Every commodity is directly money. That was Gray’s theory deducted from his incomplete and, therefore, false analysis of commodities. The “organic” structure of “labor money,” the “national bank” and the “ware-docks” are mere fantastic visions in which the dogma is made by a legerdemain to appear to us as a universal law. The dogma that a commodity is money or that the isolated labor of the individual contained in it is direct social labor, will of course not become true through the mere fact that a bank believes in it and carries on operations accordingly. It is more likely that bankruptcy would play in that case the part of the practical critic. What remains concealed in Gray’s writings and hidden from himself as well, namely, that labor-money is a well-sounding economic phrase for the pious wish to get rid of money, and with money, of exchange value, and with exchange value, of commodities, and with commodities, of the capitalistic mode of production, was clearly expressed by some English socialists of whom a few preceded and others followed Gray.64
But it remained for Mr. Proudhon and his school to preach in all earnest the degradation ofmoneyand the exaltation of thecommodityas the gist of socialism and thus to reduce socialism to an elementary misconception of the necessary connection between commodity and money.65
After the commodity has received in the process of price determination the form in which it becomes capable of circulation, and after gold has acquired the character of money in the same process, circulation will both present and solve the contradictions which are inherent in the process of exchange of commodities. The actual exchange of commodities, i. e., the social interchange of matter consists of a change of form in which is unfolded the double character of the commodity as use-value and exchange value, and at the same time its own change of form is crystallized in distinct forms of money. To describe this change of form is to describe circulation. As we have seen, given a world of commodities and with it a system of division of labor, commodity is but a developed form of exchange value; in the same manner, circulation implies a steady stream of exchange transactions which are being continually renewed on all sides. The second assumption we make is that commoditiesenter the process of exchange with adefinite priceor that they appear to each other in that process in a double capacity, really as use-values, ideally—in price—as exchange values.
The liveliest streets of London are crowded with stores whose show windows are filled with the riches of the world, Indian shawls, American revolvers, Chinese porcelain, Parisian corsets, Russian furs and tropical spices, but all of these things of joy bear fatal white labels marked with Arabian figures with the laconic characters £, s., d. Such is the picture of the commodity appearing in circulation.
On close examination the process of circulation is seen to consist of two distinct cycles. If we denote commodity by the letter C and money by the letter M we can express these two forms as follows:
C—M—CM—C—M.
In this chapter we are interested exclusively in the first form, i. e., in the form which serves as the direct expression of the circulation of commodities.
The process C—M—C consists of the movement C—M, the exchange of the commodity for money, orselling; the opposite movement M—C, exchange of money for a commodity, orbuying; and of the unity of the two movements C—M—C, exchange of the commodity for money in order to exchange the money for a commodity, orsellingin order tobuy. But the result which marks the end of the process is C—C, exchangeof commodity for commodity, real interchange of matter.
If we look at it from the extreme end of the first commodity, C—M—C represents its transformation into gold and its retransformation from gold into a commodity; a movement in which the commodity exists first as a particular use-value, then divests itself of that character, acquires the character of exchange value or universal equivalent, in which capacity it has nothing in common with its natural form, then throws off the last form as well to remain finally an actual use-value for the satisfaction of particular wants. In this last form it falls out of the sphere of circulation into that of consumption. The entire process of circulation C—M—C thus includes the combined series of metamorphoses, which every single commodity undergoes in order to become a direct use-value to its possessor. The first metamorphosis is accomplished in the first phase of the circulation process, C—M; the second in the last phase, M—C; and the entire process constitutes thecurriculum vitaeof the commodity. But the process C—M—C represents the combined metamorphosis of a single commodity and constitutes at the same time the sum of certain one-sided metamorphoses of other commodities, since every metamorphosis of the first commodity constitutes its transformation into another commodity and therefore the transformation of the other commodity into it; hence it constitutes a twofold transformation which takes place at the same stage of circulation. We must then consider separatelyeach of the two processes of exchange into which circulation C—M—C breaks up.
C—M orsale: commodity C enters the process of circulation not only as a particular use-value, e. g., a ton of iron, but as a use-value of a certain price, say, £3 17s. 10-1/2d., or an ounce of gold. While this price is on the one hand the exponent of the quantity of labor-time contained in a ton of iron, i. e., of the magnitude of its value, it at the same time expresses the pious wish of the iron to become gold, i. e., to give to the labor-time it contains the aspect of universal social labor-time. Unless this trans-substantiation takes place, the ton of iron not only ceases to be a commodity, but even a product, for it is a commodity only because it is a non-use-value to its owner; that is to say, his labor counts as actual labor only in so far as it is labor useful to others, and the thing is useful to him only as abstract universal labor. It is, therefore, the business of iron, or of its owner, to find that point in the world of commodities where iron attracts gold. But this difficulty, thesalto mortaleof the commodity, is overcome when the sale actually takes place, as is assumed here on the analysis of simple circulation. When the ton of iron is realized as a use-value through its alienation, i. e., by passing from the hands in which it is a non-use-value to hands in which it is a use-value, it at the same time realizes its price and from mere imaginary gold it becomes real gold. In place of the name one ounce of gold or £3 17s. 10-1/2d., an ounce of real gold has appeared, but the ton of iron has cleared that place. Not only does the commodity—which in its price had been ideally convertedinto gold—actually turn into gold through the sale C—M, but gold, which as a measure of value had been only ideal money and in fact figured merely as a money name of commodities—is now turned into actual money66by the same process. Just as gold became the ideal universal equivalent, because all commodities measured their values by it, so does it now become the absolutely alienable commodity, real money, because it is the product of the universal alienation of commodities for it—and the sale C—M is the process by means of which that universal alienation takes place. But gold becomes real money only through sale, because the exchange values of commodities were already ideal gold in their prices.
In the sale C—M, as well as in the purchase M—C, two commodities, entities of exchange value and use-value, confront each other, but the exchange value of the commodity exists only ideally as price; while as regards gold, although it is really a use-value, its use-value is confined only to its being the bearer of exchange value and is, therefore, merely a formal use-value, having no relation to a real individual want. The antithesis of use-value and exchange value is thus distributed at the two extreme poles of C—M, so that the commodity confronts gold as a use-value which has yet to realize in gold its exchange value or its price, while gold confronts the commodity as an exchange value, whose formal use-value is yet to be realized in the commodity. Only through this duplication of the commodity as commodity and gold, and, further, through the twofold and polar relation by virtue of which each extreme represents but ideally what its opposite is in reality and is in reality what its opposite is only ideally—in short, only through the appearance of commodities as two-sided polar opposites are the contradictions solved that are inherent in the process of exchange.
So far we have considered C—M as sale, as the conversion of commodity into money. But if we look at it from the other end, the same process will assume the form M—C, or purchase, i. e., the conversion of money into commodity. Sale is necessarily its opposite at the same time; it is the former if we look at the process from one end, and the latter if we regard the process from the other end. In practice this process differs only in that the initiative in C—M originates at the commodity end or with the seller, while in M—C it comes from the money end or the buyer. In describing the first metamorphosis of the commodity, its conversion into money as a result of the completion of the first phase of circulation C—M, we assume at the sametime that another commodity has been converted into money and is now in its second phase of circulation, M—C. Thus we get into a vicious circle of assumptions. Circulation itself constitutes such a vicious circle. If we did not consider M in M—C as the result of a metamorphosis of another commodity, we would thereby take exchange out of the process of circulation. But outside of the latter the form C—M disappears and only two different Cs confront each other, say iron and gold, the exchange of which does not constitute a part of the process of circulation, being direct barter. Gold, at the source of its production, is a commodity like any other commodity. Its relative value and that of iron or of any other commodity is expressed here in quantities in which they are mutually exchanged. But in the process of circulation this operation is implied, the value of gold being already given in the prices of commodities. Nothing can, therefore, be more erroneous than the idea that gold and commodity enter into the relation of direct barterwithin the process of circulationand that their relative values are ascertained through their exchange as simple commodities. The illusion that gold is bartered as a simple commodity for other commodities in the process of circulation is due to the fact that prices represent equations in which certain quantities of commodities are made equal to certain quantities of gold, i. e., that the commodities are made to relate to gold in its capacity of money, as a universal equivalent, and, therefore, appear to be directly exchangeable for it. In so far as the price of a commodity isrealizedin gold, it is exchanged forgold as a commodity, as a particular embodiment of labor-time; but in so far as it is thepricethat is realized in gold, the commodity is exchanged for gold in its capacity of money and not of a commodity, i. e., it is exchanged for gold as a universal embodiment of labor-time. But in either case the quantity of gold for which the commodity is exchanged in the process of circulation is not determined by exchange, but the exchange is determined by the price of the commodity, i. e., by its exchange value estimated in gold.67
Within the process of circulation gold appears in everybody’s hands as the result of sale C—M. But since C—M, sale, is at the same time M—C, purchase, it is apparent that while C, the commodity from which the process starts, is passing through its first metamorphosis, another commodity, which confronts it as the opposite pole M, is completing its second metamorphosis and is, therefore, passing through the second phase of circulation, while the first commodity is still in the first phase of its course.
As a result of the first phase of circulation, the sale, we get money which is the starting point of the second phase. In place of the commodity in its first form appears its golden equivalent. This result may now form a resting point, since the commodity in this second formpossesses a lasting existence of its own. The commodity, a non-use-value in the hands of its possessor, is now on hand in an always useful, since always exchangeable, form, and it depends upon circumstances when and at what point of the surface of the commodity world it will again enter circulation. Its formation into a gold chrysalis constitutes an independent period in its life which may last a greater or less length of time. While in the case of barter the exchange of one particular use-value is directly bound up with the exchange of another particular use-value, the universal character of labor which creates exchange value is manifested in the separation and lack of coincidence of acts of purchase and sale.
M—C, purchase, is the inverted movement of C—M and at the same time the second or final metamorphosis of the commodity. As gold, i. e., in the form of the universal equivalent, the commodity can be directly represented in the use-values of all other commodities; the latter aspire to gold as their hereafter, but at the same time indicate in their prices the key in which it must sound in order that their bodies, their use-values, may take the place of money, while their souls, their exchange-values, may enter gold. The universal product of the alienation of commodities is the absolutely alienable commodity. There is no qualitative and only a quantitative limit to the transformation of gold into commodity, namely, the limit of its own quantity or magnitude of its value. “Everything is to be had for cash.” While in the movement C—M, the commodity, through its alienation as a use-value, realizes its ownprice and the use-value of somebody else’s money; it realizes in the movement M—C, through its alienation as an exchange value, its own use-value and the price of the other commodity. While through the realization of its price the commodity transforms gold into actual money, it turns gold into its merely fleeting money-form, through its own retransformation. Since the circulation of commodities implies an extensive division of labor and consequently a diversity of wants on the part of individuals, a diversity which bears an inverse ratio to the specialization of their own products, the purchase M—C may appear as an equation with one commodity equivalent or split up into a series of commodity-equivalents limited by the variety of the demands of the purchaser and by the amount of money in his possession. Just as a sale is a purchase, so is a purchase a sale. M—C is at the same time C—M, but the initiative belongs in this case to gold or the purchaser.
Coming back now to C—M—C, or to circulation as a whole, it is apparent that it contains the combined series of metamorphoses through which a commodity passes. But at the same time as one commodity enters the first phase of its circulation and completes its first metamorphosis, another commodity enters the second phase of circulation, completes its second metamorphosis and falls out of circulation; the first commodity enters at the same time the second phase of circulation completes its second metamorphosis and falls out of circulation, while a third commodity enters circulation, passes through the first phase of its course completing the first metamorphosis.
Thus, the combined circulation C—M—C, as a complete metamorphosis of a commodity always constitutes at the same time the end of the complete metamorphosis of another commodity and the beginning of a complete metamorphosis of a third commodity, i. e., a series without beginning or end. To illustrate this let us call C in either extreme C’ and C” respectively, in order to distinguish the commodities, the series reading thus: C’—M—C”. The first member, C’—M, presupposes in fact that M is the result of another transaction C—M, and is thus itself merely the last member of a series C—M—C’, while the second part M—C” is merely a result of C”—M, or appears as the first part of C”—M—C’”, and so on. Furthermore, although M is the result of onlyonesale, it appears that the last part M—C, may be represented as M—C’ + M—C” + M—C’”, etc., i. e., it may be split up into a number of purchases, and consequently a number of sales, or into a number of first members of new complete metamorphoses of commodities. Since the complete metamorphosis of a single commodity thus appears as a link not only of one endless chain of metamorphoses, but of many such chains, the process of circulation in the world of commodities presents a hopeless confusion of intertwined movements constantly ending and starting anew at a countless number of points. But every single sale or purchase stands as an independent isolated act, whose supplemental act may be separated from it in time and place, and therefore does not need to follow it directly as its continuation. Every separate process of circulation, C—M or M—C, as a transformation of one commodity into use-value and of another into money, i. e., as the first and second phases of circulation respectively forms an independent halting point from either direction; but, on the other hand, all commodities commence their second metamorphosis in the common form of the universal equivalent, gold, and stop at the starting point of the second phase of circulation; for that, reason any M—C dovetails in actual circulation with any C—M; the second chapter in the life-course of one commodity with the first chapter of that of another commodity. A, e. g., sells £2 worth of iron. He thus completes the transaction C—M or the first metamorphosis of commodity iron, but postpones his purchase until some other time. At the same time B, who sold 2 quarters of wheat for £6 a fortnight since, buys with the same £6 a coat and trousers of Moses & Son, thus completing M—C or the second metamorphosis of the commodity, wheat.
The two transactions M—C and C—M appear here merely as links of one chain, because a commodity expressed in gold looks like any other commodity, and one cannot tell by the looks of the gold whether it is transformed iron or transformed wheat. C—M—C appears, therefore, in the actual process of circulation as a jumble of countless accidentally coinciding or successively following members of different complete metamorphoses. The actual process of circulation thus appears not as a complete metamorphosis of a commodity, not as its movement through opposite phases, but as a mere agglomeration of many accidentally coinciding or successive purchases and sales. The process thus losesall clearness of outline which is so much more the case since every single act of circulation, e. g., sale, is at the same time its opposite, purchase, and vice versa. On the other hand, the process of circulation is nothing but the movement of metamorphoses in the world of commodities and, therefore, must reflect them also in its movement as a whole. How that reflection takes place we shall consider in the following chapter. It may be added here that in C—M—C the two extreme Cs constitute two forms of commodities which do not bear the same relation to M. The first C relates to money as a commodity of a special class to a universal commodity, while money relates to the second C as a universal commodity to an individual commodity. C—M—C can, therefore, be reduced by abstract logic to the final form S—U—I in which S, standing for species, forms the first extreme; U, signifying universality, forms the connecting medium, and I, individuality, constitutes the last extreme.
The owners of commodities entered the sphere of circulation simply as guardians of commodities. Within that sphere they confront each other in the opposite roles of buyer and seller, one as a personified sugar-loaf, the other as personified gold. As soon as the sugar-loaf is turned into gold, the seller becomes a buyer. These definite social functions are no outgrowths of human nature, but are the products of relations of exchange between men who produce their goods in the form of commodities. They are so far from being purely individual relations between buyer and seller that both enter this relation only to the extent that theirindividual labor is disregarded and is turned into money as labor ofnoindividual. Just as it is, therefore, childish to consider these economic bourgeois roles of buyer and seller as eternal social forms of human individuality, so it is on the other hand, preposterous to lament in them the extinction of individuality.68They are the necessary manifestations of individuality at a certain stage of the social system of production. Moreover, in the opposition of buyer and seller the antagonistic natureof capitalistic production is expressed as yet so superficially and as mere matter of form, that this opposition belongs also to precapitalistic forms of society, since it merely requires that the mutual relations of individuals should be those of owners of commodities.
Now, if we consider the result of C—M—C, it comes down to mere interchange of matter, C—C. A commodity has been exchanged for a commodity, a use-value for a use-value, and the transformation of the commodity into money, or the commodity in its form of money, serves merely as a means of effecting this interchange of matter. Money thus appears merely as amedium of exchangeof commodities; not as a medium of exchange in general, but as a means of exchange in the sphere of circulation, i. e., amedium of circulation.69
We have seen that the process of circulation of commodities comes to a completion in C—C, appearing as mere barter carried on by means of money; further, that C—M—C represents in general not only two isolated processes, but their dynamic union as well; but to draw from that the conclusion that purchase and sale form an indivisible unit, is a mode of thinking the criticism of which belongs to the domain of logic, and not to that of economics. The separation of purchase and sale in the process of exchange destroys all local, primitive, patriarchal and naively genial barriers to interchange of matter in society. It is, moreover, the general form of the separation of the points of coincidence and opposition in this interchange, carrying within it the possibility of commercial crises, because the antagonism of commodity and money is the abstract and general form of all antagonisms with which the capitalistic system of labor is pregnant. Hence, circulation of money is possible without crises, but crises can not occur without money circulation. In other words, where labor based on the system of private exchange has not reached the stage marked by the existence of money, it is less capable of producing those phenomena which presuppose the full development of the capitalistic mode of production. Bearing this in mind we can appreciate the depth of the criticism which proposes to do away with the “shortcomings” of capitalistic production by abolishing the “privilege” enjoyed by the precious metals and introducing a so-called “rational monetary system.” As a sample of economic defence of an opposite character may serve the following pieceof reasoning which has been proclaimed exceedingly keen. JAMES MILL, the father of the well-known English economist, John Stuart Mill, says: “Whatever ... be the amount of the annual produce, it never can exceed the amount of the annual demand.... Of two men who perform an exchange, the one does not come with only a supply, the other with only a demand; each of them comes with both a demand and a supply.... The supply which he brings is the instrument of his demand; and his demand and supply are of course exactly equal to one another. It is therefore, impossible that there should ever be in any country a commodity or commodities in quantity greater than the demand, without there being, to an equal amount, some other commodity or commodities in quantity less than the demand.”70
Mill restores the balance by turning the process of circulation into direct barter and then smuggling into direct barter the character of buyer and seller borrowed by him from the process of circulation. To put it in his own confused language, during certain periods when all commodities are unsaleable there are really more buyers than sellers of one commodity,money, and more sellers than buyers ofall other money, commodities; such was, e. g., the case at certain moments during the commercial crisis of 1857-58 in London and Hamburg. The metaphysical balance of purchases and sales amounts to this, that every purchase is a sale and every sale is a purchase, which is a poor consolation to the guardian of the commodity who can not bring about its sale and therefore can not buy.71
The separation of sale and purchase makes possiblea large number of fictitious transactions side by side with genuine trade before the final exchange between the producer and the consumer of commodities takes place. It enables a host of parasites to penetrate the process of production and exploit the separation. But this, again, means that with money as the universal form of labor under the capitalist system, there isthe possibilityof the development of its contradictions.
Actual circulation appears at first sight as a mass of purchases and sales accidentally taking place side by side. In buying as in selling, commodities and money always stand in the same mutual relation: the seller, on the side of the commodity; the buyer, on that of money. Money as a medium of circulation always appears therefore asa means of purchase; and in that way the difference in its destinations in the opposite phases of the metamorphosis of the commodity becomes indistinguishable.
Money passes into the hands of the seller in the same transaction in which the commodity passes into the hands of the buyer. Commodities and money thus flow in opposite directions and this change of place in which the commodity passes over to one side and money to the other side, occurs simultaneously at an indefinitely large number of points on the entire surface of bourgeois society. But the first step which the commodity makes in the sphere ofcirculation is also its last step.72Whether it leaves its place on account of its attraction for gold (C—M), or on account of its attraction by gold (M—C), with one move, with one change of place it falls out of the sphere of circulation into that of consumption. Circulation is a continuous flow of commodities, but different commodities all the time, since each commodity makes but one move. Every commodity enters upon the second phase of its circulation not as the same commodity, but as another commodity, gold. Hence the movement of a metamorphosed commodity is the movement of gold. The same piece of gold or the identical gold coin which changed places with one commodity in the act C—M, reappears from the opposite end as the starting point for M—C and thus changes places for the second time with another commodity. Just as it passed from the hands of buyer B into those of seller A, it now leaves A’s hands who has become a buyer and passes into C’s hands. The path described by a commodity in its transformation into money and its retransformation from money, i. e., the movement of a complete metamorphosis of a commodity assumes the aspect of an apparent movement of the same coin that changes places twice with two different commodities. No matter in how scattered and haphazard fashion purchases and sales may take place near each other, there is always in actualcirculation a seller for each buyer and the money which moves into the place of the commodity sold, before it came into the hands of the buyer, must have already changed places with another commodity. Sooner or later it again leaves the hands of the seller, who turns buyer, to pass into the hands of a new seller and this frequently repeated change of place forms the interlacing of the metamorphoses of commodities. The same coins are moving, some more, others less frequently, from one place in the sphere of circulation to another, always in the direction opposite to that of the commodities moved, thus describing a longer or shorter circulation-curve. The different movements of the same coin can follow each other in point of time only, and on the contrary, the many scattered purchases and sales which appear as so many separate changes of place between commodities and money, occur simultaneously separated only in point of space.
The circulation of commodities C—M—C in its elementary form is completely described in the transition of money from the hands of the buyer into those of the seller and from the hands of the latter, as soon as he has turned buyer, into those of a new seller. This completes the metamorphosis of the commodity and with it the movement of money in so far as that movement is the expression of the metamorphosis. But since new use-values are continually produced in the shape of new commodities and must thus be constantly thrown anew into circulation, the process C—M—C is repeatedly renewed by the same commodity owners. The money which they have spent as buyers gets back into their handsas soon as they appear again as vendors of commodities. The constant renewal of the circulation of commodities finds its reflection in the continual circulation over the entire surface of bourgeois society of a quantity of money which, passing from hand to hand, describes at the same time a number of different small cycles starting from numberless points and returning each to its own starting point, to repeat the same movement over again.
The change of form on the part of commodities appears as a mere change of place on the part of money and the continuity of the circulation movement is all on the side of money, since the commodity always makes but one step in the direction opposite to money, while the latter makes in each case the second step for the commodity; the entire movement seems, therefore, to proceed from money, although in the case of a sale the commodity draws money out of its place, i. e., it circulates money as much as it is circulated by the latter in the case of a purchase. Furthermore, owing to the fact that money always confronts commodities in its capacity of a means of purchase, and in that capacity moves commodities only by realizing their price, the entire movement of circulation appears as a change of place between money and commodities, the former realizing the prices of the latter either by separate acts of circulation taking place simultaneously and side by side, or by successive transactions when the same coin realizes the prices of different commodities one after another. If we consider, e. g., the series C—M—C’—M—C”—M—C’”, etc., without regard to the qualitative aspects which become indistinguishable in the processof circulation, we witness the same monotonous operation. After realizing the price of C, M successively realizes those of C’, C”, etc., and commodities C’, C”, C’”, etc., constantly take the place which money has left. Money thus appears to keep commodities in circulation by realizing their prices. In discharging this function of realization of prices, money is itself constantly circulating, now changing its place, now describing a curve of circulation, now completing a small circuit where the starting and returning points coincide. As a medium of circulation, money is subject to a circulation of its own. The change of form of the circulating commodities appears, therefore, as a movement of money which furthers the exchange of commodities, motionless in themselves. The movement of the circulation process of commodities thus takes on the form of the movement of gold as a medium of circulation, i. e. of thecirculation of money.
Since owners of commodities give the products of their individual labor the appearance of products of social labor by turning one object, viz. gold, into the direct expression of universal labor-time and therefore into money, their own movement by which all of them effect the interchange of the material products of their labor now appears to them as the direct movement of that one object, as the circulation of gold. The social movement itself appears to the owners of commodities partly as an outward necessity and partly as a mere formal intermediary process which enables every individual who puts any use-value into circulation to get other use-values out of it of an equal value. The use-value of commodities comes into play with their disappearancefrom the sphere or circulation, while the use-value of money as a medium of circulation is in its very circulation. The movement of a commodity in the sphere of circulation is of a transitory kind, while ceaseless motion in that sphere constitutes the function of money. Through this special function which it performs within the sphere of circulation money acquires a new capacity, which we have to consider now more closely.
In the first place, we see that the circulation of money forms an endlessly split up movement, since it reflects the splitting up of the process of circulation into an infinitely large number of purchases and sales and the independent separation of the mutually supplementary phases of metamorphoses of commodities. In the small cycles described by money, where the starting and returning points coincide, we do find a return movement, i. e., an actual circular movement, but the fact that there are as many starting points as there are commodities and that the number of these cycles is infinitely large puts them beyond all control, measurement, or computation. The time between the start and the return of a commodity is just as indefinite. Moreover, it is immaterial whether or not such a circuit has been actually described in a given case. No economic fact is more generally known than that one can spend money with one hand without getting it back with the other. Money proceeds from an endless number of points and returns to as many different points, but the coincidence of the starting and returning points is a matter of chance, because in the movement C—M—C the turning of the buyer again into a seller is not a necessary condition. Still less does thecirculation of money resemble a movement radiating from a common centre to all points of the periphery and back from the peripheral points to the centre. The so-called cycle described by money, as it is pictured, amounts simply to this, that at all points we observe its appearance and disappearance, its never ceasing transition from place to place. In a higher, more involved form of money circulation, e. g. bank-note circulation, we shall find that the conditions of emission of money include those for its return. But in the simple money circulation it is a matter of chance for the same buyer to become again a seller. Where we really see constant cycle motions taking place, they are only reflections of deeper forces in the sphere of production, e. g., the manufacturer draws money from his banker on Friday, pays it out to his working-men on Saturday, the men immediately pay out the greater part of it to the storekeepers, etc., and the latter turn it in on Monday back to the banker.
We have seen that money realizes simultaneously a certain number of prices in the variegated purchases and sales which take place side by side at the same time. On the other hand, in so far as its movement represents the movement of the combined metamorphoses of commodities and the interlacing of these metamorphoses, the same coin realizes the prices of different commodities and thus makes a larger or smaller number of moves. If we take the circulation of a country for a given length of time, say a day, the quantity of gold required for the realization of prices and, consequently, for the circulation of commodities, will be determinedby two conditions: first, the sum total of the prices; second, the average number of moves made by one coin. This number of moves or the rapidity of circulation of money is in its turn determined by or expresses the average rapidity with which commodities go through the different phases of their metamorphoses, the rapidity with which these metamorphoses succeed one another, and with which those commodities that have gone through their metamorphoses are replaced by new commodities in the process of circulation. We have seen that in the process of the determination of prices the exchange value of all commodities is ideally converted into a certain quantity of gold of the same value and that the same amount of value is present in a double form in either of the isolated acts of circulation M—C and C—M, first embodied in the commodity, and second, in gold; yet gold enjoys the capacity of a medium of circulation not by virtue of its isolated relation to separate commodities in a state of rest, but owing to its active presence in the dynamic world of commodities, viz., its function of expressing the change of form of commodities by its change of place and expressing the rapidity of their change of form by the rapidity of its change of place. The extent to which it is present in the sphere of circulation, i. e., the actual quantity of gold in circulation, is thus determined by the extent to which it is discharging its function throughout the entire process.
The circulation of money implies the circulation of commodities; money circulates commodities which have prices, i. e., which are beforehand ideally equated to certain quantities of gold. In the determination of theprices of commodities, the value of the quantity of gold which serves as a unit of measure, or the value of gold, is assumed to be given. Under that assumption the quantity of gold necessary for circulation is determined first of all by the sum total of the prices of commodities that are to be realized. But this sum is itself determined: 1. By the level of prices, the relatively high or low exchange value of commodities estimated in gold; and 2. By the mass of commodities circulating at fixed prices, i. e. by the number of purchases and sales at given prices.73If one quarter of wheat is worth 60 shillings, then twice as much gold is required to circulate it or to realize its price as would be the case if it were worth only 30 shillings. To circulate 500 quarters of wheat at 60 shillings, twice as much gold is necessary as for the circulation of 250 quarters at the same price. Finally, to circulate 10 quarters at 100 shillings only half as much money is necessary as when circulating 40 quarters at 50 shillings. It follows that the quantity of gold required for circulation may fall in spite of a rise in price, if the mass of commodities in circulation declines in a greater ratio than the rise of the combined sum of prices; and, inversely, the quantity of the circulating medium may rise in spite of a decline of the mass of commodities in circulation, if the sum total of prices rises in a greater ratio. Thorough and minute English investigations have demonstrated e. g. that in the early stages of a dearth of grain in England the quantity of money in circulation increases, because the total price of the diminished supply of grain is greater than the former total price of a larger supply of grain, while the circulation of the other commodities continues undisturbed for some time at their old prices. At a later stage of the dearth of grain, there is a decline in the quantity of circulating money, either because less goods are sold at old prices besides grain, or the same quantity of those goods is sold at lower prices.
But, as we have seen, the quantity of money in circulation is determined not only by the sum total of prices of commodities that are to be realized, but also by the rapidity with which money circulates or with which it completes this work of realization. If the same sovereign makes ten purchases a day, each of a commodity having a price of one sovereign, and thus changes hands ten times, it does as much work as would be accomplished by ten sovereigns each performing but a single act of circulation a day.74Consequently, rapidityof gold circulation can make up for its quantity, or the presence of gold in the sphere of circulation is determined not only by its presence as an equivalent of a commodity side by side with it, but also by its participation in the movement of metamorphoses of commodities. The rapidity of the circulation of money, however, can serve as a substitute for its quantity only to a limited extent, since at any given moment an endless number of isolated purchases and sales takes places in different localities.
If the total price of the commodities in circulation rises, but in a smaller ratio than the increase in the rapidity of circulation of money, the volume of the circulating medium will diminish. If on the contrary the rapidity of circulation decreases in a greater ratio than the total price of the commodities in circulation, the volume of currency will increase. An increasing volume of currency combined with a general fall of prices or a diminishing volume of currency in connection with a general rise of prices is one of the best known phenomena in the history of prices. But the consideration of the causes which bring about a simultaneous rise in the level of prices and a still greater rise in the rate of velocity of circulation of money, or the opposite phenomenon, falls outside of the sphere of simple circulation. By way of illustration, it may be mentioned that in periods of prevailing credit, the rapidity of circulation of money growsfaster than the prices of commodities, while in times of declining credit the prices of commodities fall slower than the rapidity of circulation. The shallow and artificial character of the simple circulation of money is manifested in the fact that all the elements which have a determining influence on the volume of currency, such as the volume of commodities in circulation, prices, the rise or fall of prices, the number of simultaneous purchases and sales, the rapidity of the circulation of money,—depend on the metamorphic process which takes place in the world of commodities, and that again depends on the general character of the methods of production, the size of population, the relation between city and country, the development of the means of transportation, the greater or less division of labor, credit, etc.; in short, on circumstances all of which lieoutsideof the sphere of simple circulation of money and are only reflected in it.
The rapidity of circulation being given, the volume of currency is simply determined by the prices of commodities. Hence, prices are not high or low, because there is more or less money in circulation, but on the contrary, there is more or less money in circulation, because prices are high or low. This is one of the most important laws, whose demonstration in detail by means of the history of prices constitutes perhaps the only merit of the post-Ricardian English Political Economy. If experience shows, that the level of metallic circulation or the mass of gold and silver in circulation in a given country is subject to temporary ebbs and tidesand very violent ones at times,75but on the whole remains stationary for long periods, the deviations forming but small oscillations about the average level, this is explained by the antagonistic nature of the circumstances which determine the quantity of money in circulation. Their simultaneous modifications neutralize their effects and leave everything where it was before.
The law, that with a given rapidity of circulation of money and a given total sum of prices of commodities the quantity of the circulating medium is determined, may also be expressed as follows. If the exchange values of commodities and the average rapidity of their metamorphoses are given, the quantity of gold in circulation depends on its own value. If, therefore, the value of gold, i. e. the labor-time necessary for its production, should rise or fall, the prices of commodities will riseor fall in inverse ratio, and corresponding to that rise or fall of prices, the rapidity of circulation remaining the same, a larger or smaller quantity of gold would be required to keep the same volume of commodities in circulation. The same change would occur, if the old standard of value were superseded by a more or less valuable metal. Thus, Holland required from fourteen to fifteen times as much silver as it had previously required gold, in order to circulate the same volume of commodities, when out of tender regard for the government creditors and out of fear of the effects of the discoveries in California and Australia it substituted silver for gold money.
From the fact that the quantity of gold in circulation depends on the variable sum total of prices of commodities and the varying rapidity of circulation, it follows that the volume of the circulating medium must be capable of contraction and expansion; in short, that according to the requirements of circulation, gold must now enter, now leave the sphere of circulation in its capacity of a medium of circulation. How the circulation process itself realizes these conditions, we shall see later on.
In its capacity of a medium of circulation, gold acquires a shape of its own, it becomescoin. In order to prevent any technical difficulties in the way of its circulation, it is coined according to the standard of the money of account. Gold pieces whose imprints and legends show that they contain certain weights of goldcorresponding to the reckoning names of money, £, s., etc., are coins. The establishment of a mint-price, as well as the technical work of coining, are the business of the state. Both as money of account and as coin, money acquires alocal and political character; it speaks different languages and wears different national uniforms. The sphere in which money circulates as coin, is distinguished as aninternalsphere of circulation which is separated from theuniversalsphere of circulation in the commodity world by national boundaries.
Yet, the only difference between gold bullion and gold coin is that between coin denomination and weight denomination. What seems to be a difference in name in the latter case appears as a difference in shape in the former. Gold coin can be thrown into the melting-pot and thus be converted again into goldsans phrase, just as, on the contrary, gold bars only have to be sent to the mint to receive the shape of coins. The conversion and reconversion from one form into another appears to be a purely technical matter.
For 100 pounds or 1200 ounces troy of 22 carat gold one can get £4,672-1/2 or gold sovereigns at the English mint; if these sovereigns be put on one side of the weighing scale and one hundred pounds of gold bullion on the other, the two will balance each other, which proves that the sovereign is nothing but a piece of gold of certain weight bearing this name in English coinage and having a shape and stamp of its own. The 4,672-1/2 sovereigns are put into circulation at different points, and once in its grasp they make a certain number of moves per day, some sovereigns more, others less. If theaverage number of moves per day of each ounce be ten, the 1200 ounces of gold would realize 12,000 ounces or 46,725 sovereigns as the total price of commodities. You may turn and toss an ounce of gold in any way you like, and it will never weigh ten ounces. But here in the process of circulation one ounce practically does weigh ten ounces. The work performed by a coin in the sphere of circulation is equivalent to the quantity of gold it contains multiplied by the number of its moves. Besides the actual importance which a coin possesses by virtue of its being an individual piece of gold of a definite weight, it acquires an ideal significance due to its function. But whether the sovereign circulates once or ten times, in each particular purchase or sale it acts only as one sovereign. It is like a general who by timely appearance at ten different points on the battle field does the work of ten generals, but still remains the same identical general at each point. The idealization of the means of circulation which is due to the supplanting of quantity by rapidity in money circulation, affects only the function of the coin within the sphere of circulation, but not the nature of the individual coin.
The circulation of money is a movement through the outside world, and the sovereign, though itnon olet, keeps rather mixed company. In the course of its friction against all kinds of hands, pouches, pockets, purses, money-belts, bags, chests and strong-boxes, the coin rubs off, loses one gold atom here and another one there and thus, as it wears off in its wanderings over the world, it loses more and more of its intrinsic substance. By being usedit gets used up. Let us take up a sovereign at the moment when its natural, inborn character has been slightly affected. A baker, says Dodd,76who receives from the bank to-day a brand new sovereign and pays it to-morrow to the miller, does not pay the same veritable sovereign; the latter has become lighter than it was at the time he received it. It is clear, says an anonymous writer,77that in the very nature of things, coins must depreciate one by one as a result of ordinary and unavoidable friction. It is a physical impossibility to entirely exclude light coins from circulation at any time, even for one day. Jacob estimates that of the 380 million pounds sterling which were in existence in Europe in 1809, nineteen million pounds sterling entirely disappeared by 1829, i. e., within a period of twenty years.78Thus, while a commodity at its first step into the sphere of circulation, falls out of it, a coin, after a couple of steps within that sphere represents moremetal than it actually contains. The longer a coin remains in circulation, the rapidity of circulation remaining the same, or the greater its rapidity of circulation within the same period of time, the greater the discrepancy between its form as coin and its actual gold or silver substance. What remains ismagni nominis umbra. The body of the coin becomes but a shadow. If at first it became heavier through the process of circulation, it now becomes lighter on account of it, but continues to represent the original quantity of gold in each single purchase or sale. The sovereign, as a fictitious sovereign, as fictitious gold, continues to perform the function of a legitimate coin. While other beings lose their idealism in contact with the outer world, the coin is idealized by practice, being gradually transformed into a mere phantom of its golden or silver body. This second idealization of metal money springing from the very process of circulation, or from the discrepancy between its nominal weight and its real weight is exploited in all kinds of coin counterfeiting practiced partly by governments, partly by private adventurers. The entire history of coinage from the beginning of the middle ages until late in the eighteenth century is nothing but a history of these two-fold and antagonistic adulterations, and Custodi’s voluminous collection of writings of Italian economists turns mostly about this point.
But the fictitious importance of gold due to its function, comes in conflict with its real substance. One gold coin has lost more, another, less of its metal substance in the course of circulation, and one of them is, as a matter of fact, worth more now than the other. Butsince in the discharge of their function of coins they are taken at the same value, the sovereign weighing a quarter of an ounce passing for no more than the sovereign which only stands for a quarter of an ounce, the full-weight sovereigns are subjected in the hands of unscrupulous owners to surgical operations which produce artificially what the circulation process has caused in a natural way to their more light-weighted brothers. They are clipped and reduced and the superfluous gold fat lands in the melting pot. If 4,672-1/2 gold sovereigns when put on one side of the weighing scale weigh on an average only 800 ounces instead of 1200, they will buy when brought to the gold market only 800 ounces of gold; that is, the market price of gold would rise above its mint price. Every coin, even if of full weight would pass in its mint form for less than in bullion form. The full weight sovereigns would be reconverted into bullion, a form in which a greater quantity of gold is always worth more than a smaller quantity. As soon as this decline of metallic weight would affect a sufficiently large number of sovereigns to bring about a permanent rise of the market price of gold above its mint price, the reckoning names of the coins, though remaining the same, would begin to denote a smaller quantity of gold. That is to say, the standard of money would change and gold would be coined in the future according to this new standard. By virtue of its idealization as a medium of circulation, gold would react upon and change the legally determined ratios under which it acted as the standard of price. The same revolution would be repeated after a certain length of time and thus goldwould be subject to constant change both as a standard of price and as a medium of circulation, a change under one of these forms leading to a change under the other and vice versa. This explains the phenomenon mentioned above, namely that in the history of all modern nations the same money-name stands for a constantly diminishing quantity of metal. The contradiction between gold as coin and gold as standard of price becomes also one between gold as coin and gold as the universal equivalent; in the latter capacity it circulates not only within the limits of national boundaries, but in the world market. As a measure of value gold was always of full weight, because it served only as ideal gold. In its capacity of equivalent in the isolated transaction C—M it passes at once from a state of motion to a state of rest; but in its capacity of coin its natural substance comes in constant conflict with its function. The transformation of the gold sovereign into fictitious gold can not be wholly avoided, but legislation seeks to prevent its unlimited circulation as coin by prescribing its withdrawal from circulation as soon as its shortage of metallic substance reaches a certain degree. According to the English law, e. g., a sovereign which lacks more than 0.747 grains of its weight ceases to be legal tender. The Bank of England which weighed forty-eight million gold sovereigns in the short period between 1844 and 1848, possesses in Mr. Cotton’s gold weighing scale a machine which not only detects a difference of 1-100 part of a grain between two sovereigns, but like a sensible being, immediately throws out the light-weight coin on a boardwhere it lands under another machine which cuts it up with oriental cruelty.
That being the case, gold coins could not circulate at all were not their circulation confined to definite spheres in which they do not wear off so rapidly. In so far as a gold coin weighing only one-fifth of an ounce passes in circulation for a quarter of an ounce of gold, it is practically merely a sign or a symbol for one-twentieth of an ounce of gold, and in that way all gold coins are transformed by the very process of circulation into more or less of a mere sign or symbol of their substance. But no thing can be its own symbol. Painted grapes are no symbol of real grapes, they are imaginary grapes. Still less can a light-weight sovereign be a symbol of a full-weighted one, just as a lean horse can not serve as a symbol of a fat one. Since gold thus becomes a symbol of its own self, but at the same time can not serve in that capacity, it receives a symbolical, silver or copper substitute in those spheres of circulation in which it is most subject to wear and tear, namely where purchases and sales are constantly taking place on the smallest scale. In these spheres, even if not the same identical coins, still a certain part of the entire supply of gold money would constantly circulate as coin. To that extent gold is substituted by silver or copper tokens. Thus, while only a specific commodity can perform in a given country the function of a measure of value and therefore of money, different commodities can serve as coin side by side with gold. These subsidiary mediums of circulation, such as silver or copper coins, represent definite fractions of a gold coin within the sphere of circulation. Their own silver or copper weight is, therefore, not determined by the proportions of the respective values of silver and copper to that of gold, but is arbitrarily fixed by law. They may be issued only in such quantities in which the diminutive fractions of gold coin which they represent would constantly circulate either for purposes of change for gold coins of higher denominations, or for realizing equally small prices of commodities. In retail trade silver and copper tokens belong to distinct spheres of circulation. In the nature of things, the rapidity of their circulation is in inverse ratio to the price which they realize in each separate purchase or sale, or to the size of the fraction of gold coin which they represent. If we consider how immense the volume of the daily retail trade in a country like England is, we will understand from the comparatively insignificant proportions of its combined volume how rapid and steady the circulation of the subsidiary coin must be. From a parliamentary report of recent date we see, e. g., that in 1857 the English mint coined £4,859,000 worth of gold, £733,000 of silver nominal value which contained metal actually worth £363,000. The total amount of gold coined in the ten years ending December 31, 1857, was £55,239,000, and of silver only £2,434,000. The supply of copper coin in 1857 amounted only to £6,720 nominal value containing £3,492 worth of copper; of this £3,136 was in pennies, £2,464 in half-pennies, and £1,120 in farthings. The total value of copper coined in the ten years was £141,477 nominal, the metallic value being £73,503. Just as gold coin is prevented from permanently retaining its function of coin by thelegal provision of the loss of weight which demonetizes it, so are the silver and copper tokens prevented from passing from their spheres of circulation into that of gold coin and acquiring the character of money by the provision of the maximum amount for which they are legal tender. In England e. g. copper is legal tender only to the amount of six pence and silver up to forty shillings. If silver and copper tokens were to be issued in greater quantities than the requirements of their spheres of circulation call for, prices of commodities would not rise as a result, but the accumulation of these tokens in the hands of retail dealers would reach such an extent that they would be finally compelled to sell them as metal. Thus in 1798 English copper coins, issued by private individuals, accumulated in the hands of small traders to the amount of £20,350 which they tried in vain to put again in circulation, being finally compelled to throw them as metal on the copper market.79
The silver and copper tokens which represent gold coin in certain spheres of circulation in the interior of the country, contain a definite quantity of silver and copper prescribed by law, but after they get into circulation, they wear off like gold coins and become even more rapidly mere phantoms, according to the rapidity and steadiness of their circulation. To draw again a line of demonetization beyond which silver and copper tokens would lose their character of coins, they would have to bereplaced in turn within certain spheres of their own circulation by some other symbolic money, say iron and lead, and such representation of one kind of symbolic money by another kind would form an endless process. In all countries with a well developed circulation the very requirements of money circulation make it necessary that the character of silver and copper tokens as money be made independent of any loss of weight in those coins. Thus, as it was in the nature of things, it appears that they serve as symbols of gold coin not because they are symbols made of silver or copper, not because they have certain value, but only in so far as they have no value.
Relatively worthless things, such aspaper, can consequently perform the function of symbols of gold money. That subsidiary currency consists of metal tokens, such as silver, copper, etc., is mainly due to the fact that in most countries the less valuable metals such as silver in England, copper in ancient Rome, Sweden, Scotland, etc., had circulated as money before they were degraded by the process of circulation to the rank of small change and replaced by a more precious metal. Besides, it is natural that the money symbol which grows directly out of metallic circulation, should itself be a metal. Just as that portion of gold which would always have to circulate as small change, is replaced by metal tokens; so can the other portion of gold which is constantly absorbed as coin by circulation in the interior of the country and, therefore, must continually circulate, be replaced with worthless tokens. The level below which the mass of circulating coin never sinks is determined in eachcountry by experience. Thus, the originally imperceptible difference between the nominal weight and the metallic weight of a metal coin can grow apace until it reaches the point of absolute separation. The mint name of money parts company with its substance and exists outside of it in worthless slips of paper. Just as the exchange value of commodities is crystallized by their process of exchange into gold money, so is gold money sublimated in its currency into its own symbol first in the form of worn coin, then in the form of subsidiary metal currency, and finally in the form of a worthless token, paper, meresign of value.
Gold coin has produced its substitutes, first metallic and then paper, only because in spite of its loss of metallic weight it continued to perform the function of coin. It did not circulate because of its wear and tear; on the contrary, it wore out to a symbol because it continued to circulate. Only in so far as gold money becomes simply a token of its own value in the process of circulation, can mere tokens of value take its place.
In so far as the movement C—M—C represents a dynamic unity of two processes C—M and M—C which pass directly one into the other, or in so far as a commodity passes through the complete process of its metamorphosis, it express its exchange value in price and in money only to discard that form at once and to become again a commodity or, rather, a use-value. That is to say, it developsonly an apparent assertion of the independenceof its exchange value. On the other hand, we have seen that gold, in so far as it performs the function of coin or in so far as itcontinually circulates, actually forms only a connecting link between the metamorphoses of commodities and constitutesbut their transitory money form; furthermore, that it realizes the price of one set of commodities only in order to realize that of another, but in no case does it constitute a stable form of exchange value or appear itself as a commodity in a state of rest. The reality which the exchange value of commodities acquires in the process and which is represented by gold in its circulation, is the reality of an electric spark. Although real gold, it plays the part of fictitious gold, and can, therefore, be replaced in this function by a token of itself.
The token of value, say paper, which plays the part of coin, is the token of a quantity of gold expressed in its currency name, i. e., it is a gold token. Just as a certain quantity of gold does not in itself express a value ratio, so is that true of the token which takes its place. In so far as a certain quantity of gold, as embodied labor-time, has a value of a certain magnitude, the gold token represents value. But the magnitude of the value which it represents depends all the time on the value of the quantity of gold for which it stands. As regards commodities the token of value expressesthe reality of their price, it issignum pretiiand sign of their value only because their value is expressed in their price. In the process C—M—C, in so far as it represents the dynamic unity or direct alternation of the two metamorphoses—and that is the aspect it assumes in the sphere of circulation in which the token of value discharges its function—the exchange value of commodities acquires inprice only an ideal expression and in money only an imaginary symbolic existence. Exchange value thus acquiresonlyan imaginary though material expression, but it has no real existence except in the commodities themselves, in so far as a certain quantity of labor-time is embodied in them. Itappears, therefore, that the token of value representsdirectlythe value of commodities, by figuring not as a token of gold but as a token of the value which exists in the commodity alone and is only expressed in price. But it is a false appearance. The token of value is directly onlya token of price, i. e., atoken of gold, and only indirectly a token of value of a commodity. Unlike Peter Shlemihl, gold has not sold its shadow, but buys with its shadow. The token of value operates only in so far as it represents the price of one commodity as against that of another within the sphere of circulation, or in so far as itrepresents goldto every owner of commodities. A certain comparatively worthless object such as a piece of leather, a slip of paper, etc., becomes by force of custom a token of money material, but maintains its existence in that capacity only so long as its character as a symbol of money is guaranteed by the general acquiescence of the owners of commodities, i. e., so long as it enjoys a legally established conventional existence and compulsory circulation. Paper money issued by the state and circulating as legal tender is the perfected form of the token of value, and the only form of paper money, which has its immediate origin in metallic circulation or even in the simple circulation of commodities.Credit moneybelongs to a higher sphere of the social process of production and is governed by entirely different laws. Symbolic paper money does not in fact, differ in the least from subsidiary metal coin, except that it reaches wider spheres of circulation. We have seen that the mere technical development of the standard of price or of the mint price and later the shaping of gold bullion into coin have called forth the interference of the state; this circumstance brought about a visible separation of national circulation from the world circulation of commodities: this separation is completed by the evolution of coin into a token of value. As a mere medium of circulation money can assume an independent existence only within the sphere of national circulation.80
Our presentation has shown that the coin form of gold as a token of value differentiated from the gold substance itself, has its direct origin in the process of circulation and not in any agreement or state interference. Russia offers a striking example of the natural origin of the token of value. At the time when hides and furs played there the part of money, the conflict between the perishable and bulky nature of the material and its function as a medium of circulation resulted in the custom of replacing it by small pieces of stamped leather which thus became a kind of draft payable in hides and furs. Later on they became under the name of copecs mere tokens for fractions of the silver rouble and remained in use in some parts until 1700, when Peter the Great ordered their withdrawal in exchange for small copper coinsissued by the state. Ancient writers who could observe the phenomena of exclusively metallic circulation, already took the view of coin as a symbol or token of value. That is true both ofPlato81andAristotle.82In countries where credit is not developed,as e. g. in China, legal tender paper money is found at an early date83. Early advocates of paper money expressly point out the fact that metallic coin is transformed into a token of value in the very processof circulation. So Benjamin Franklin84and Bishop Berkeley.85
How many reams of paper cut up into bills can circulate as money? Put in that way, the question would be absurd. The worthless tokens are signs of value only in so far as they represent gold within the sphere of circulation and they represent it only to the extent to which it would itself be absorbed as coin by the process of circulation; this quantity is determined by its own value, the exchange values of the commodities and the rapidity of their metamorphoses being given. Bills of a denomination of £5 could circulate in a quantity five times less than those of £1 denomination, and if all payments were made in shilling bills, then twenty times as many shilling bills would have to be in circulation as are one pound bills. If the gold currency were represented by bills ofdifferent denominations, e. g. five pound, one pound and ten shilling bills, then the quantity of these different tokens of value would be determined not only by the quantity of gold necessary for circulation as a whole, but also by that required in the sphere of circulation of each kind of bills. If fourteen million pounds sterling (this is the provision of the English Bank Law, not for the entire currency but only for credit money) were the level below which the circulation of a country never sank, then fourteen million paper bills, each a token of value of one pound, could circulate. If the value of gold fell or rose because the labor-time necessary for its production had fallen or risen, then, the exchange value of the same volume of commodities remaining the same, the number of one pound bills in circulation would rise or fall in inverse ratio to the change in the value of gold. If gold were replaced by silver as a measure of value, the ratio of the respective values of silver and gold being 1:15, and if each bill were to represent now the same quantity of silver as it represented gold before, then there would be 210 million one pound bills in circulation instead of the previous fourteen million. The number of paper bills is thus determined by the quantity of gold money which they represent in circulation, and since they are tokens of value only in so far as they represent it, their value is simply determined by theirquantity. Thus, while the quantity of gold in circulation is determined by the prices of commodities, the value of the paper bills in circulation, on the contrary, depends exclusively on their own quantity.