhichthecapitalofthecountry，collectedinourruraldistricts，andinsmallamountsintheshapeofdepositsincountrybanks，andcentresinLombardStreetforemployment，hasbeen，first，madeavailablefortheextendingoperationsinourminingandmanufacturingdistricts，bytherediscountofbillstobanksinthoselocalities；next，forgrantinggreaterfacilitiesfortheimportationofforeignproducebyadvancesupondockwarrantsandbillsoflading，andthusliberatingthe’legitimate’mercantilecapitalofhousesengagedinforeignandcolonialtrade，andinducingtoitsmostobjectionableadvancesonforeignplantations。”(Economist，November20，1847，p。1334。)Thisishowcreditsare”nicely”devoured。

Theruraldepositorfanciesthathedepositsonlywithhisbanker，andfanciesfurthermorethatwhenhisbankerlendstoothers，itisdonetoprivatepersonswhomheknows。HehasnottheslightestsuspicionthatthisbankerplaceshisdepositatthedisposalofsomeLondonbill-broker，overwhoseoperationsneitherofthemhavetheslightestcontrol。

Wehavealreadyseenhowlargepublicenterprises，suchasrailways，maymomentarilyincreaseloancapital，owingtothecircumstancethatthedepositedamountsalwaysremainatthedisposalofthebankersforacertainlengthoftimeuntiltheyarereallyused。

Incidentally，themassofloancapitalisquitedifferentfromthequantityofcirculation。Bythequantityofcirculationwemeanherethesumofallthebank-notesandcoin，includingbarsofpreciousmetals，existingandcirculatinginacountry。Aportionofthisquantityconstitutesthereserveofthebankswhichcontinuouslyvaryinmagnitude。”OnNovember12，1857”[thedateofthesuspensionoftheBankActof1844]，”theentirereserveoftheBankofEnglandwasonly£；580，751

(includingLondonandallitsbranches)；theirdepositsatthesametimeamountingto£；22，500，000；ofwhichnearsixandahalfmillionbelongedtoLondonbankers。”(BankActs，1858，p。LVII。)

Thevariationsintheinterestrate(asidefromthoseoccurringoverlongerperiodsorthevariationintheinterestrateamongvariouscountries；

theformeraredependentuponvariationsinthegeneralrateofprofit，thelatterondifferencesintheratesofprofitandinthedevelopmentofcredit)dependuponthesupplyofloancapital(allothercircumstances，stateofconfidence，etcbeingequal)，thatis，ofcapitalloanedintheformofmoney，coinandnotes；incontradistinctiontoindustrialcapital，which，assuch-incommodity-form-isloanedbymeansofcommercialcreditamongtheagentsofreproductionthemselves。

However，themassofthisloanablemoney-capitalisdifferentfrom，andindependentof，themassofcirculatingmoney。

Forexample，if£；20wereloanedfivetimesperday，amoney-capitalof£；100wouldbeloaned，andthiswouldimplyatthesametimethatthis£；20wouldhaveserved，moreover，atleastfourtimesasameansofpurchaseorpayment；for，ifnopurchaseandpaymentintervened-sothatitwouldnothaverepresentedatleastfourtimestheconvertedformofcapital(commodities，includinglabour-power)-itwouldnotconstituteacapitalof£；100，butonlyfiveclaimsof£；20each。

Incountrieswithadevelopedcredit，wecanassumethatallmoney-capitalavailableforlendingexistsintheformofdepositswithbanksandmoney-lenders。

Thisisatleasttrueforbusinessasawhole。Moreover，intimesofflourishingbusiness，beforetherealspeculationgetsunderway-whencreditiseasyandconfidenceisgrowing-mostofthefunctionsofcirculationaresettledbyasimpletransferofcredit，withoutthehelpofcoinorpapermoney。

Themerepossibilityoflargesumsofdepositsexistingwhenarelativelysmallquantumofamediumofcirculationisavailable，dependssolelyon:

1)thenumberofpurchasesandpaymentswhichthesamecoinperforms；

2)thenumberofreturnexcursions，wherebyitgoesbacktothebanksasdeposits，sothatitsrepeatedfunctionasameansofpurchaseandpaymentispromotedthroughitsrenewedtransformationintodeposits。Forexample，asmalldealerdepositsweeklywithhisbanker£；100inmoney；thebankerpaysoutaportionofthedepositofamanufacturerwiththis；thelatterpaysittohisworkers；andtheworkersuseittopaythesmalldealer，whodepositsitinthebankagain。The£；100depositedbythissmalldealerhaveserved，therefore，first，topaythemanufactureradepositofhis；secondly，topaytheworkers；thirdly，topaythedealerhimself；fourthly，todepositanotherportionofthemoney-capitalofthesamesmalldealer；thusattheendoftwentyweeks，ifhehimselfdidnothavetodrawagainstthismoney，hewouldhavedeposited£；2，000inthebankbymeansofthesame£；100。

Towhatextentthismoney-capitalisidle，isshownonlybytheebbandflowinthereservefundofthebanks。Therefore，Mr。Weguelin，GovernoroftheBankofEnglandin1857，concludesthatthegoldoftheBankofEnglandisthe”only”reservecapital:”1258。Practically，Ithink，therateofdiscountisgovernedbytheamountofunemployedcapitalwhichthereisinthecountry。TheamountofunemployedcapitalisrepresentedbythereserveoftheBankofEngland，whichispracticallyareserveofbullion。When，therefore，thebullionisdrawnupon，itdiminishestheamountofunemployedcapitalinthecountry，andconsequentlyraisesthevalueofthatwhichremains。”-[Newmarch]”1364。ThereserveofbullionintheBankofEnglandis，intruth，thecentralreserve，orhoardoftreasure，uponwhichthewholetradeofthecountryiscarriedon……Anditisuponthathoardorreservoirthattheactionoftheforeignexchangesalwaysfalls。”(ReportonBankActs，1857[PP。108，119]。)

Thestatisticsofexportsandimportsfurnishameasureoftheaccumulationofreal，i。e。，productiveandcommodity-capital。Thesealwaysshowthat，duringtheten-yearcyclicalperiodsofdevelopmentofBritishindustry(1815to1870)，themaximumofthelastprosperitybeforethecrisisalwaysreappearsastheminimumofthefollowingprosperity，whereuponitrisestoanewandfarhigherpeak。

TheactualordeclaredvalueoftheexportedproductsfromGreatBritainandIrelandintheprosperityyearof1824was£；40，396，300。Withthecrisisof1825，theamountofexportsthenfallsbelowthissumandfluctuatesbetween35and39millionannually。Withthereturnofprosperityin1834，itrisesabovetheformermaximumto£；41，649，191，andreachesin1836thenewmaximumof£；53，368，571。Beginningwith1837，itfallsagainto42million，sothatthenewminimumisalreadyhigherthantheoldmaximum，andthenfluctuatesbetween50and53million。Thereturnofprosperityliftstheamountofexportsin1844to£；58，500，000，wherebythepeakof1836isagainalreadyfarexceeded。In1845，itreaches£；60，111，082；itthenfallstosomethingover57millionin1846，reachesin1847almost59million，in1848almost53million，risesin1849to63，500，000，in1853tonearly99million，in1854to97million，in1855to94，500，000，in1856almost116millionandreachesapeakof122millionin1857。Itfallsin1858to116million，risesalreadyin1859to130million，in1860tonearly136million，in1861only125million(thenewlowishereagainhigherthantheformerpeak)，in1863to146，500，000。

Ofcourse，thesamethingcouldbedemonstratedinthecaseofimports，whichshowstheexpansionofthemarket；hereitisonlyamatterofthescaleofproduction。[Ofcourse，thisholdstrueofEnglandonlyforthetimeofitsactualindustrialmonopoly；butitappliesingeneraltothewholecomplexofcountrieswithmodernlarge-scaleindustries，aslongastheworld-marketisstillexpanding-F。E。]

2。TRANSFORMATIONOFCAPITALORREVENUEINTOMONEYTHATISTRANSFORMED

INTOLOANCAPITAL

Wewillconsiderheretheaccumulationofmoney-capital，insofarasitisnotanexpressioneitherofastoppageintheflowofcommercialcreditorofaneconomy-whetheritbeaneconomyintheactualcirculatingmediumorinthereservecapitaloftheagentsengagedinreproduction。

Asidefromthesetwocases，anaccumulationofmoney-capitalcanarisethroughanunusualinflowofgold，asin1852and1853asaresultofthenewAustralianandCaliforniangoldmines。ThisgoldwasdepositedintheBankofEngland。Thedepositorsreceivednotesforit，whichtheydidnotdirectlyredepositwithbankers。BythismeanstheCirculatingmediumwasunusuallyincreased。(TestimonyofWeguelin，BankCommittee，1857，No。

1329。)TheBankstrovetoutilisethesedepositsbyloweringitsdiscountto2%。ThemassofgoldaccumulatedintheBankroseduringsixmonthsof1853to22-23million。

Theaccumulationofallmoney-lendingcapitalistsnaturallyalwaystakesplacedirectlyinmoney-form，whereaswehaveseenthattheactualaccumulationofindustrialcapitalistsisaccomplished，asarule，byanincreaseintheelementsofreproductivecapitalitself。Hence，thedevelopmentofthecreditsystemandtheenormousconcentrationofthemoney-lendingbusinessinthehandsoflargebanksmust，bythemselvesalone，acceleratetheaccumulationofloanablecapital，asaformdistinctfromactualaccumulation。Thisrapiddevelopmentofloancapitalis，therefore，aresultofactualaccumulation，foritisaconsequenceofthedevelopmentofthereproductionprocess，andtheprofitwhichformsthesourceofaccumulationforthesemoney-capitalistsisonlyadeductionfromthesurplus-valuewhichthereproductiveonesfilch(anditisatthesametimetheappropriationofaportionoftheinterestfromthesavingsofothers)。Loancapitalaccumulatesattheexpenseofboththeindustrialandcommercialcapitalists。Wehaveseenthatintheunfavourablephasesoftheindustrialcycletherateofinterestmayrisesohighthatittemporarilyconsumesthewholeprofitofsomelinesofbusinesswhichareparticularlyhandicapped。Atthesametime，pricesofgovernmentandothersecuritiesfall。Itisatsuchtimesthatthemoney-capitalistsbuythisdepreciatedpaperinhugequantitieswhichinthelaterphasessoonregainsitsformerlevelandrisesaboveit。Itisthensoldagainandaportionofthemoney-capitalofthepublicisthusappropriated。Thatportionwhichisnotsoldyieldsahigherinterestbecauseitwasboughtbelowpar。Butthemoney-capitalistsconvertallprofitsmade，endreconvertedbythemintocapital，firstintoloanablemoney-capital。Theaccumulationofthelatter-asdistinctfromtheactualaccumulation，althoughitsoffshoot-thustakesplace，evenwhenweconsideronlythemoney-capitalists，bankers，etc。，bythemselves，asanaccumulationofthisparticularclassofcapitalists。Anditmustgrowwitheveryexpansionofthecreditsystemwhichaccompaniestheactualexpansionofthereproductionprocess。

Iftheinterestrateislow，thisdepreciationofthemoney-capitalfallsprincipallyuponthedepositors，notuponthebanks。Beforethedevelopmentofstockbanks，three-fourthsofallthedepositsinEnglandlayinthebankswithoutyieldinginterest。Whileinterestisnowpaidonthem，itamountstoatleast1%lessthanthecurrentrateofinterest。

Asforthemoneyaccumulationoftheotherclassesofcapitalists，wedisregardthatportionofitwhichisinvestedininterest-bearingpaperandaccumulatesinthisform。Weconsideronlythatportionwhichisthrownuponthemarketasloanablemoney-capital。

Inthefirstplace，wehaveherethatportionoftheprofitwhichisnotspentasrevenue，butissetasideforaccumulation-forwhich，however，theindustrialcapitalistshavenouseintheirownbusinessatthemoment。

Thisprofitexistsdirectlyincommodity-capital，apartofwhosevalueitconstitutes，andalongwithwhichitisrealisedinmoney。Now，ifitisnotreconvertedintotheproductionelementsofcommodity-capital(weleaveoutofconsiderationforthepresentthemerchant，whomweshalldiscussseparately)，itmustremainforalengthoftimeintheformofmoney。Thisamountincreaseswiththeamountofcapitalitself，evenwhentherateofprofitdeclines。Thatportionwhichistobespentasrevenueisgraduallyconsumed，but，inthemeantime，asdeposits，itconstitutesloancapitalwiththebanker。Thus，eventhegrowthofthatportionofprofitwhichisspentasrevenueexpressesitselfasagradualandcontinuallyrepeatedaccumulationofloancapital。Thesameistrueoftheotherportion，whichisintendedforaccumulation。Therefore，withthedevelopmentofthecreditsystemanditsorganisation，evenanincreaseinrevenue，i。e。，theconsumptionoftheindustrialandcommercialcapitalists，expressesitselfasanaccumulationofloancapital。Andthisholdstrueforallrevenuessofarastheyareconsumedgradually，inotherwords，forground-rent，wagesintheirhigherform，incomesofunproductiveclasses，etc。Allofthemassumeforacertaintimetheformofmoneyrevenueandare，therefore，convertibleintodepositsandthusintoloancapital。Allrevenue-whetheritbeintendedforconsumptionoraccumulation-aslongasitexistsinsomeformofmoney，isapartofthevalueofcommodity-capitaltransformedintomoney，andis，forthisreason，anexpressionandresultofactualaccumulation，butisnotproductivecapitalitself。Whenaspinnerhasexchangedhisyarnforcotton-thatportionwhichconstitutesrevenuehoweverformoney，therealexistenceofhisindustrialcapitalistheyarn，whichhaspassedintothehandsoftheweaveror，perhaps，ofsomeprivateconsumer，andtheyarnis，infact，theexistence-whetheritisforreproductionorconsumption-ofthecapital-valueaswellasthesurplus-valuecontainedinit。Themagnitudeofthesurplus-valuetransformedintomoneydependsuponthemagnitudeofthesurplus-valuecontainedintheyarn。Butassoonasithasbeentransformedintomoney，thismoneyisonlythevalueexistenceofthissurplus-value。Andassuchitbecomesamomentofloancapital。

Forthispurpose，nothingmoreisrequiredthanthatitbetransformedintoadeposit，ifithasnotalreadybeenloanedoutbyitsowner。Butinordertoberetransformedintoproductivecapital，itmust，ontheotherhand，alreadyhavereachedacertainminimumlimit。

Capital，Vol。3，Chapter32KarlMarxCAPITALVol。III

THEPROCESSOF

CAPITALISTPRODUCTIONASAWHOLEPartV

DIVISIONOFPROFITINTOINTERESTANDPROFIT

OFENTERPRISE。

INTEREST-BEARINGCAPITALCHAPTER32

MoneyCapitalandRealCapital。

III。

Themassofmoneytobetransformedbackintocapitalinthismannerisaresultoftheenormousreproductionprocess，butconsideredbyitself，asloanablemoney-capital，itisnotitselfamassofreproductivecapital。

Themostimportantpointofourpresentationsofaristhattheexpansionofthepartoftherevenueintendedforconsumption(leavingoutofconsiderationtheworker，becausehisrevenueisequaltothevariablecapital)showsitselfatfirstasanaccumulationofmoney-capital。Afactor，therefore，entersintotheaccumulationofmoney-capitalthatisessentiallydifferentfromtheactualaccumulationofindustrialcapital；fortheportionoftheannualproductwhichisintendedforconsumptiondoesnotbyanymeansbecomecapital。Aportionofitreplacescapital，i。e。，theconstantcapitaloftheproducersofmeansofconsumption，buttotheextentthatitisactuallytransformedintocapital，itexistsinthenaturalformoftherevenueoftheproducersofthisconstantcapital。Thesamemoney，whichrepresentstherevenueandservesmerelyforthepromotionofconsumption，isregularlytransformedintoloanablemoney-capitalforaperiodoftime。Insofarasthismoneyrepresentswages，itisatthesametimethemoney-formofthevariablecapital；andinsofarasitreplacestheconstantcapitaloftheproducersofmeansofconsumption，itisthemoney-formtemporarilyassumedbytheirconstantcapitalandservestopurchasethecomponentsoftheirconstantcapitaltobereplacedinkind。

Neitherintheonenorintheotherformdoesitexpressinitselfaccumulation，althoughitsquantityincreaseswiththegrowthofthereproductionprocess。

Butitperformstemporarilythefunctionofloanablemoney，i。e。，ofmoney-capital。Inthisrespect，therefore，theaccumulationofmoney-capitalmustalwaysreflectagreateraccumulationofcapitalthanactuallyexists，owingtothefactthattheextensionofindividualconsumption，becauseitispromotedbymeansofmoney，appearsasanaccumulationofmoney-capital，sinceitfurnishesthemoney-formforactualaccumulation，i。e。，formoneywhichpermitsnewinvestmentsofcapital。

Thus，theaccumulationofloanablemoney-capitalexpressesinpartonlythefactthatallmoneyintowhichindustrialcapitalistransformedinthecourseofitscircuitassumestheformnotofmoneyadvancedbythereproductivecapitalists，butofmoneyborrowedbythem；sothatindeedtheadvanceofmoneythatmusttakeplaceinthereproductionprocessappearsasanadvanceofborrowedmoney。Infact，onthebasisofcommercialcredit，onepersonlendstoanotherthemoneyrequiredforthereproductionprocess。Butthisnowassumesthefollowingform:thebanker，whoreceivesthemoneyasaloanfromonegroupofthereproductivecapitalists，lendsittoanothergroupofreproductivecapitalists，sothatthebankerappearsintheroleofasupremebenefactor；andatthesametime，thecontroloverthiscapitalfallscompletelyintothehandsofthebankerinhiscapacityasmiddleman。

Afewspecialformsofaccumulationofmoney-capitalstillremaintobementioned。Forexample，capitalisreleasedbyafallinthepriceoftheelementsofproduction，rawmaterials，etc。Iftheindustrialcapitalistcannotexpandhisreproductionprocessimmediately，aportionofhismoney-capitalisexpelledfromthecircuitassuperfluousandistransformedintoloanablemoney-capital。Secondly，however，capitalintheformofmoneyisreleasedespeciallybythemerchant，wheneverinterruptionsinhisbusinesstakeplace。Ifthemerchanthascompletedaseriesoftransactionsandcannotbeginanewseriesbecauseofsuchinterruptionsuntillater，themoneyrealisedrepresentsforhimonlyahoard，surplus-capital。Butatthesametime，itrepresentsadirectaccumulationofloanablemoney-capital。Inthefirstcase，theaccumulationofmoney-capitalexpressesarepetitionofthereproductionprocessundermorefavourableconditions，anactualreleaseofaportionofformerlytied-upcapital；inotherwords，anopportunityforexpandingthereproductionprocesswiththesameamountofmoney。Butintheothercase，itexpressesmerelyaninterruptionintheflowoftransactions。

However，inbothcasesitisconvertedintoloanablemoney-capital，representsitsaccumulation，influencesequallythemoney-marketandtherateofinterest——althoughitexpressesapromotionoftheactualaccumulationprocessinonecaseanditsobstructionintheother。Finally，accumulationofmoney-capitalisinfluencedbythenumberofpeoplewhohavefeatheredtheirnestsandhavewithdrawnfromreproduction。Theirnumberincreasesasmoreprofitsaremadeinthecourseoftheindustrialcycle。Inthiscase，theaccumulationofloanablemoney-capitalexpresses，ontheonehand，anactualaccumulation(inaccordancewithitsrelativeextent)，and，ontheotherhand，onlytheextentofthetransformationoftheindustrialcapitalistsintomeremoney-capitalists。

Asfortheotherportionofprofit，whichisnotintendedtobeconsumedasrevenue，itisconvertedintomoney-capitalonlywhenitisnotimmediatelyabletofindaplaceforinvestmentintheexpansionofbusinessilltheproductivesphereinwhichithasbeenmade。Thismaybeduetotwocauses。

Eitherbecausethissphereofproductionissaturatedwithcapital，orbecauseaccumulationmustfirstreachacertainvolumebeforeitcanserveascapital，dependingontheinvestmentmagnitudesofnewcapitalrequiredinthisparticularsphere。Henceitisconvertedforawhileintoloanablemoney-capitalandservesintheexpansionofproductioninotherspheres。

Assumingallotherconditionsbeingequal，thequantityofprofitsintendedfortransformationbackintocapitalwilldependonthequantityofprofitsmadeandthusontheextensionofthereproductionprocessitself。Butifthisnewaccumulationmeetswithdifficultiesinitsemployment，throughalackofspheresforinvestment，i。e。，duetoasurplusinthebranchesofproductionandanover-supplyofloancapital，thisplethoraofloanablemoney-capitalmerelyshowsthelimitationsofcapitalistproduction。Thesubsequentcreditswindleprovesthatnorealobstaclestandsinthewayoftheemploymentofthissurplus-capital。However，anobstacleisindeedimmanentinitslawsofexpansion，i。e。，inthelimitsinwhichcapitalcanrealiseitselfascapital。Aplethoraofmoney-capitalassuchdoesnotnecessarilyindicateover-production，notevenashortageofspheresofinvestmentforcapital。

Theaccumulationofloancapitalconsistssimplyinthefactthatmoneyisprecipitatedasloanablemoney。Thisprocessisverydifferentfromanactualtransformationintocapital；itismerelytheaccumulationofmoneyinaforminwhichitcanbetransformedintocapital。Butthisaccumulationcanreflect，aswehaveshown，eventswhicharegreatlydifferentfromactualaccumulation。Aslongasactualaccumulationiscontinuallyexpanding，thisextendedaccumulationofmoney-capitalmaybepartlyitsresult，partlytheresultofcircumstanceswhichaccompanyitbutarequitedifferentfromit，and，finally，evenpartlytheresultofimpedimentstoactualaccumulation。Iffornootherreasonthanthataccumulationofloancapitalisinflatedbysuchcircumstances，whichareindependentofactualaccumulationbutneverthelessaccompany。it，theremustbeacontinuousplethoraofmoney-capitalindefinitephasesofthecycleandthisplethoramustdevelopwiththeexpansionofcredit。Andsimultaneouslywithit，thenecessityofdrivingtheproductionprocessbeyonditscapitalisticlimitsmustalsodevelop:over-trade，over-production，andexcessivecredit。Atthesametime，thismustalwaystakeplaceinformsthatcallforthareaction。

Asfarasaccumulationofmoney-capitalfromground-rent，wages，etc。，isconcerned，itisnotnecessarytodiscussthatmatterhere。Onlyoneaspectshouldbeemphasisedandthatisthatthebusinessofactualsavingandabstinence(byhoarders)，totheextentthatitfurnisheselementsofaccumulation，。isleftbythedivisionoflabour，whichcomeswiththeprogressofcapitalistproduction，tothosewhoreceivetheminimumofsuchelements，andwhofrequentlyenoughloseeventheirsavings，asdothelabourerswhenbanksfail。Ontheonehand，thecapitaloftheindustrialcapitalistisnot”saved”byhimself，buthehascommandofthesavingsofothersinproportiontothemagnitudeofhiscapital；ontheotherhand，themoney-capitalistmakesofthesavingsofothershisowncapital，andofthecredit，whichthereproductivecapitalistsgivetooneanotherandwhichthepublicgivestothem，aprivatesourceforenrichinghimself。

Thelastillusionofthecapitalistsystem，thatcapitalisthefruitofone抯ownlabourandsavings，istherebydestroyed。Notonlydoesprofitconsistintheappropriationofotherpeople抯labour，butthecapital，withwhichthislabourofothersissetinmotionandexploited，consistsofotherpeople抯property，whichthemoney-capitalistplacesatthedisposaloftheindustrialcapitalists，andforwhichheinturnexploitsthelatter。

Afewremarksremaintobemadeaboutcreditcapital。

Howoftenthesamepieceofmoneycanfigureasloancapital，whollydepends，aswehavealreadypreviouslyshown，on:

1)howoftenitrealisescommodity-valuesinsaleorpayment，thustransferscapital，andfurthermorehowoftenitrealisesrevenue。Howoftenitgetsintootherhandsasrealisedvalue，eitherofcapitalorofrevenue，obviouslydepends，therefore，ontheextentandmagnitudeoftheactualtransactions；

2)thisdependsontheeconomyofpaymentsandthedevelopmentandorganisationofthecreditsystem；

3)finally，theconcatenationandvelocityofactionofcredits，sothatwhenadepositismadeatonepointitimmediatelystartsoffasaloanatanother。

Evenassumingthattheforminwhichloancapitalexistsisexclusivelythatofrealmoney，goldorsilver——thecommoditywhosesubstanceservesasameasureofvalue——alargeportionofthismoney-capitalisalwaysnecessarilypurelyfictitious，thatis，atitletovalue——justaspapermoney。Insofarasmoneyfunctionsinthecircuitofcapital，itconstitutesindeed，foramoment，money-capital；butitdoesnottransformitselfintoloanablemoney-capital；itisratherexchangedfortheelementsofproductivecapital，orpaidoutasamediumofcirculationintherealisationofrevenue，andcannot，therefore，transformitselfintoloancapitalforitsowner。

Butinsofarasitistransformedintoloancapital，andthesamemoneyrepeatedlyrepresentsloancapital，itisevidentthatitexistsonlyatonepointintheformofmetallicmoney；atallotherpointsitexistsonlyintheformofclaimstocapital。Withtheassumptionmade，theaccumulationoftheseclaimsarisesfromactualaccumulation，thatis，fromthetransformationofthevalueofcommodity-capital，etc。，intomoney；butneverthelesstheaccumulationoftheseclaimsortitlesassuchdiffersfromtheactualaccumulationfromwhichitarises，aswellasfromthefutureaccumulation(thenewproductionprocess)，whichispromotedbythelendingofthismoney。

Primafacieloancapitalalwaysexistsintheformofmoney，[9]laterasaclaimtomoney，sincethemoneyinwhichitoriginallyexistsisnowinthehandsoftheborrowerinactualmoney-form。Forthelenderithasbeentransformedintoaclaimtomoney，intoatitleofownership。

Thesamemassofactualmoneycan，therefore，representverydifferentmassesofmoney-capital。Meremoney，whetheritrepresentsrealisedcapitalorrealisedrevenue，becomesloancapitalthroughthesimpleactoflending，throughitstransformationintoadeposit，ifweconsiderthegeneralforminadevelopedcreditsystem。Thedepositismoney-capitalforthedepositor。

Butinthehandsofthebankeritmaybeonlypotentialmoney-capital，whichliesidleinhissafeinsteadofinitsowner抯。[10]Withthegrowthofmaterialwealththeclassofmoney-capitalistsgrows；

ontheonehand，thenumberandthewealthofretiringcapitalists，rentiers，increases；andontheotherhand，thedevelopmentofthecreditsystemispromoted，therebyincreasingthenumberofbankers，money-lenders，financiers，etc。Withthedevelopmentoftheavailablemoney-capital，thequantityofinterest-bearingpaper，governmentsecurities，stocks，etc。，alsogrowsaswehavepreviouslyshown。However，atthesametimethedemandforavailablemoney-capitalalsogrows，thejobbers，whospeculatewiththispaper，playingaprominentroleonthemoney-market。Ifallthepurchasesandsalesofthispaperwereonlyanexpressionofactualinvestmentsofcapital，itwouldbecorrecttosaythattheycouldhavenoinfluenceonthedemandforloancapital，sincewhenAsellshispaper，hedrawsexactlyasmuchmoneyasBputsintothepaper。Butevenifthepaperitselfexiststhoughnotthecapital(atleastnotasmoney-capital)originallyrepresentedbyit，italwayscreatesprotantoanewdemandforsuchmoney-capital。

Butatanyrateitisthenmoney-capital，whichwaspreviouslyatthedisposalofBbutisnowatthedisposalofA。

B。A。1857。No。4886。”Doyouconsiderthatitisacorrectdescriptionofthecauseswhichdeterminedtherateofdiscount，tosaythatitisfixedbythequantityofcapitalonthemarket，whichisapplicabletothediscountofmercantilebills，asdistinguishedfromotherclassesofsecurities？”——[Chapman:]”No，Ithinkthatthequestionofinterestisaffectedbyallconvertiblesecuritiesofacurrentcharacter；itwouldbewrongtolimititsimplytothediscountofbills，becauseitwouldbeabsurdtosaythatwhenthereisagreatdemandformoneyupon[thedepositof]consols，orevenuponExchequerbills，ashasruledverymuchoflate，ataratemuchhigherthanthecommercialrate，ourcommercialworldisnotaffectedbyit；itisverymateriallyaffectedbyit。？-”4890。

Whensoundandcurrentsecurities，suchasbankersacknowledgetobeso，areonthemarket，andpeoplewanttoborrowmoneyuponthem，itcertainlyhasitseffectuponcommercialbills；forinstance，Icanhardlyexpectamantoletmehavemoneyat5%uponcommercialbills，ifhecanlendhismoneyatthesamemomentat6%uponconsols，orwhateveritmaybe；

itaffectsusinthesamemanner；amancanhardlyexpectmetodiscountbillsat51/2%，ifIcanlendmymoneyat6%。”——”4892。Wedonottalkofinvestorswhobuytheir£；2，000，or£；5，000，or£；40，000，asaffectingthemoney-marketmaterially。Ifyouaskmeastotherateofinterestupon[adepositof]consols，Ialludetopeople，whodealinhundredsofthousandsofpounds，whoarewhatarecalledjobbers，whotakelargeportionsofloans，ormakepurchasesonthemarket，andhavetoholdthatstocktillthepublictakeitofftheirhandsataprofit；thesemen，therefore，wantmoney。”

Withthedevelopmentofthecreditsystem；greatconcentratedmoney-marketsarecreated，suchasLondon，whichareatthesametimethemainseatsoftradeinthispaper。Thebankersplacehugequantitiesofthepublic抯

money-capitalatthedisposalofthisunsavourycrowdofdealers，andthusthisbroodofgamblersmultiplies。”MoneyupontheStockExchangeis，generallyspeaking，cheaperthanitiselsewhere，”saysJamesMorristheincumbentoftheGovernor抯chairoftheBankofEnglandin1848beforetheSecretCommitteeofLords(C。D。1848，printed1857，No。219)。

Inthediscussiononinterest-bearingcapital，wehavealreadyshownthattheaverageinterestoveralongperiodofyears，otherconditionsremainingequal，isdeterminedbytheaveragerateofprofit；notprofitofenterprise，whichisnothingmorethanprofitminusinterest。[Presentedition:Ch。XXII——Ed。]

Ithasalsobeenmentioned，andwillbefurtheranalysedinanotherplace，thatalsoforthevariationsincommercialinterest，thatis，interestcalculatedbythemoney-lendersfordiscountsandloanswithinthecommercialworld，aphaseisreached，inthecourseoftheindustrialcycle，inwhichtherateofinterestexceedsitsminimumandreachesitsmeanlevel(whichitexceedslater)andthatthismovementisaresultofariseinprofits。

Inthemeantime，twothingsaretobenotedhere。

First:Whentherateofintereststaysupforalongtime(wearespeakinghereoftherateofinterestinagivencountrylikeEngland，wheretheaveragerateofinterestisgivenoveralengthyperiodoftime，andalsoshowsitselfintheinterestpaidonlong-termloans-whatcouldbecalledprivateinterest)，itisprimafacieproofthattherateofprofitishighduringthisperiod，butitdoesnotprovenecessarilythattherateofprofitofenterpriseishigh。Thislatterdistinctionismoreorlessremovedforcapitalists，whooperatemainlywiththeirowncapital；theyrealisethehighrateofprofit，sincetheypaytheinteresttothemselves。Thepossibilityofahighrateofinterestoflongdurationispresentwhentherateofprofitishigh；thisdoesnotrefer，however，tothephaseofactualsqueeze。Butitispossiblethatthishighrateofprofitmayleaveonlyalowrateofprofitofenterprise，afterthehighrateofinteresthasbeendeducted。Therateofprofitofenterprisemayshrink，whilethehighrateofprofitcontinues。Thisispossiblebecausetheenterprisesmustbecontinued，oncetheyhavebeenstarted。Duringthisphase，operationsarecarriedontoalargeextentwithpurecreditcapital(capitalofotherpeople)；andthehighrateofprofitmaybepartlyspeculativeandprospective。Ahighrateofinterestcanbepaidwithahighrateofprofitbutdecreasingprofitofenterprise。Itcanbepaid(andthisisdoneinpartduringtimesofspeculation)，notoutoftheprofit，butoutoftheborrowedcapitalitself，andthiscancontinueforawhile。

Secondly:Thestatementthatthedemandformoney-capital，andthereforetherateofinterest，grows，becausetherateofprofitishigh，isnotidenticalwiththestatementthatthedemandforindustrialcapitalgrowsandthereforetherateofinterestishigh。

Intimesofcrisis，thedemandforloancapital，andthereforetherateofinterest，reachesitsmaximum；therateofprofit，andwithitthedemandforindustrialcapital，hastoallintentsandpurposesdisappeared。Duringsuchtimes，everyoneborrowsonlyforthepurposeofpaying，inordertosettlepreviouslycontractedobligations。Ontheotherhand，intimesofrenewedactivityafteracrisis，loancapitalisdemandedforthepurposeofbuyingandforthepurposeoftransformingmoney-capitalintoproductiveorcommercialcapital。Andthenitisdemandedeitherbytheindustrialcapitalistorthemerchant。Theindustrialcapitalistinvestsitinmeansofproductionandinlabour-power。

Therisingdemandforlabour-powercanneverbyitselfbeacauseforarisingrateofinterest，insofarasthelatterisdeterminedbytherateofprofit。Higherwagesareneveracauseforhigherprofits，althoughtheymaybeoneoftheconsequencesofhigherprofitsduringsomeparticularphasesoftheindustrialcycle。

Thedemandforlabour-powercanincreasebecausetheexploitationoflabourtakesplaceunderespeciallyfavourablecircumstances，buttherisingdemandforlabour-power，andthusforvariablecapital，doesnotinitselfincreasetheprofit；it，onthecontrary，lowersitprotanto。Butthedemandforvariablecapitalcanneverthelessincreaseatthesametime，thusalsothedemandformoney-capital——whichcanraisetherateofinterest。

Themarket-priceoflabour-powerthenrisesaboveitsaverage，morethantheaveragenumberoflabourersareemployed，andtherateofinterestrisesatthesametimebecauseundersuchcircumstancesthedemandformoney-capitalrises。Therisingdemandforlabour-powerraisesthepriceofthiscommodity，aseveryother，increasesitsprice；butnottheprofit，whichdependsmainlyupontherelativecheapnessofthiscommodityinparticular。

Butitraisesatthesametime——undertheassumedconditions——therateofinterest，becauseitincreasesthedemandformoney-capital。Ifthemoney-capitalist，insteadoflendingthemoney，shouldtransformhimselfintoanindustrialcapitalist，thefactthathehastopaymoreforlabour-powerwouldnotincreasehisprofitbutwouldratherdecreaseitcorrespondingly。

Thestateofbusinessmaybesuchthathisprofitmayneverthelessrise，butitwouldneverbesobecausehepaysmoreforlabour。Thelattercircumstance，insofarasitincreasesthedemandformoney-capital，is，however，sufficienttoraisetherateofinterest。Ifwagesshouldriseforsomereasonduringanotherwiseunfavourablestateofbusiness，theriseinwageswouldlowertherateofprofit，butraisetherateofinteresttotheextentthatitincreasedthedemandformoney-capital。

Leavinglabouraside，thethingcalled”demandforcapital”byOverstoneconsistsonlyinademandforcommodities。Thedemandforcommoditiesraisestheirprice，eitherbecauseitrisesaboveaverage，orbecausethesupplyofcommoditiesfallsbelowaverage。Iftheindustrialcapitalistormerchantmustnowpay，e。g。，£；150forthesameamountofcommoditiesforwhichheusedtopay£；100，hewouldnowhavetoborrow£；150

insteadoftheformer£；100，andiftherateofinterestwere5%，hewouldnowhavetopayaninterestof£；71/2ascomparedwith£；5formerly。Theamountofinteresttobepaidbyhimwouldrisebecausehenowhastoborrowmorecapital。

ThewholeendeavourofMr。Overstoneconsistsinrepresentingtheinterestsofloancapitalandindustrialcapitalasbeingidentical，whereashisBankActispreciselycalculatedtoexploitthisverydifferenceofintereststotheadvantageofmoney-capital。

Itispossiblethatthedemandforcommodities，incasetheirsupplyhasfallenbelowaverage，doesnotabsorbanymoremoney-capitalthanformerly。

Thesamesum，orperhapsasmallerone，hastobepaidfortheirtotalvalue，butasmallerquantityofuse-valuesisreceivedforthesamesum。

Inthiscase，thedemandforloanablecapitalwillbeunchangedandthereforerateofinterestwillnotrise，althoughthedemandforcommoditieswouldhaverisenascomparedtotheirsupplyandconsequentlythepriceofcommoditieswouldhavebecomehigher。Therateofinterestcannotbeaffected，unlessthetotaldemandforloancapitalincreases，andthisisnotthecaseundertheaboveassumptions。

Thesupplyofanarticlecanalsofallbelowaverage，asitdoeswhencropfailuresincorn，cotton，etc。，occur；andthedemandforloancapitalcanincreasebecausespeculationinthesecommoditiescountsonfurtherriseinpricesandtheeasiestwaytomakethemriseistotemporarilywithdrawaportionofthesupplyfromthemarket。Butinordertopayforthepurchasedcommoditieswithoutsellingthem，moneyissecuredbymeansofthecommercial”billofexchangeoperations。”Inthiscase，thedemandforloancapitalincreases，andtherateofinterestcanriseasaresultofthisattempttoartificiallypreventthesupplyofthiscommodityfromreachingthemarket。Thehigherrateofinterestthenreflectsanartificialreductioninthesupplyofcommodity-capital。Ontheotherhand，thedemandforanarticlecangrowbecauseitssupplyhasincreasedandthearticlesellsbelowitsaverageprice。

Inthiscase，thedemandforloancapitalcanremainthesame，orevenfall，becausemorecommoditiescanbehadforthesamesumofmoney。Speculativestock-pilingcouldalsooccur，eitherforthepurposeoftakingadvantageofthemostfavourablemomentforproductionpurposes，orinexpectationofafutureriseinprices。Inthiscase，thedemandforloancapitalcouldgrow，andtheriseintherateofinterestwouldthenbeareflectionofcapitalinvestmentinsurplusstock-pilingofelementsofproductivecapital。

Weareonlyconsideringherethedemandforloancapitalasitisinfluencedbythedemandfor，andsupplyof，commodity-capital。Wehavealreadydiscussedhowthevaryingstateofthereproductionprocessinthephasesoftheindustrialcycleinfluencesthesupplyofloancapital。Thetrivialpropositionthatthemarketrateofinterestisdeterminedbythesupplyanddemandof(loan)capitalisshrewdlyjumbledupbyOverstonewithhisownpostulate，namely，thatloancapitalisidenticalwithcapitalingeneral；andinthiswayhetriestotransformtheusurerintotheonlycapitalistandhiscapitalintotheonlycapital。

Intimesofstringency，thedemandforloancapitalisademandformeansofpaymentandnothingelse；itisbynomeansademandformoneyasameansofpurchase。Atthesametime，therateofinterestmayriseveryhigh，regardlesswhetherrealcapital，i。e。，productiveandcommoditycapital，existsinabundanceorisscarce。Thedemandformeansofpaymentisameredemandforconvertibilityintomoney，sofarasmerchantsandproducershavegoodsecuritiestooffer；itisademandformoney-capitalwheneverthereisnocollateral，sothatanadvanceofmeansofpaymentgivesthemnotonlytheformofmoneybutalsotheequivalenttheylack，whateveritsform，withwhichtomakepayment。Thisisthepointwherebothsidesofthecontroversyontheprevalenttheoryofcrisesareatthesametimerightandwrong。Thosewhosaythatthereismerelyalackofmeansofpayment，eitherhaveonlytheownersofbonafidesecuritiesinmind，ortheyarefoolswhobelievethatitisthedutyandpowerofbankstotransformallbankruptswindlersintosolventandrespectablecapitalistsbymeansofpiecesofpaper。Thosewhosaythatthereismerelyalackofcapital，areeitherjustquibblingaboutwords，sincepreciselyatsuchtimesthereisamassofinconvertiblecapitalasaresultofover-importsandover-production，ortheyarereferringonlytosuchcavaliersofcreditwhoarenow，indeed，placedinthepositionwheretheycannolongerobtainotherpeople抯capitalfortheiroperationsandnowdemandthatthebankshouldnotonlyhelpthemtopayforthelostcapital，butalsoenablethemtocontinuewiththeirswindles。

Itisabasicprincipleofcapitalistproductionthatmoney，asanindependentformofvalue，standsinoppositiontocommodities，orthatexchange-valuemustassumeanindependentforminmoney；andthisisonlypossiblewhenadefinitecommoditybecomesthematerialwhosevaluebecomesameasureofallothercommodities，sothatitthusbecomesthegeneralcommodity，thecommodityparexcellence——asdistinguishedfromallothercommodities。Thismustmanifestitselfintworespects，particularlyamongcapitalisticallydevelopednations，whichtoalargeextentreplacemoney，ontheonehand，bycreditoperations，andontheotherbycredit-money。

Intimesofasqueeze，whencreditcontractsorceasesentirely，moneysuddenlystandsastheonlymeansofpaymentandtrueexistenceofvalueinabsoluteoppositiontoallothercommodities。Hencetheuniversaldepreciationofcommodities，thedifficultyorevenimpossibilityoftransformingthemintomoney，i。e。，intotheirownpurelyfantasticform。Secondly，how-ever，credit-moneyitselfisonlymoneytotheextentthatitabsolutelytakestheplaceofactualmoneytotheamountofitsnominalvalue。Withadrainongolditsconvertibility，i。e。，itsidentitywithactualgoldbecomesproblematic。Hencecoercivemeasures，raisingtherateofinterest，etc。，forthepurposeofsafeguardingtheconditionsofthisconvertibility。Thiscanbecarriedmoreorlesstoextremesbymistakenlegislation，basedonfalsetheoriesofmoneyandenforceduponthenationbytheinterestsofthemoney-dealers，theOverstonesandtheirilk。Thebasis，however，isgivenwiththebasisofthemodeofproductionitself。

Adepreciationofcredit-money(nottomention，incidentally，apurelyimaginarylossofitscharacterasmoney)wouldunsettleallexistingrelations。

Therefore，thevalueofcommoditiesissacrificedforthepurposeofsafeguardingthefantasticandindependentexistenceofthisvalueinmoney。Asmoney-value，itissecureonlyaslongasmoneyissecure。Forafewmillionsinmoney，manymillionsincommoditiesmustthereforebesacrificed。Thisisinevitableundercapitalistproductionandconstitutesoneofitsbeauties。Informermodesofproduction，thisdoesnotoccurbecause，onthenarrowbasisuponwhichtheystand，neithercreditnorcredit-moneycandevelopgreatly。

Aslongasthesocialcharacteroflabourappearsasthemoney-existenceofcommodities，andthusasathingexternaltoactualproduction，moneycrises——independentoforasanintensificationofactualcrises——areinevitable。Ontheotherhand，itisclearthataslongasthecreditofabankisnotshaken，itwillalleviatethepanicinsuchcasesbyincreasingcredit-moneyandintensifyitbycontractingthelatter。Theentirehistoryofmodernindustryshowsthatmetalwouldindeedberequiredonlyforthebalancingofinternationalcommerce，wheneveritsequilibriumismomentarilydisturbed，ifonlydomesticproductionwereorganised。Thatthedomesticmarketdoesnotneedanymetalevennowisshownbythesuspensionofthecashpaymentsoftheso-callednationalbanks，whichresorttothisexpedientinallextremecasesasthesolerelief。

Inthecaseoftwoindividuals，itwouldberidiculoustosaythatintheirtransactionswithoneanotherbothhaveanunfavourablebalanceofpayments。Iftheyarereciprocallycreditoranddebtorofoneanother，itisevidentthatwhentheirclaimsdonotbalance，onemustbethecreditorandtheotherthedebtorforthebalance。Withnationsthisisbynomeansthecase。Andthatthisisnotthecaseisacknowledgedbyalleconomistswhentheyadmitthatthebalanceofpaymentscanbefavourableorunfavourableforanation，thoughitstradebalancemustultimatelybesettled。Thebalanceofpaymentsdiffersfromthebalanceoftradeinthatitisabalanceoftradewhichmustbesettledatadefinitetime。Whatthecrisesnowaccomplishistonarrowthedifferencebetweenthebalanceofpaymentsandthebalanceoftradetoashortinterval；andthespecificconditionswhichdevelopinthenationsufferingfromacrisisand，therefore，havingitspaymentsbecomedue-theseconditionsalreadyleadtosuchacontractionofthetimeofsettlement。First，shippingawaypreciousmetals；thensellingconsignedcommoditiesatlowprices；exportingcommoditiestodisposeofthemortoobtainmoneyadvancesonthemathome；increasingtherateofinterest，recallingcredit，depreciatingsecurities，disposingofforeignsecurities，attractingforeigncapitalforinvestmentinthesedepreciatedsecurities，andfinallybankruptcy，whichsettlesamassofclaims。Atthesametime，metalisstilloftensenttothecountrywhereacrisishasbrokenout，becausethedraftsdrawnonitareinsecureandpaymentinspecieismosttrustworthy。Furthermore，inregardtoAsia，allcapitalistnationsareusuallysimultaneously——directlyorindirectly——itsdebtors。

Assoonasthesevariouscircumstancesexerttheirfulleffectupontheotherinvolvednation，itlikewisebeginstoexportgoldandsilver，inshort，itspaymentsbecomedueandthesamephenomenaarerepeated。

Incommercialcredit，theinterest——asthedifferencebetweencreditpriceandcashprice——entersintothepriceofcommoditiesonlyinsofarasthebillsofexchangehavealongerthanordinaryrunningtime。

Otherwiseitdoesnot。Andthisisexplainedbythefactthateveryonetakescreditwithonehandandgivesitwiththeother。[Thisdoesnotagreewithmyexperience——F。E。]Butinsofarasdiscountinthisformentershere，itisnotregulatedbythiscommercialcredit，butbythemoney-market。

Ifsupplyanddemandofmoney-capital，whichdeterminetherateofinterest，wereidenticalwithsupplyanddemandofactualcapital，asOverstonemaintains，theinterestwouldbesimultaneouslylowandhigh，dependingonwhethervariouscommoditiesorvariousphases(rawmaterial，semi-finishedproduct，finishedproduct)ofthesamecommoditywerebeingconsidered。In1844，therateofinterestoftheBankofEnglandfluctuatedbetween4%(fromJanuarytoSeptember)and21/2and3%(fromNovembertotheendoftheyear)。In1845，itwas21/2，23/4，and3%fromJanuarytoOctober，andbetween3and5%duringtheremainingmonths。TheaveragepriceoffairOrleanscottonwas61/4d。

in4844and47/8d。in1845。OnMarch3，1844，thecottonsupplyinLiverpoolwas627，042bales，andonMarch3，1845，itwas773，800bales。Tojudgebythelowpriceofcotton，therateofinterestshouldhavebeenlowin1845，anditwasindeedforthegreaterpartofthistime。Buttojudgebytheyarn，therateofinterestshouldhavebeenhigh，forthepriceswererelativelyhighandtheprofitsabsolutelyhigh。

Fromcottonat4d。perpound，yarncouldbespun，in1845withaspinningcostof4d。(goodsecundamuletwistNo。40)，oratotalcostof8d。tothespinner，whichhecouldsellinSeptemberandOctober1845at101/2or111/2d。perpound。(SeethetestimonyofWyliebelow。)

Theentiremattercanberesolvedasfollows:

Supplyanddemandofloancapitalwouldbeidenticalwithsupplyanddemandofcapitalgenerally(althoughthislaststatementisabsurd；fortheindustrialorcommercialcapitalistacommodityisaformofhiscapital，yetheneverasksforcapitalassuch，butonlyfortheparticularcommodityassuch，hebuysandpaysforitasacommodity，e。g。，cornorcotton，regardlessoftherolethatithastoplayinthecircuitofhiscapital)，iftherewerenomoney-lenders，andifintheirsteadthelendingcapitalistswereinpossessionofmachinery，rawmaterials，etc。，whichtheywouldlendorhireout，ashousesarerentedoutnow，totheindustrialcapitalists，whoarethemselvesownersofsomeoftheseobjects。Undersuchcircumstances，thesupplyofloancapitalwouldbeidenticalwiththesupplyofelementsofproductionfortheindustrialcapitalistandcommoditiesforthemerchant。

Butitisclearthatthedivisionofprofitbetweenthelenderandborrowerwouldthen，tobeginwith，completelydependontherelationofthecapitalwhichislenttothatwhichisthepropertyoftheonewhoemploysit。

AccordingtoMr。Weguelin(B。A。1857)，therateofinterestisdeterminedby”theamountofunemployedcapital”(252)；itis”butanindicationofalargeamountofcapitalseekingemployment”(271)；laterthisunemployedcapitalbecomes”floatingcapital”(485)andbythishemeans”theBankofEnglandnotesandotherkindsofcirculationinthecountry，forinstance，thecountrybankscirculationandtheamountofcoinwhichisinthecountryIincludeinfloatingcapitalthereservesofthebankers”(502，503)，andlateralsogoldbullion(503)。ThusthesameMr。WeguelinsaysthattheBankofEnglandexertsgreatinfluenceupontherateofinterestintimes，when”we”[theBankofEngland]”areholdersofthegreaterportionoftheunemployedcapital”(1198)，while，accordingtotheabovetestimonyofMr。Overstone，theBankofEngland”isnoplaceforcapital。”Mr。Weguelinfurthersays:”Ithinktherateofdiscountisgovernedbytheamountofunemployedcapitalwhichthereisinthecountry。TheamountofunemployedcapitalisrepresentedbythereserveoftheBankofEngland，whichispracticallyareserveofbullion。When，therefore，thebullionisdrawnupon，itdiminishestheamountofunemployedcapitalinthecountryandconsequentlyraisesthevalueofthatwhichremains”(1258)。J。StuartMillsays(2102):”TheBankisobligedtodependforthesolvencyofitsbankingdepartmentuponwhatitcandotoreplenishthereserveinthatdepartment；andthereforeassoonasitfindsthatthereisanydraininprogress，itisobligedtolooktothesafetyofitsreserve，andtocommencecontractingitsdiscountsorsellingsecurities。”——Thereserve，insofarasonlythebankingdepartmentisconsidered，isareserveforthedepositsonly。AccordingtotheOverstones，thebankingdepartmentissupposedtoactonlyasabanker，withoutregardtothe”automatic”issueofnotes。

ButintimesofactualstringencytheBank，independentlyofthereserveofthebankingdepartment；whichconsistsonlyofnotes，keepsasharpeyeonthebullionreserve，andmustdosoifitdoesnotwishtofail。

For，totheextentthatthebullionreservedwindles，sothereserveofbank-notesalsodwindles，andnooneshouldbebetterinformedofthisthanMr。Overstone，whopreciselybyhisBankActof1844hassosagaciouslyarrangedthis。

Footnotes[9]B。A。1857。TestimonyofTwells，banker:”4516。Asabanker，doyoudealincapitalorinmoney？——Wedealinmoney。”——”4517。Howarethedepositspaidintoyourbank？——Inmoney。”——”4518。Howaretheypaidout？——

Inmoney。”——”4519。Thencantheybecalledanythingelsebutmoney？——

No。”Overstone(seeChapterXXVI)confusescontinually”capital”and”money。””Valueofmoney”alsomeansinteresttohim，butinsofarasitisdeterminedbythemassofmoney，”valueofcapital”issupposedtobeinterest，insofarasitisdeterminedbythedemandforproductivecapitalandtheprofitmadebyit。Hesays:”4140。Theuseoftheword慶apital？isverydangerous。”——”4148。Theexportofbullionfromthiscountryisadiminutionofthequantityofmoneyinthiscountry，andadiminutionofthequantityofmoneyinthiscountrymustofcoursecreateapressureuponthemoney-marketgenerally”[butnotinthecapital-market，accordingtothis]——”4112。Asthemoneygoesoutofthecountry，thequantityinthecountryisdiminished。Thatdiminutionofthequantityremaininginthecountryproducesanincreasedvalueofthatmoney”[thisoriginallymeansinhistheoryanincreaseinthevalueofmoneyassuchthroughacontractionofcirculation，ascomparedtothevaluesofcommodities；inotherwords，anincreaseinthevalueofmoneyisthesameasafallinthevalueofcommodities。Butsinceinthemeantimeevenhehasbeenconvincedbeyondperadventurethatthemassofcirculatingmoneydoesnotdetermineprices，itisnowthediminutioninmoneyasamediumofcirculationwhichissupposedtoraiseitsvalueasinterest-bearingcapital，andthustherateofinterest]。”Andthatincreasedvalueofwhatremainsstopstheexitofmoney，andiskeptupuntilithasbroughtbackthatquantityofmoneywhichisnecessarytorestoretheequilibrium。”——MoreofOverstone抯

contradictionslateron。

[10]Atthispointtheconfusionstarts:bothofthesethingsaresupposedtobe”money”，namely，thedepositasaclaimtopaymentfromthebanker，andthedepositedmoneyinthehandsofthebanker。BankerTwells，beforetheBankingCommitteeof1857，offersthefollowingexample:”IfIbeginbusinesswith£；10，000，Ibuywith£；5，000commoditiesandputthemintowarehouse。Ideposittheother£；5，000withabanker，todrawuponitanduseitasIrequireit。Iconsideritstill£；10，000

capitaltome，though£；5，000isintheshapeofdepositsormoney”

(4528)——Thisnowgivesrisetothefollowingpeculiardebate——”4531。

Youhavepartedwithyour£；5，000ofnotestosomebodyelse？——Yes。”——”4532。Thenhehas£；5，000ofdeposits？-Yes。”——”4533。Andyouhave£；5，000ofdepositsleft？——Exactly。”——”4534。Hehas£；5，000

inmoney，andyouhave£；5，000inmoney？——Yes。”——”4535。Butitisnothingbutmoneyatlast？——No。”ThisconfusionisduepartlytothecircumstancethatA，whohasdeposited£；5，000，candrawonitanddisposeofitasthoughhestillhadit。Tothatextentitserveshimaspotentialmoney。However，inallcasesinwhichhedrawsonithedestroyshisdepositprotanto。Ifhedrawsoutrealmoney，andhisownmoneyhasalreadybeenlenttosomeoneelse，heisnotpaidwithhisownmoney，butwiththatofsomeotherdepositor。IfhepaysadebttoBwithachequeonhisbanker，andBdepositsthischequewithhisbanker，andthebankerofAalsohasachequeonthebankerofB，sothatthetwobankersmerelyexchangecheques，themoneydepositedbyAhasperformedthefunctionofmoneytwice；first，inthehandsoftheonewhohasreceivedthemoneydepositedbyA；secondly，inthehandsofAhimself。Inthesecondfunction，itisabalancingofclaims(theclaimofAonhisbanker，andtheclaimofthelatteronthebankerofB)withoutusingmoney。Herethedepositactstwiceasmoney，namely，asrealmoneyandthenasaclaimonmoney。

Mereclaimstomoneycantaketheplaceofmoneyonlybyabalancingofclaims。

Capital，Vol。3，Chapter33KarlMarxCAPITALVol。III

THEPROCESSOF

CAPITALISTPRODUCTIONASAWHOLEPartV

DIVISIONOFPROFITINTOINTERESTANDPROFIT

OFENTERPRISE。

INTEREST-BEARINGCAPITALCHAPTER33

TheMediumofCirculationintheCreditSystemThegreatregulatorofthevelocityofthecurrencyiscredit。Thisexplainswhyaseverepressureuponthemoney-marketisgenerallycoincidentwithafullcirculation。”(TheCurrencyTheoryReviewed，p。65。)

Thisistobetakeninadoublesense。Ontheonehand，allmethodswhichsaveonmediumofcirculationarebaseduponcredit。Ontheotherhand，however，take，forexample，a500-poundnote。AgivesittoBonacertaindayinpaymentforabillofexchange；Bdepositsitonthesamedaywithhisbanker；thelatterdiscountsabillofexchangewithitontheverysamedayforC；Cpaysittohisbank，thebankgivesittothebill-brokerasanadvance，etc。Thevelocitywithwhichthenotecirculateshere，toserveforpurchasesandpayments，iseffectedbythevelocitywithwhichitrepeatedlyreturnstosomeoneintheformofadepositandpassesovertosomeoneelseagainintheformofaloan。Thepureeconomyinmediumofcirculationappearsmosthighlydevelopedintheclearinghouse——inthesimpleexchangeofbillsofexchangethataredue——andinthepreponderantfunctionofmoneyasameansofpaymentformerelysettlingbalances。Buttheveryexistenceofthesebillsofexchangedependsinturnoncredit，whichtheindustrialistsandmerchantsmutuallygiveoneanother。Ifthiscreditdeclines，sodoesthenumberofbills，particularlylong-termones，andconsequentlyalsotheeffectivenessofthismethodofbalancingaccounts。

Andthiseconomy，whichconsistsineliminatingmoneyfromtransactionsandrestsentirelyuponthefunctionofmoneyasameansofpayment，whichinturnisbaseduponcredit，canonlybeoftwokinds(asidefromthemoreorlessdevelopedtechniqueintheconcentrationofthesepayments):

mutualclaims，representedbybillsofexchangeorcheques，arebalancedouteitherbythesamebanker，whomerelytranscribestheclaimfromtheaccountofonetothatofanother，orbythevariousbankersamongthemselves。[11]Theconcentrationof8to40millionbillsofexchangeinthehandsofonebill-broker，suchasthefirmofOverend，Gurney&；Co。，wasoneoftheprincipalmeansofexpandingthescaleofsuchbalancinglocally。

Theeffectivenessofthemediumofcirculationisincreasedthroughthiseconomyinsofarasasmallerquantityofitisrequiredsimplytobalanceaccounts。Ontheotherhandthevelocityofthemoneyflowingasmediumofcirculation(bywhichitisalsoeconomised)dependsentirelyupontheflowofpurchasesandsales，andonthechainofpayments，insofarastheyoccursuccessivelyinmoney。Butcrediteffectsandtherebyincreasesthevelocityofcirculation。Asinglepieceofmoney，forinstance，caneffectonlyfivemoves，andremainslongerinthehandsofeachindividualasmeremediumofcirculationwithoutcreditmediating-whenA，itsoriginalowner，buysfromB，BfromC，CfromD，DfromE，andEfromF，thatis，whenitstransitionfromonehandtoanotherisdueonlytoactualpurchasesandsales。ButwhenBdepositsthemoneyreceivedinpaymentfromAwithhisbankerandthelatterusesitindiscountingbillsofexchangeforC，CinturnbuysfromD，DdepositsitwithhisbankerandthelatterlendsittoE，whobuysfromF，thenevenitsvelocityasmeremediumofcirculation(meansofpurchase)iseffectedbyseveralcreditoperations:

B’sdepositingwithhisbankerandthelatter’sdiscountingforC，D’sdepositingwithhisbanker，andthelatter’sdiscountingforE；inotherwordsthroughfourcreditoperations。Withoutthesecreditoperations，thesamepieceofmoneywouldnothaveperformedfivepurchasessuccessivelyinthegivenperiodoftime。Thefactthatitchangedbandswithoutmediationofactualsalesandpurchases，throughdepositinganddiscounting，hashereaccelerateditschangeofhandsintheseriesofactualtransactions。

Wehaveseenpreviouslythatoneandthesamebank-notecanconstitutedepositsinseveralbanks。Similarly，itcanalsoconstitutevariousdepositsinthesamebank。Thebankerdiscounts，withthenotewhichAhasdeposited，B’sbillofexchange，BpaysC，andCdepositsthesamenoteinthesamebankthatissuedit。

Wehavealreadydemonstratedinthediscussionofsimplemoneycirculation(VolI，Ch。III，2)thatthemassofactualcirculatingmoney，assumingthevelocityofcirculationandeconomyofpaymentsasgiven，isdeterminedbythepricesofcommoditiesandthequantityoftransactions。Thesamelawgovernsthecirculationofnotes。

Inthefollowingtable，theannualaveragenumberofnotesoftheBankofEngland，insofarastheywereinthehandsofthepublic，arerecorded，namely，the5-and10-poundnotes，the20-to100-poundnotes，andthelargerdenominationsbetween200and1，000poundssterling；alsothepercentagesofthetotalcirculationthateachoneofthesegroupingsconstitutes。

Theamountsareinthousands，i。e。，thelastthreefiguresareomitted。*

Year£；5-10Notes%£；20-100Notes%£；200-1，000Notes%Total18449，26345。75，73528。35，25326。020，241

18459，69846。96，08229。34，94223。820，722

18469，91848。95，77828。54，59022。620，286

18479，59150。15，49828。74，06621。219，155

18488，73248。35，04627。94，30723。818，085

18498，69247。25，23428。54，47724。318，403

18509，16447。25，58728。84，64624。019，398

18519，36248。15，55428。54，55723。419，473

18529，83945。06，16128。25，85626。821，856

185310，69947。36，39328。25，54124。522，653

185410，56551。05，91028。54，23420。520，709

185510，62853。65，70628。93，45917。519，793

185610，68054。45，64528。73，32316。919，648

185710，65954。75，56728。63，24116。719，467(B。A。1858，p。XXVI。)Thetotalsumofcirculatingbank-notes，therefore，positivelydecreasedfrom1844to1857，althoughcommercialbusiness，asindicatedbyexportsandimports，hadmorethandoubled。Thesmallerbank-notesof£；5and£；10increased，asthetableshows，from£；9，263，000

in1844to£；10，659，000in1857。Andthistookplacesimultaneouslywiththeparticularlyheavyincreaseingoldcirculationatthattime。

Ontheotherhand，therewasadecreaseinthenotesofhigherdenominations(£；200to£；1，000)from£；5，856，000in1852to£；3，241，000

in1857，i。e。，adecreaseofmorethan£；21/2million。Thisisexplainedasfollows:”Onthe8thJune1854，theprivatebankersofLondonadmittedthejoint-stockbankstothearrangementsoftheclearinghouse，andshortlyafterwardsthefinalclearingwasadjustedintheBankofEngland。Thedailyclearancesarenoweffectedbytransfersintheaccountswhichtheseveralbankskeepinthatestablishment。Inconsequenceoftheadoptionofthissystem，thelargenoteswhichthebankersformerlyemployedforthepurposeofadjustingtheiraccountsarenolongernecessary。”(B。A。1858，p。V。)

Towhatsmallminimumtheuseofmoneyinwholesaletradehasbeenreduced，canbededucedfromthetablereprintedinBookI(Ch。III，Footnote)，whichwaspresentedtotheBankCommitteebyMorrison，Dillon&；Co。，oneofthelargestofthoseLondonfirmsfromwhichasmalldealercanbuyhisentireassortmentofcommodities。

AccordingtothetestimonyofW。NewmarchbeforetheBankCommittee1857，No。1741，othercircumstancesalsocontributedtoeconomyinthecirculatingmedium:pennypostage，railways，telegraphy，inshort，theimprovedmeansofcommunication；thusEnglandcannowcarryonfivetosixtimesmorebusinesswithaboutthesamecirculationofbank-notes。

Thisisalsoessentiallyduetothewithdrawalfromcirculationofnotesofhigherdenominationthan£；10。HereNewmarchseesanaturalexplanationforthephenomenonthatinScotlandandIreland，whereone-poundnotesalsocirculate，notecirculationhasrisenbyabout31%(1747)。Thetotalcirculationofbank-notesintheUnitedKingdom，includingone-poundnotes，issaidtobe£；39million(1749)。Thegoldcirculation，£；70

million(1750)。InScotland，thecirculationofnoteswas£；3，120，000

in1834；£；3，020，000in1844；and£；4，050，000in1854(1752)。

Fromthesefiguresalone，itisevidentthatbanksissuingnotescanbynomeansincreasethenumberofcirculatingnotesatwill，aslongasthesenotesareatalltimesexchangeableformoney。[Inconvertiblepapermoneyisnotconsideredhereatall；inconvertiblebank-notescanbecomeauniversalmediumofcirculationonlywheretheyareactuallybackedbystatecredit，asisthecaseinRussiaatpresent。Theythenfallunderthelawsofinconvertiblepapermoneyissuedbythestate，whichhavealreadybeendevelopedinBookI(Ch。III，2，c)”CoinandSymbolsofValue。”——F。E。]

Thequantityofcirculatingnotesisregulatedbytheturnoverrequirements，andeverysuperfluousnotewendsitswaybackimmediatelytotheissuer。

SinceinEnglandonlythenotesoftheBankofEnglandcirculateuniversallyaslegalmeansofpayment，wecandisregardatthispointtheinsignificant，andmerelylocal，notecirculationofthecountrybanks。