The change of form, C — M — C, by which the circulation of the material products of labour is brought about, requires that a given value in the shape of a commodity shall begin the pro- cess, and shall, also in the shape of a commodity, end it. The movement of the commodity is therefore a circuit. On the other hand, the form of this movement precludes a circuit from 1 See my observations on James Mill in ''Zur Kritik, &c.," p. 74-76. With regard to this subject, we may notice two methods characteristic of apologetic economy. The first is the identification of the circulation of commodities with the direct barter of products, by simple abstraction from their points of difference; the second is, the attempt to explain away the contradictions of capitalist production, by reducing the relations between the persons engaged in that mode of production, to the simple rela- tions arising out of the circulation of commodities. The production and circulation of commodities are, however, phenomena that occur to a greater or less extent in modes of production the most diverse. If we are acquainted with nothing but the abstract categories of circulation, which are common to all these modes of production, we cannot possibly know anything of the specific points of difference of those modes, nor pronounce any judgment upon them. In no science is such a big fuss made with commonplace truisms as in political economy. For instance, J. B. Say sets himself up as a judge of crises, because, forsooth, he knows that a commodity is a product.
2 Translator's note. — This word is here used in its original signification of the course or track pursued by money as it changes from hand to hand, a course which essentially differs from circulation.
Money, or the Circulation of Commodities. 89 being made by the money. The result is not the return of the money, but its continued removal further and further away from its starting-point. So long as the seller sticks fast to his money, which is the transformed shape of his commodity, that commodity is still in the first phase of its metamorphosis, and has completed only half its course. But so soon as he com- pletes the process, so soon as he supplements his sale by a pur- chase, the money again leaves the hands of its possessor. It is true that if the weaver, after buying the Bible, sell more linen, money comes back into his hands. But this return is not owing to the circulation of the first 20 yards of linen; that cir- culation resulted in the money getting into the hands of the .seller of the Bible. The return of money into the hands of the weaver is brought about only by the renewal or repetition of the process of circulation with a fresh commodity, which renewed process ends with the same result as its predecessor did. Hence the movement directly imparted to money by the circulation of commodities takes the form of a constant motion away from its starting-point, of a course from the hands of one commodity owner into those of another. This course consti- tutes its currency (cours de la monnaie).
The currency of money is the constant and monotonous re- petition of the same process. The commodity is alwaj^s in the hands of the seller; the money, as a means of purchase, always in the hands of the buyer. And money serves as a means of purchase by realising the price of the commodity. This reali- sation transfers the commodity from the seller to the buyer, and removes the money from the hands of the buyer into those of the seller, where it again goes through the same process with another commodity. That this one-sided character of the money's motion arises out of the two-sided character of the commodity's motion, is a circumstance that is veiled over. The very nature of the circulation of commodities begets the op- posite appearance. The first metamorphosis of a commodity is visibly, not only the money's movement, but also that of the commodity itself; in the second metamorphosis, on the con- trary, the movement appears to us as the movement of the money alone. In the first phase of its circulation the com- 90 Capitalist Production.
modity changes place with the money. Thereupon the com- modity, under its aspect of a useful object, falls out of circulation into consumption.^ In its stead we have its value- shape — the money. It then goes through the second phase of its circulation, not under its own natural shape, but under the shape of money. The continuity of the movement is therefore kept up by the money alone, and the same movement that as regards the commodity consists of two processes of an anti- thetical character, is, when considered as the movement of the money, always one and the same process, a continued change of places with ever fresh commodities. Hence the result brought about by the circulation of commodities, namely, the replacing of one commodity by another, takes the appear- ance of having been effected not by means of the change of form of the commodities, but rather hy the money acting as a medium of circulation, by an action that circulates commodi- ties, to all appearance motionless in themselves, and transfers them from hands in which they are non-use-values, to hands in which they are use-values; and that in a direction constantly opposed to the direction of the money. The latter is con- tinually withdrawing commodities from circulation and stepping into their places, and in this way continually moving further and further from its starting-point. Hence, although the movement of the money is merely the expression of the circulation of commodities, yet the contrary appears to be the actual fact, and the circulation of commodities seems to be the result of the movement of the money.^ Again, money functions as a means of circulation, only because in it the values of commodities have independent realit}^ Hence its movement, as the medium of circulation, is, in fact, merely the movement of commodities while changing their forms. This fact must therefore make itself plainly visible in the currency of money. The twofold change of form in a 1 Even when the commodity is sold over and over again, a phenomenon that at I>resent has no existence for us, it falls, when definitely sold for the last time, out of the sphere of circulation into that of consumption, where it serves either as means of subsistence or means of production.
2 " II (I'argent) n'a d'autre mouvement que celui qui lui est imprimS par les pro- ductions." (Le Trosne I.e. p. 885.)
Money ^ or the Circulation of Commodities. 9 1 commodity is reflected in the twice repeated change of place of the same piece of money during the complete metamorphosis of a commodity, and in its constantly repeated change of place, as metamorphosis follows metamorphosis, and each becomes interlaced with the others.
The linen, for instance, first of all exchanges its commodity- form for its money-form. The last term of its first metamor- phosis (C — M), or the money-form, is the first term of its final metamorphosis (M — C), of its re-conversion into a useful commo- dity, the Bible. But each of these changes of form is accom- plished by an exchange between commodity and money, by their reciprocal displacement. The same pieces of coin, in the first act, changed places with the linen, in the second, with the Bible. They are displaced twice. The first metamorphosis puts them into the weaver's pocket, the second draws them out of it. The two inverse changes undergone by the same com- modity are reflected in the displacement, twice repeated, but in opposite directions, of the same pieces of coin.
If, on the contrary, only one phase of the metamorphosis is gone through, if there are only sales or only purchases, then a given piece of money changes its place only once. Its second change corresponds to and expresses the second metamorphosis of the commodity, its re-conversion from money into another commodity intended for use. It is a matter of course, that all this is applicable to the simple circulation of commodities alone, the only form that we are now considering.
Every commodity, when it first steps into circulation, and undergoes its first change of form, does so only to fall out of circulation again and to be replaced by other commodities. Money, on the contrary, as the medium of circulation, keeps continually within the sphere of circulation, and moves about in it. The question therefore arises, how much money this sphere constantly absorbs?
In a given country there take place every day at the same time, but in diflferent localities, numerous one-sided metamor- phoses of commodities, or, in other words, numerous sales and numerous purchases. The commodities are equated before- hand in imagination, by their prices, to definite quantities of 92 Capitalist Production.
money. And since, in the form of circulation now under con- sideration, money and commodities always come bodily face to face, one at the positive pole of purchase, the other at the negative pole of sale, it is clear that the amount of the means of circulation required, is determined beforehand by the sum of the prices of all these commodities. As a matter of fact, the money in reality represents the quantity or sum of gold ideally expressed beforehand by the sum of the prices of the com- modities. The equality of these two sums is therefore self- evident. We know, however, that, the values of commodities remaining constant, their prices vary with the value of gold (the material of money), rising in proportion as it falls, and falling in proportion as it rises. Now if, in consequence of such a rise or fall in the value of gold, the sum of the prices of commodities fall or rise, the quantity of money in currency must fall or rise to the same extent. The change in the quantity of the circulating medium is, in this case, it is true, caused by the money itself, yet not in virtue of its function as a medium of circulation, but of its function as a measure of value. First, the price of the commodities varies inversely as the value of the money, and then the quantity of the medium of circulation varies directly as the price of the commodities. Exactly the same thing would happen if, for instance, instead of the value of gold falling, gold were replaced by silver as the measure of value, or if, instead of the value of silver rising, gold were to thrust silver out from being the measure of value. In the one case, more silver would be current than gold was before; in the other case, less gold would be current than silver was before. In each case the value of the material of money, i.e., the value of the com- modity that serves as the measure of value, would have under- gone a change, and therefore so, too, would the prices of com- modities which express their values in money, and so, too, would the quantity of money current whose function it is to realise those prices. We have already seen, that the sphere of circulation has an opening through which gold (or the material of money generally) enters into it as a commodity with a given value. Hence, when money enters on its functions as a Money ^ or the Circulation of Commodities. 93 measure of value, when it expresses prices, its value is already determined. If now its value fall, this fact is first evidenced by a change in the prices of those commodities that are directly bartered for the precious metals at the sources of their production. The greater part of all other commodities, especially in the imperfectly developed stages of civil society, will continue for a long time to be estimated by the former antiquated and illusory value of the measure of value. Nevertheless, one commodity infects another through their common value-relation, so that their prices, expressed in gold or in silver, gradually settle down into the proportions detei- mined by their comparative values, until finally the values of all commodities are estimated in terms of the new value of the metal that constitutes money. This process is accompanied by the continued increase in the quantity of the precious metals, an increase caused by their streaming in to replace the articles directly bartered for them at their sources of production. In proportion therefore as commodities in general acquire their true prices, in proportion as their values become estimated according to the fallen value of the precious metal, in the same proportion the quantity of that metal necessary for realising those new prices is provided beforehand. A one-sided observation of the results that followed upon the discovery of fresh supplies of gold and silver, led some economists in the 17th, and particularly in the 18th century, to the false con- clusion, that the prices of commodities had gone up in conse- quence of the increased quantity of gold and silver serving g,s means of circulation. Henceforth we shall consider the value of gold to be given, as, in fact, it is momentarily whenever we estimate the price of a commodity.
On this supposition then, the quantity of the medium of circulation is determined by the sum of the prices that have to be realised. If now we further suppose the price of each com- modity to be given, the sum of the prices clearly depends on the mass of commodities in circulation. It requires but little racking of brains to comprehend that if one quarter of wheat costs £2, 100 quarters will cost £200, 200 quarters £400, and so on, that consequently the quantity of money that changes 94 Capitalist Production.
place with the wheat, when sold, must increase with the quan- tity of that wheat.
If the mass of commodities remain constant, the quantity of circulating money varies with the fluctuations in the prices of those commodities. It increases and diminishes because the sum of the prices increases or diminishes in consequence of the change of price. To produce this effect, it is by no means requisite that the prices of all commodities should rise or fall simultaneously. A rise or a fall in the prices of a number of leading articles, is sufficient in the one case to increase, in the other to diminish, the sum of the prices of all commodities, and, therefore, to put more or less money in circulation. Whether the change in the price correspond to an actual change of value in the commodities, or whether it be the result of mere fluctuations in market prices, the effect on the quan- tity of the medium of circulation remains the same.
Suppose the following articles to be sold or partially meta- morphosed simultaneously in difierent localities: say, one <|uarter of wheat, 20 yards of linen, one Bible, and 4 gallons of brandy. If the price of each article be £2, and the sum of the prices to be realised be consequently £8, it follows that £8 in money must go into circulation. If, on the other hand, these same articles are links in the following chain of metamorphoses: 1 quarter of wheat — £2 — 20 yards of linen — £2 — 1 Bible — £2 — 4 gallons of brandy — £2, a chain that is already well- known to us, in that case the £2 cause the difierent com- modities to circulate one after the other, and after realizing their prices successively, and therefore the sum of those prices, £8, they come to rest at last in the pocket of the distiller. The £2 thus make four moves. This repeated change of place of the same pieces of money corresponds to the double change in form of the commodities, to their motion in opposite directions through two stages of circulation, and to the interlacing of the metamorphoses of diflferent commodities.^ These antithetic and complementary phases, of which the process of metamorphosis ^ "Ce sont les productions qui le (I'argent) mettent en mouvement et le font circular...La celerite de son mouvement (sc. de I'argent) supplee d, sa quantite Lorsqu'il en est besoin, il ne fait que glisser d'une main dans I'autre sans s'arreter un instant." (Le Trosne 1. c. pp. 915, 916.)
Money, or the Circulation of Com7nodities. 95 consists, are gone through, not simultaneously, but successively. Time is therefore required for the completion of the series. Hence the velocity of the currency of money is measured by the number of moves made by a given piece of money in a given time. Suppose the circulation of the 4 articles takes a day. The sum of the prices to be realised in the day is £8, the number of moves of the two pieces of money is four, and the quantity of money circulating is £2. Hence, for a given interval of time during the process of circulation, we have the following relation: the quantity of money functioning as the circulating medium is equal to the sum of the prices of the commodities divided by the number of moves made by coins of the same denomination. This law holds generally.
The total circulation of commodities in a given country during a given period is made up on the one hand of numerous isolated and simultaneous partial metamorphoses, sales which are at the same time purchases, in which each coin changes its place only once, or makes only one move; on the other hand, of numerous distinct series of metamorphoses partly running side by side, and partly coalescing with each other, in each of which series each coin makes a number of moves, the number being greater or less according to circumstances. The total number of moves made by all the circulating coins of one denomination being given, we can arrive at the average num- ber of moves made by a single coin of that denomination, or at the average velocity of the currency of money. The quantity of money thrown into the circulation at the beginning of each day is of course determined by the sum of the prices of all the commodities circulating simultaneously side by side. But once in circulation, coins are, so to say, made responsible for one another. If the one increase its velocity, the other either retards its own, or altogether falls out of circulation; for the circulation can absorb only such a quantity of gold as when multiplied by the mean number of moves made by one single coin or element, is equal to the sum of the prices to be rea- lised. Hence if the number of moves made by the separate pieces increase, the total number of those pieces in circulation diminishes. If the number of the moves diminish, the total number of pieces increases. Since the quantity of money cap- able of being absorbed by the circulation is given for a given mean velocity of currency, all that is necessary in order to abstract a given number of sovereigns from the circulation is to throw the same number of one-pound notes into it, a trick well known to all bankers.
Just as the currency of money, generally considered, is but a reflex of the circulation of commodities, or of the antithetical metamorphoses they undergo, so, too, the velocity of that cur- rency reflects the rapidity with which commodities change their forms, the continued interlacing of one series of meta- morphoses with another, the hurried social interchange of matter, the rapid disappearance of commodities from the sphere of circulation, and the equally rapid substitution of fresh ones in their places. Hence, in the velocity of the cur- rency we have the fluent unity of the antithetical and com- plementary phases, the unity of the conversion of the useful aspect of commodities into their value-aspect, and their re-con- version from the latter aspect to the former, or the unity of the two processes of sale and purchase. On the other hand, the retardation of the currency reflects the separation of these two processes into isolated antithetical phases, reflects the stagna- tion in the change of form, and therefore, in the social inter- change of matter. The circulation itself, of course, gives no clue to the origin of this stagnation; it merely puts in evidence the phenomenon itself. The general public, who, simultane- ously, with the retardation of the currency, see money appear and disappear less frequently at the periphery of cii^culation, naturally attribute this retardation to a quantitative deficiency in the circulating medium.^ 1 Money being...the common measure of buying and selling, every body who hath anything to sell, and cannot procure chapmen for it, is presently apt to think, that want of money in the kingdom, or country, is the cause why his goods do not go off; and so, want of money is the common cry; which is a great mistake...What do these peoi)le want, who cry out for money?...The farmer complains...he thinks that were more money in the country, he should have a price for his goods. Then it seems money is not his want, but a price for his corn and cattel, which he would sell, but cannot...Why cannot he get a price?...(!) Either there is too much corn and cattel in the country, so that most who come to market have need of selling, as he hath, and few of buying; or (2) There wants the usual vent Money, or the Circulation of Commodities. 97 The totaJ quantity of money functioning during a given period as the circulating medium, is determined, on the one hand, by the sum of the prices of the circulating commodities, and on the other hand, by the rapidity with which the anti- thetical phases of the metamorphoses follow one another. On this rapidity depends what proportion of the sum of the prices can, on the average, be realised by each single coin. But the sum of the prices of the circulating commodities depends on the quantity, as well as on the prices, of the commodities. These three factors, however, state of prices, quantity of circu- lating commodities, and velocity of money-currency, are all variable. Hence, the sum of the prices to be realised, and consequently the quantity of the circulating medium depend- ing on that sum, will vary with the numerous variations of these three factors in combination. Of these variations we shall consider those alone that have been the most important in the history of prices.
While prices remain constant, the quantity of the circulat- ing medium may increase owing to the number of circulating commodities increasing, or to the velocity of currency decreas- ing, or to a combination of the two. On the other hand the quantity of the circulating medium may decrease with a decreasing number of commodities, or with an increasing rapidity of their circulation.
With a general rise in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities in circulation decrease proportionally abroad by transportation...; or (3) The consumption fails, as when men, by reason of poverty, do not spend so much in their houses as formerly they did; wherefore it is not the increase of specific money, which would at all advance the farmer's goods, but the removal of any of these three causes, which do truly keep down the market...The merchant and shoiDkeeper want money in the same manner, that is, they want a vent for the goods they deal in, by reason that the markets fail "...[A nation] "never thrives better, than when riches are tost from hand to hand." (Sir Dudley North: ** Discourses upon Trade," Lond. 1691, pp. 11-15, passim.) Herren- schwand's fanciful notions amount merely to this, that the antagonism, which has- its origin in the nature of commodities, and is reproduced in their circulation, can be removed by increasing the circulating medium. But if, on the one hand, it is a popu- lar delusion to ascribe stagnation in production and circulation to insuflSciency of the circulating medium, it by no means follows, on the other hand, that an actual paucity of the medium in consequence, e.g.^ of bungling legislative interference with. the regulation of currency, may not give rise to such stagnation.
G 98 Capitalist Prcduction.
to the increase in their prices, or provided the velocity of currency increase at the same rate as prices rise, the number of commodities in circulation remaining constant. The quantity of the circulating medium may decrease, owing to the number of commodities decreasing more rapidly; or to the velocity of currency increasing more rapidly, than prices rise.
With a general fall in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities increase proportionally to their fall in price, or provided the velocity of currency decrease in the same proportion. The quantity of the circulating medium will increase, provided the number of commodities increase quicker, or the rapidity of circulation decrease quicker, than the prices fall.