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In so far as the payments mutually balance as positive and negative quantities, no money actually appears on the scene. It figures here only in its capacity of a measure of value: first, in the prices of commodities, and second, in the magnitude of mutual obligations. Aside from its ideal form, exchange value does not exist here independently, not even in the form of a token of value; that is to say, money plays here only the part of ideal money of account. The function of money as a means of payment thus implies a contradiction. On the one hand, in so far as payments balance, it serves only ideally as a measure of value. On the other hand, in so far as a payment has actually to be made, money enters circulation not as a transient circulating medium, but as the final resting form of the universal equivalent, as the absolute commodity, in a word, as money. Therefore, whenever such a thing as a chain of payments and an artificial system of settling them, is developed, money suddenly changes its visionary nebulous shape as a measure of value, turning into hard cash or means of payment, as soon as some shock causes a violent interruption of the flow of payments and disturbs the mechanism of their settlement. Thus, under conditions of fully developed capitalist production, where the commodity owner has long become a capitalist, knows his Adam Smith, and condescendingly laughs at the superstition that gold and silver alone constitute money or that money differs at all from other commodities as the absolute commodity, moneyPg 198 suddenly reappears not as a medium of circulation, but as the only adequate form of exchange value, as the only form of wealth, exactly as it is looked upon by the hoarder. In its capacity of such an exclusive form of wealth, it reveals itself, unlike under the monetary system, not in mere imaginary, but in actual depreciation and worthlessness of all material wealth. That is what constitutes the particular phase of crises of the world market which is known as a money crisis. The summum bonum for which everybody is crying at such times as for the only form of wealth, is cash, hard cash; and by the side of it all other commodities just because they are use-values, appear useless like so many trifles and toys, or, as our Dr. Martin Luther says, as mere objects of ornament and gluttony. This sudden reversion from a system of credit to a system of hard cash heaps theoretical fright on top of the practical panic; and the dealers by whose agency circulation is affected shudder before the impenetrable mystery in which their own economical relations are involved.108
Payments, in their turn, require the formation of Pg 199reserve funds, the accumulation of money as a means of payment. The building up of reserve funds appears no longer as a practice carried on outside of the sphere of circulation, as in the case of hoarding; nor as a mere technical accumulation of coin, as in the case of coin reserves; on the contrary, money must now be gradually accumulated to be available on certain future dates when payments become due. While hoarding, in its abstract form as a means of enrichment, declines with the development of the capitalist system of production, that species of hoarding which is directly called for by the process of production, increases; or, to put it differently, a part of the treasure which is generally formed in the sphere of circulation of commodities, is absorbed as a reserve fund of means of payment. The more developed the capitalist system of production, the more these reserve funds are limited to the necessary minimum. Locke, in his work "On the Lowering of Interest"109 furnishes interesting data with reference to the size of these reserve funds in his time. They show what a considerable part of the total money in circulation the reservoirs for means of payment absorbed in England just at the time when banking began to develop.
The law as to quantity of money in circulation, as it has been formulated in the analysis of the simple circulation of money, receives an essential modification when the circulation of the means of payment is taken into account. The rapidity of the circulation of money whether as circulating medium or as means of Pg 200payment—being given, the total amount of money in circulation at a given time will be determined by the sum total of the prices of commodities to be realized, plus the total amount of payments falling due at the same time, minus the amount of payments balancing each other. The general law that the volume of money in circulation depends on the prices of commodities is not affected by this in the least, since the extent of the payments is itself determined by the prices stipulated in contracts. What is, however, strikingly demonstrated, is that even if the rapidity of circulation and the economy of payments be assumed to remain the same, the sum total of the prices of the commodities circulating in a given period of time, say one day, and the volume of money in circulation on the same day are by no means equal, because there is a large number of commodities in circulation whose prices have yet to be realized in money at a future date, and there is a quantity of money in circulation which constitutes the payment for commodities which have long gone out of circulation. The latter amount will depend on the sum of payments falling due on the same day although contracted for at entirely different periods.
We have seen that a change in the values of gold and silver does not affect their function as measures of value or money of account. But this change is of decisive importance for money as a hoard, since with the rise or fall of value of gold and silver, the total value of a gold or silver hoard will also rise or fall. Of still greater importance is the effect of this change on money as a means of payment. The payment takesPg 201 place after the sale of the commodity, or the money serves in two different capacities at two different periods; first, as a measure of value, then as a means of payment corresponding to the measurement. If, during this interval, the value of the precious metals or the labor-time necessary for their production undergoes a change, the same quantity of gold or silver will be worth more or less when it appears as a means of payment than what it was when it served as a measure of value, i. e., when the contract was concluded. The function of a particular commodity, like gold or silver, to serve as money or independent exchange value comes here in conflict with the nature of the particular commodity whose magnitude of value depends on changes in the cost of its production. The great social revolution which caused the fall in value of the precious metals in Europe, is as well known as the revolution of an opposite character which had been brought about at an early period in the history of the ancient Roman republic by the rise in value of copper in terms of which the debts of the plebeians had been contracted. Without attempting here to follow any further the fluctuations of value of the precious metals and their effect on the system of bourgeois political economy, it is at once apparent that a fall in the value of the precious metals favors the debtors at the expense of the creditors, while a rise in their value favors the creditors at the expense of the debtors.
Gold becomes money as distinguished from coin only after it is withdrawn from circulation in the shape ofPg 202 a hoard; it then enters circulation as a non-medium of circulation, and finally breaks through the barriers of home circulation to assume the part of a universal equivalent in the world of commodities. It becomes world money.
