Nasser Paydar
In order for the products of labour to be related to each other as commodities, their owners must establish a relationship with each other as individuals, both agree to this, and through a joint voluntary act they must possess each other’s commodities and recognize them as their own. This legal relationship, whose outward appearance takes the form of a contract, is a voluntary relationship with economic content, regardless of whether it is legal or not. The important point is that these people, as two human beings, have nothing to do with each other and no relationship with each other; they come to each other only because they are commodity owners and need this relationship. For each commodity owner, the use value of his own commodity is meaningless. If it were, otherwise, he would not bring it to market, but he would want the other party’s commodity for its use value.
To be more precise, all commodities have no use value for their owners and use value for non-owners. That is why they must be exchanged; they are placed as a countervalue in order to realize this value. Before a commodity can be used in the form of use value, it must realize its exchange value, but in order to be exchanged and realize its value, it must have use value and be usable by another. Every commodity owner wants to exchange his commodity for something whose use value satisfies some of his needs. From this perspective, exchange is an individual matter, while at the same time the commodity owner wants to realize the value of his commodity by exchanging it with any other commodity, regardless of whether this commodity has use value for the other party or not. Here exchange is not an individual matter but a social act. But a single flow cannot be both individual and social for all commodity owners at the same time. Let us examine the matter further. Each commodity owner, while seeing the commodities of others as equivalent to his own, considers his property to be equivalent to all commodities. All commodity owners think so, and in such a situation no commodity becomes a general equivalent for all commodities. Even more mysteriously, in this situation, objects do not encounter each other as commodities. Because exchange requires an equivalent as an index for determining the socially necessary labour crystallized in commodities. Therefore, reality is different from the fantasies and ideas of the owners of commodities. The difference between a commodity and its owner is that the commodity sees every other commodity simply as a form of manifestation of its value, and this is the instinctive duty of its owner. In this regard, the owners of commodities have acted before they have thought. They can only compare the products of their labour as values when they first compare them with another specific commodity that plays the role of a general equivalent. It is in the process of social action that commodities single out a particular commodity from among themselves, differentiate it, and create a universal equivalent to express their value. Money was born from this process. Money is the forced product of the exchange of commodities. It was in exchange that different products, on the basis of the necessary social labour concentrated in them, were confronted with each other as equals and became commodities. The historical development of exchange led to the development and defiance of the inherent contradiction between value and use value. Value became universal and required an external embodiment, a kind of embodiment or independent form of value by reference to which all commodities express their value. The process of the development of commodity production or the commodification of the product of labour is at the same time the process of the transformation of commodities into money.
Commodities are transferable; in order to be transferred, individuals must come together as owners or independent individuals, such a relationship did not exist between the members of a primitive communal community. Exchange began when communal life came to an end. Members of different communal communities came into contact with each other, exchanged the products of their labour as commodities, and this exchange of commodities between separate communal communities also transformed the internal relations of their members. The members of these fraternities or patriarchal families gradually began to exchange the products of their labour with each other. The exchange of commodities and their quantitative relationship with each other was at first a random affair. The inhabitants of a communal community developed a need for consumer goods produced by other communities, this need grew, became stable, and little by little individuals decided to produce some of the products for the purpose of exchange. It is from this moment that the boundary appears between production to meet the needs of human life and production with the prospect of exchange. Use value is distinguished from value.
In simple exchange, the product is a medium of exchange for its owner and an equivalent for the other party only if it is considered a use value. Here, what is exchanged is not a commodity, nor do they traded goods need a form of value independent of their use value. This need arises when diverse goods belonging to different people are brought together in the course of exchange. It is in these circumstances that the means of solving the problem also appears, the commodity of a third party becomes the standard of measurement and acquires the role of a general social equivalent. This role was not permanent, it was transferred from one commodity to another in accordance with the development of commodity production and different conditions, but the same process of development of commodity production eventually imposed the need for a stable equivalent, and it is from this process that money was born and came to power. The type of commodity that fulfilled this role was initially accidental, but in this accidental event two factors were influential. The monetary form of value belonged either to the most important imported goods from foreign societies or to a useful object such as livestock, which constituted an important element of domestic movable wealth.
The first case occurred more often among nomadic tribes because they were constantly in contact with alien societies. The attachment of the monetary form of value to land could only be proposed and realized in an advanced bourgeois society, this happened for the first time in the last third of the seventeenth century, and the attempt to expand and consolidate it on a “national” state scale came to fruition a century later, during the bourgeois revolution of 1789. In proportion as commodity production expanded and exchange broke its local bonds, the monetary form of value was also attached to commodities which, by their nature, were better suited to play the role of equivalent. Precious metals were among these commodities. Another point was also important here. In order for a substance to take the desired form of the embodiment of abstract human labour, each quantity of it must have a homogeneous quality and be identical to its other components. Money-commodity or money-commodity must be able to be divided into components at will and, if necessary, returned to its original state. Gold and silver were the most suitable in this respect.
The exchange process did not assign value to the commodity it placed as money, because the commodity itself had value; what the exchange process gave to the commodity was its specific form of value. The lack of reflection on this point has led some to consider the value of gold and silver to be a kind of illusory value. Money may assign its role to this or that sign. This in turn has led some to consider money to be just a symbol. The Enlightenment of the 18th century, which was unable to analyse the course of the emergence of money, fell into this same pit and saw money as an arbitrary creation of human thought.
It was said that the appearance of a commodity as an equivalent does not imply a determination of its value. In other words, even if we know that gold is money and can be exchanged for all commodities, it is still not clear how much, for example, a kilo of gold is worth. Money, like any other commodity, expresses its value only relatively, in comparison with other commodities and with reference to the socially necessary labour time crystallized in it. The value of gold is determined at the place of its extraction and through barter. Gold has a certain value from the moment it enters circulation as money. The appearance of the matter is that because a commodity is money, other commodities measure their value by it. But the reality is the opposite. This commodity has become money because and in the sense that other commodities have measured and expressed their value by it. The process by which this transformation has taken place eventually disappears, leaving no trace.
Chapter Three: Money or the Circulation of Commodities
- Measure of values
Money does not make commodities measurable; quite the opposite is true. Commodities, as values, are the embodiment of human labour and, therefore, the embodiment of the labour time latent in them. That is why they are measurable. Money, as a measure of value, is the representation of labour time, which is the latent value of the commodity. The price of commodities is the monetary form of their value; this price, like the value itself, is separated from the physical form of the commodity and acquires a mental aspect. Just as the material conditions of human life or social existence are pumped into the formulas of their beliefs and thoughts. The value of iron or the necessary social work exists in the iron itself but is not seen, this value reveals itself in comparison with gold. Money or gold plays the role of a guard that glues this value to the commodity. Expressing the value of commodities in gold is a subjective matter, but this value actually exists in the commodity, and a subjective gold is used to represent the price. When the owner of a commodity expresses the value of his goods in the form of price or hypothetical gold, he is far from converting these values into gold, but to estimate the amount of this gold, he does not need even the smallest carat of gold. Money in the role of valuation is only a hypothetical and virtual element. Let us not forget that although money has an imaginary state in performing the function of valuation, the price of each commodity represents the necessary social work hidden in it and therefore hidden behind money. Depending on whether gold, silver or copper are the scale of value, the value of a ton of iron will be expressed at different prices and with different amounts of the three metals above. In the same vein, if gold and silver are used simultaneously as a measure of value, copper will naturally find two different expressions of value, one with gold and one with silver. In this case, any change in the value relationship between these two metals will affect the ratio of the price of copper in terms of gold or silver.
Money has two different functions in terms of measuring values and in terms of measuring prices. As a social symbol of human labour, it is a measuring instrument of values, and as a fixed quantity of metal of fixed weight, it is a measuring instrument of prices. In the first role, it converts the different values of various commodities into prices, that is, virtual quantities of gold, and in the second role, it measures these quantities of gold. As a measure of value, it says how much socially necessary labour is embodied in this or that commodity, for example, equivalent to how much gold. As a measure of prices, it states how much the same amount of gold is worth in terms of a unit of gold. There are several points worth considering regarding the relationship between fluctuations in the price of commodities on the one hand and their value on the other.
1- The value of goods increases but the value of money remains constant, in this case prices rise.
2- The value of goods is constant but the value of money decreases, prices still rise.
3- The value of money is constant, but the value of goods decreases, in this case prices fall.
4- The value of goods is constant but the value of money increases, prices still fall.
5- An increase in the value of money does not necessarily lead to a decrease in the price of goods, just as a decrease in the value of money does not necessarily lead to an increase in the price of goods.
Price is the monetary name for the labour embodied in the commodity. As the representative of the value-value of the commodity, price is also the representative of the exchange relation of the commodity with money, but the reverse is not true. The representative of the exchange relation of the commodity and money is not the representative of the value-value of the commodity. In a quarter of wheat and 2 pounds sterling lies an equal amount of socially necessary labour. 2 pounds sterling is the monetary expression of the value-value of a quarter of wheat and its price. Now, if the price of a quarter of wheat becomes three- or one-pound sterling, then one pound or three pounds sterling, in terms of expressing the value of wheat, are smaller or larger than the actual value, but they are still considered the price of wheat. Because, first, they are the value form of wheat in the form of money, and second, they represent its exchange relationship with money. The value of a commodity expresses an inherent relation to the socially necessary labour time in it. By converting the value of the value into a price, this inherent relation appears as the exchange ratio of a commodity to the commodity-money existing outside it. In this relation, both the value of the commodity and the smaller or larger amount of money that the commodity is selling for under given conditions may appear. Thus, the possibility of a slight difference between the price and the value-value or of a deviation of the price from the value-value is inherent in the price form itself. This is not a defect of this form. On the contrary, it makes it the proper form of that mode of production within which order and rule can compensate for disorder only by blind law. The price form is not only accompanied by the possibility of a quantitative difference between the value amount and the price or the value amount and money, but it can also carry a qualitative contradiction within itself. For example, although the price is the value form of a commodity, it does not express any value. Conscience and honour are not commodities in themselves, but they may be traded for money for their owners and thus acquire the form of a commodity with their price. On the other hand, the virtual form of price may also conceal a real value relation or a derivative thereof. Such as the price of waste land in which no human labour has been expended and therefore has no value. The price form expresses the exchangeability of commodities with money and the necessity of this exchange. On the other hand, if gold plays a role as a subjective measure of value, it is because it has already consolidated its position as commodity money in the course of exchanges. Therefore, behind the subjective measure of value, coin money has taken refuge.
2. The Medium of Circulation
A. The Metamorphosis of Commodities
Let us begin with an example. A weaver goes to the market with 20 yards of linen and exchanges his linen for 2 pounds of gold. With these two pounds he buys a story book. Linen, which is a mere commodity and a carrier of value, leaves its original natural state in exchange for gold and takes on the form of a naked value. But a little later it leaves this value state and is exchanged for a story book, a commodity with use value. The exchange process here consists of two mutual and complementary transformations. In the first instance, the commodity is transformed into money, and in the second instance, money is transformed into a commodity. The first transformation is a sale, the second is a purchase. The first is (commodity-money), the second is (money-commodity). The weaver now has a storybook instead of linen, he is the owner of a commodity with a different use value from his previous commodity. Commodity production is inherently contradictory. The contradiction between use value and exchange value, the contradiction between abstract and concrete labour, this form of production expresses the continuous personalization of things and the continuous objectification of persons. The increasing development of commodity production does not reduce these contradictions and contradictions, on the contrary, it provides a form in which these inherent contradictions can continue. The change in form in the commodity is the result of the exchange of two commodities, one an ordinary commodity and the other commodity money. Commodities enter into exchange without being gold-plated or sugar-coated, but exchange divides them into commodities and money. Commodities and money are the external manifestation of the inherent opposition of use value and exchange value. Commodities represent use value and money represents exchange value. The process of exchange of commodities, as we have seen above, ends with changes in their form. Commodities become money and then money becomes commodities. Linen becomes money and money becomes a storybook (commodity – money – commodity).
The product of the weaver’s labour is useful to him only as exchange value, it will only acquire a socially accepted or equivalent form of value through its conversion into money. But money is in someone else’s pocket, it must come out of his pocket, for this to work, first of all, the product of the owner of the commodity must be useful to the owner of the money or have a use value. The commodity loves money, but the path to love is not smooth. The owners of the commodity find in practice that the same division of labour that has made them separate independent producers has also freed the process of social production and the relations of the producers in it from dependence on their will and placed them above them. The formal independence of the producers from each other is supplemented by a system of all-round, solid, and material dependence.
The division of labour helps to transform the product into a commodity, and in this way its transformation into money becomes necessary. The seller of linen substitutes gold coins for his commodity. The buyer substitutes gold for linen. Linen and gold change places, the commodity being exchanged for its general form of value, and gold for a specific form of use value. It will be asked why gold was placed as money against linen? The answer is not difficult. The £2 had already established a relationship between linen and gold. Price is the monetary expression of value, the monetary expression of the socially necessary labour inherent in the commodity. Linen had a price that had a hypothetical existence before being exchanged for gold, but by transferring it to another person it actually managed to attract money and went beyond its original form, that is, linen. This means that the realization of price or a merely hypothetical form of value is also the realization of the imaginary use value of money. The conversion of commodity into money is also the conversion of money into commodity. In the pole of the owner of goods, there is a sale, and in the pole of the owner of money, there is a purchase, in other words, every sale is also a purchase. (commodity – money) is simultaneously (money – commodity).
In order for gold to play the role of money, it must have entered the market of commodities from a point. This point is the origin of its production, where it has been exchanged as a direct product of human labour for another product or concentrated human labour of equal value. From then on, and apart from this particular case, gold represents the realized price of commodities; gold in the hands of each commodity owner is in fact his commodity, separated from its original form by being transferred. When commodities are exchanged for money, when they take on the value form of money, they are stripped of their use value and every sign and trace of this use value. All, like chrysalises, sink into a material cocoon of uniform and social form, that is, homogeneous human labour; all become similar to one another, all become identical in the form of money.
For the owner of the linen, the sale of his commodity was the beginning of an action that ended with its reciprocal action, the purchase of a storybook, (linen – money – book). But now let us suppose that the 2 pounds of gold we are referring to is the transformed form of half a ton of wheat, or in fact the result of the sale of half a ton of wheat. In other words, the buyer of the linen has obtained his 2 pounds of gold from the sale of this amount of wheat, in which case the purchase of the linen is the end of a process that began with a reciprocal action, the sale of the wheat (Wheat – money – linen). If we reflect on what has been said, we will see how the process of exchange of commodities breaks down all the limitations of the direct exchange of products, expands the circulation of the products of human social labor day by day, spontaneously and spontaneously creates a complex network of social connections, constantly expands and governs this network, such that the human producers have no role in it and are unable to exert any significant influence. If the weaver is able to sell his linen, it is only because the farmer has previously sold his wheat, if the wine merchant sells his wine, the reference’ of his practical treatise and the rabbi of his Torah, it is because many other people have previously produced and sold many products and have been engaged in a chain of trade. Money, as a medium of the circulation of commodities, plays the role of a means of circulation.
B. The circulation of money
Let us look at the dynamics of the commodity cycle. The commodity is always in the hands of the seller and money is in the hands of the buyer. What money does as a means of purchase is to realize the price of the commodity. By realizing the price, it transfers the commodity from the seller to the buyer, and at the same time it leaves the buyer’s hands and falls into the hands of the seller to do the same thing with another commodity. The first change of commodity (commodity – money) is not seen only as the movement of money, it is also considered the movement of commodity, but in the second change (money – commodity) the movement of commodity is seen only as the movement of money. In the first circle, the commodity is replaced by money, its use form disappears, and its value form or monetary embodiment takes its place. In the second circle, the commodity sheds its natural covering and is dressed in money. In this way, the continuation of the movement of the commodity is assigned to money. A movement that for the commodity is two different processes, but for money is a single dynamic (the process of changing the place of money with the commodity). Here we are witnessing a kind of morphism. It is suggested that the substitution of one commodity for another does not result from the transformation of the commodities themselves, but rather from money as a means of circulation. If money functions as a means of circulation, it is only because the value of commodities has acquired a definite and independent form in its existence. The movement of money as a medium of circulation is nothing other than the movement of commodities accompanied by their transformation. The substitution of one commodity for another occurs because each of these commodities carries the same amount of socially necessary human labour.
In our example, cotton first replaced its commodity form by the money form, and then its money form replaced its new commodity form. The constant repetition of the exchange of money is not only a reflection of the transformations that a given commodity undergoes, but also a demonstration of the multitudinous intertwining of transformations that take place throughout the world of commodities. Let us not forget that all this applies only to the simple circulation of commodities. Money is a constant presence in this sphere as a medium of circulation. This raises the question of how much money does the sphere of circulation need? The answer is not so difficult. Money is the embodiment of the value of commodities, and commodities reflect the monetary expression of their values in the form of prices, so the amount of the medium necessary for the circulation of commodities is determined by the total price of commodities. Let us not forget one point. The prices of commodities, if their value remains constant, will increase or decrease with the decrease or increase in the value of gold (as money). If, as a result of such a decrease or increase in the value of gold, the sum of the prices of commodities increases or decreases, then the volume of money in circulation will also witness the same fluctuation. Another factor that affects the amount of money required for the circulation of commodities in the market is the slowness or rapidity of the dynamics of the various transformations or cycles of the transformation of the form of use of commodities into their form of value. Let us illustrate the matter with an example. Let us consider four different goods, consisting of a quarter of wheat, 20 meters of cloth, a Torah, and a few litres of wine. The price of each of these four items is 2 pounds sterling. These commodities are ready for sale, and two distinct cases are conceivable for their sale. The first case: the goods are sold in parallel and unrelated places. In this case, 8 pounds sterling of gold or money are required for the cycle of circulation. The second case: the owner of a quarter of wheat sells his goods for 2 pounds sterling, and with these 2 pounds he buys 20 meters of cloth. A little further on the exchanges the cloth for 2 liras and buys a book with this money, he sells the book an hour later and buys wine with 2 liras. Here, in contrast to the first case, the circulation does not require more than 2 liras sterling. Because the same 2 liras sterling has been circulated 4 times. The more the number of circulations of money increases, the less money is required for the circulation of a given commodity.
C. Coin and symbols of value
A weight of gold, which is represented by a price or monetary expression of value, takes the form of a coin in the process of circulation. The mintage of coins, like the determination of the scale of price measurement, is determined by governments. The national uniform that the gold and silver coins of a country wear and that they bring out on the world market, indicates the separation of the internal and external spheres of the circulation of commodities. The only difference between coins and bullion is in their external appearance; both are constantly transformed into one another. The path from the mint to the smelting furnace is intertwined. Gold coins are worn out in the process of circulation. The weight of gold that was the standard of price diverged from the weight that played the role of the intermediary in the circulation of commodities; the latter could no longer be a real equivalent for the commodities whose prices were realized. This event had a message.
If worn gold, with its lesser weight, still had the capacity to be a measure of value, then metallic money could gradually be replaced by tokens of other metals or by specific symbols. It was from within the material possibility of this process or circulation of metallic money that paper money finally emerged. Money issued by the state and whose circulation depended on state power. Real paper money arose from money as a medium of exchange, but credit money did not arise in this way, but rather spontaneously, from the very nature of money as a means of payment. The government injected the paper money into the circulation from outside, and insofar as it replaced the amount of gold needed by the circulation, it played a role in accordance with the laws of money circulation and as a medium of exchange. If a law were passed for paper money, its content would be to specify the ratio between paper money and gold. The circulation of goods in each individual society required a certain volume of gold coins, and now paper money replaced this volume of gold. Paper money is a symbol of gold or money, and its relationship to the value of goods is such that first the values find a hypothetical expression in the form of a certain quantity of gold, and then paper money becomes a tangible and tangible symbol of this quantity of gold. Here a question must be answered. The question of why a worthless object like paper was able to replace gold? Gold (money) allowed this replacement in a situation where it had already established and established its role as a coin in the process of commodity circulation. In the process of exchange, commodities expressed their value in gold coins, and this situation gradually allowed gold or gold money to replace another metal, another symbol, including paper money.
3. Money
The commodity that is the measure of the value inherent in goods and plays the role of a medium of circulation is money. Gold and silver also serve as money and play the same role in different forms, so let’s briefly examine these roles.
A – Gold-hoarding
In the early stages of the development of the commodity economy, only the surplus value of human use is exchanged and converted into money or gold and silver. During this period, those who acquire a volume of gold by selling their goods turn their gold into treasure. With the expansion of commodity production, every human producer gradually found increasing needs, he had to constantly buy new goods and needed some kind of social security to buy these goods. This happened in a situation where the production and sale of his own goods required time. He could not realize what he wanted with a mere feeling of need and determination to produce a product or exchange.
In such a situation, in order for him to buy without selling, he had to sell goods in advance without buying. This was a contradiction, and this contradiction was resolved in such a way that producers exchanged their goods for precious metals on certain days, without buying any goods. This event led to the accumulation of gold, silver, and other precious metals in the hands of a group of producers, the desire for goldsmithing grew, money-gold became the social form of wealth that could be used everywhere and at any time, and its power grew. Money expanded the sphere of power and became the universal representative of material wealth. Money does not reveal what it is exchanged for, it is exchangeable for everything. It eliminates the qualitative difference between goods in its appearance and replaces them all, but it is itself a commodity. An external object that can become the private property of any individual. In this way, it is transformed from a social power into a special power of private individuals. Ancient society denounced money for this reason, because of its tendency to destroy the economic and moral order. As a use value, a commodity satisfies a specific need and is part of material wealth, but the value of a commodity measures its popularity for all components of material wealth, including the social wealth of its owner. It is also worth mentioning that any present amount of money is limited in quantity and has a certain range as a means of purchase. This contradiction between the quantitative limitation of money on the one hand and the qualitative unlimitedness, that is, it’s being usable everywhere and always and being exchangeable for all commodities, has led goldsmiths or money-mad lovers to seek hoarding with the greatest desire. In order to treasure gold as much as possible and to turn it into a reserve currency, its role as a means of purchase had to be reduced as much as possible. It had to be removed from the circulation. On this basis, the goldsmith sacrificed his physical pleasures and comforts on the threshold of hoarding. On the other hand, the more he produced, the more he could sell, and on this basis, work, contentment, and greed were his three main virtues. Selling a lot and buying a little also determined the pillars of his political economy.
In an economy dominated by the circulation of metallic money, hoarding plays an effective role. With the constant fluctuations in the circulation of goods, the volume of money in circulation decreases or increases in terms of size, price, and speed, which is why it is necessary for the volume of money to be able to contract and expand, sometimes money goes out of circulation as coins and sometimes enters it. In order for the volume of money in circulation to always be able to adapt to the degree of saturation of the circulation environment, it is necessary for the amount of gold or silver in the country to be greater than the quantity that they perform according to their coinage function. Hoards and treasuries, as channels for the removal and absorption of money in circulation, help in this task. Money in circulation never overflows the channels of circulation.
B – Payment method
In simple commodity circulation, a single value always assumes two different forms: commodity and money. On this basis, the owners of commodities appear as representatives of equivalents with two different forms in opposition to each other. But with the development of circulation, a situation arose that had a significant impact on the dynamics of this confrontation. The acquisition of the price of a commodity gradually became more distant from the time of its dispatch. Let us explain the story a little. The production of one commodity required a short time, while the other required more or much more time. Depending on their type, commodities were produced at different times of the year, some were procured in the local market, while others arrived from distant places. The owner of one commodity was ready to sell before the owner of another commodity was ready to buy. These conditions of production required the adjustment of the conditions of sale to suit themselves, and they had to do so, or they created and made these conditions prevail. Apart from this, some commodities, for example houses, were sold under contract before the time of delivery arrived, the buyer became the owner of the use value of the house after the expiration of the period, and he paid the money at the end of this period, while the seller had sold the house without receiving the price in advance. In other words, the seller was the creditor, and the buyer was the debtor. Given all these changes and the emergence of new conditions, money acquired a new role, it became a means of payment. Let us not forget that we are still talking about simple commodity circulation, the positions of debtor and creditor are also considered with the components of this same cycle of circulation. However, what had happened, for example, the conflicts between debtor and creditor, had the capacity to appear and intensify as a social event, apart from the process of commodity circulation. For example, the class struggle that prevailed in the ancient world took the form of a struggle between debtors and creditors. In Rome, this struggle resulted in the defeat of the plebeians, or poor peasants and small craftsmen. The plebeians were defeated in war by the patricians (nobles) and were enslaved by the slave economy. In the Middle Ages, the defeat of the feudal lords and debtors led to the destruction of their political power.
Let us return to the sphere of commodity circulation. With the explanations we have given, the simultaneous presence of goods and money at the two poles of the sales process was suspended and postponed. Now, on the one hand, money had become the measure of value for determining the price of the goods sold, the price of the goods sold according to the contract and which the buyer had to pay at a certain date. On the other hand, it played the role of a hypothetical means of purchase and, with this role, also caused the transfer of goods. Needless to say, money only entered the circulation as a means of payment when the payment period was due and passed from the buyer to the seller.
The role of money as a means of payment is seriously contradictory. As long as payments compensate each other, for example, producers sell their commodities, buy new things with their price, and purchases and sales complement each other, money has a subjective function and acts as a measure of values. But as soon as real, asymmetrical payments come into play, for example, multiple sales with multiple contracts, with different due dates, money no longer enters the field simply as a medium of circulation or a determinant of the value of commodities, but on the contrary, it firmly and steadfastly demonstrates its embodied role, demonstrates the independent existence of its exchange value, and manifests itself as a public commodity. The rise of this contradiction can be clearly seen in the occasional rebellious industrial and commercial crises. These crises broke out where the long chain of payments, and with it the system artificially created for clearing these payments, had fully developed. Whenever and for whatever reason this payment system is disturbed, money suddenly and immediately goes beyond its merely hypothetical form, and lays bare its material and embodied status. Commodities become worthless, their use value disappears from sight and pales in comparison with their exchange value. If only yesterday the bourgeois were shouting that the commodity is everything and money is a mental creation, now they are everywhere shouting that money is above everything and nothing is above money. The crisis raises the contradiction between the commodity and its value form, money, to the point of absolute contradiction.
If we consider the total volume of money in circulation at a given time, we will see that this money, with respect to its specific speed of circulation, as a means of circulation and payment, must be equivalent to the following items: 1- The sum of the prices that must be realized, 2- The total of the payments that are due one after the other, of course, we must subtract the payments that are made one after the other and the transactions in which a given coin is alternately the medium of circulation and the means of payment. Let us illustrate the matter with an example. A farmer sells his wheat for £2, this money acts as a medium of exchange, the farmer uses the money to pay for the linen he has previously bought from the weaver, so the same £2 here acts as a payment. The weaver buys a garment with this cash; the money here again acts as a medium of exchange. This process can continue in this way. Therefore, if prices, the velocity of circulation of money and the rate of use of the means of payment are constant quantities, the volume of money in circulation and the volume of goods that circulate in a given time interval, say a day, will not coincide. Here there is money in circulation that represents goods that have already left circulation, while at the same time there are goods in circulation whose monetary equivalents arrive later.
Besides all this, the payments which are committed every day and the payments which fall due one after the other are completely dissimilar quantities. Credit money is the result of the function of money as a means of payment. A promissory note relating to the claims arising from the sale of commodity, in turn, circulates and transfers these claims to another. With the development of the credit system, the role of money as a means of payment also continues to expand. Money in this direction acquires specific forms of existence and with these forms becomes the field of large-scale trade. While gold and silver coins gradually take the path of retail trade. When commodity production has passed certain stages of its development, it extends the scope of money’s function as a means of payment beyond the sphere of commodity circulation. Money becomes the general commodity of contracts. Interest, taxes, and the like all abandon the form of payments in kind and become payments in cash. The two great failures of the Roman Empire in collecting tribute in the form of money loudly declare that the conversion of payments in kind into cash requires certain conditions in the development of commodity production. The indescribable poverty of the French peasants in the time of Louis XIV was not simply due to the heavy taxes; the change in the form of taxation from in-kind to cash played a much more fundamental role. The reverse was the case in Asia. Here the payment of rent in kind, which determined the main share of state taxes, depended on the prevailing production relations, and this method of payment in turn helped to preserve the old form of production. This was also one of the secrets of the survival of the Ottoman Empire. If the foreign trade imposed on Japan by Europe had led to the transformation of rent in kind into cash in that country, it would have been the triumph of Japanese model agriculture. With the development of bourgeois society, hoarding as an independent form of wealth accumulation disappeared, but it grew enormously in the form of a reserve fund for means of payment.
C. Universal Money
In world trade, commodities universalize their value. Their independent value form appears before them in the form of world money. Here, for the first time, money plays the full role of a commodity whose natural form is directly the social form of the realization of abstract human labour. In the domestic sphere, only one commodity can play the role of a measure of value, and it is this commodity that becomes money. In the world market, two measures of value are common. These two measures are gold and silver. World money performs several important functions at once. It is a universal means of purchase, a universal means of payment, and it also plays the role of the absolute social embodiment of wealth in its global sense. In the meantime, the task it assumes as a means of payment in settling the balance of international accounts is its main function. Gold and silver assume the role of a means of global purchases mainly at times when the balance in the sphere of exchange of products between countries or governments is disturbed, and finally, when the issue is not purchase or payment but the transfer of wealth from one country to another, it is this global money that solves the problem. Every country needs a monetary reserve in the same way that it needs a monetary reserve in the world market for the circulation of its economic affairs.