Capital, Chapter Three: Money, or the Circulation of Commodities

Money as Power Defetishize reading Defetishize reading Class context Class context Money as power Money as power  for capital  for workers

Structure of Chapter Money as Measure of Value Money as Measure of Value Money as Standard of Price Money as Standard of Price Money as Means of Circulation Money as Means of Circulation Money as Store of Value (or Hoard) Money as Store of Value (or Hoard) Money as Means of Payment Money as Means of Payment World Money World Money

Money as Measure of Value Pre-sale: C - M(?) - C(?) Pre-sale: C - M(?) - C(?)  “Price” is hypothetical, asked for but not paid  Use value C has been produced, but has not found an expression of value After-sale: C - M - C After-sale: C - M - C  Money paid; Price has been realized  Amount of Money measures value of C

Money as Standard of Price Money Form: (zB, yC,... nN) = xAu Money Form: (zB, yC,... nN) = xAu Price form, e.g., zB = xAu Price form, e.g., zB = xAu Value is measured by quantity of gold, ounces Value is measured by quantity of gold, ounces Price is measured by money name of weight of gold, e.g., $35/oz, $1.00 = 1/35oz of Au Price is measured by money name of weight of gold, e.g., $35/oz, $1.00 = 1/35oz of Au Money names attached to coins Money names attached to coins

Contradictions As Measure of Value & Standard of Price As Measure of Value & Standard of Price The distinction means possible rupture The distinction means possible rupture Price and value can differ Price and value can differ e.g., debasement of currency e.g., debasement of currency e.g., clipped coins’ value less than nominal value e.g., clipped coins’ value less than nominal value e.g., Locke & recoinage during war e.g., Locke & recoinage during war

Money as Means of Circulation - 1 As facilitator of exchange As facilitator of exchange C - M - C represents circulation of commodities C - M - C represents circulation of commodities C - M = 1st metamorphosis (of form) C - M = 1st metamorphosis (of form)  realization of exchange value M - C = 2nd metamorphosis (of form) M - C = 2nd metamorphosis (of form)  realization of use value

Money as Means of Circulation -2 Syllogistic mediation Syllogistic mediation C - M - C = P - U - I C - M - C = P - U - I C is produced for its particularity exchange value C is produced for its particularity exchange value M is the universal equivalent & mediator M is the universal equivalent & mediator C is acquired for its individual use value in consumption C is acquired for its individual use value in consumption

Money as Means of Circulation -3 Prime example: LP - M - C Prime example: LP - M - C LP = ability to work (for capital) LP = ability to work (for capital) M = wage M = wage C = C(MS) = means of subsistence C = C(MS) = means of subsistence All this working class view of working for money as a means to an end: consumption/life All this working class view of working for money as a means to an end: consumption/life

Possibility of Crisis - 1 Separation of sale & purchase = possibility of rupture in circuit Separation of sale & purchase = possibility of rupture in circuit C - M can be accomplished, but C - M can be accomplished, but M - C might not be M - C might not be Money can be hoarded Money can be hoarded Say’s Law doesn’t hold in money economy Say’s Law doesn’t hold in money economy Refusal to spend = inadequate aggregate D Refusal to spend = inadequate aggregate D

Possibility of Crisis - 2 In the case of LP - M - C In the case of LP - M - C Workers can refuse to sell LP for M Workers can refuse to sell LP for M e.g., refuse to leave land, strike e.g., refuse to leave land, strike Workers can refuse to spend (today) Workers can refuse to spend (today) e.g., increase savings, reduce consumption demand e.g., increase savings, reduce consumption demand

Quantity Theory - 1 Classical Quantity Theory of Money Classical Quantity Theory of Money M = ∑pq/V M = ∑pq/V M = money, p = price, q = goods, M = money, p = price, q = goods, V = velocity of money (e.g., turnover/yr) V = velocity of money (e.g., turnover/yr) With q & V fixed, change in M produces a change in p, i.e., p = f(M) With q & V fixed, change in M produces a change in p, i.e., p = f(M) e.g. influx of gold from new world in 16th C meant inflation in Europe e.g. influx of gold from new world in 16th C meant inflation in Europe

Quantity Theory - 2 Marx’s Interpretation Marx’s Interpretation M = ∑vq/V Behind price (p) lies value (v) Behind price (p) lies value (v) So instead of p = f(M), we have So instead of p = f(M), we have M = f(v) M = f(v) e.g., 16th C gold had lower value per unit e.g., 16th C gold had lower value per unit so, M had to increase to express ∑vq/V so, M had to increase to express ∑vq/V

Quantity Theory - 3 Marx’s interpretation with paper money Marx’s interpretation with paper money M = ∑vq/V M = ∑vq/V Paper money only represents value Paper money only represents value Amount of value depends on ∑vq/V Amount of value depends on ∑vq/V Value per unit of money depends on quantity of money Value per unit of money depends on quantity of money So, Marx’s interpretation rejoins Classics’ So, Marx’s interpretation rejoins Classics’

Money as Store of Value Money “stores” value when hoarded Money “stores” value when hoarded Hoard functions in circulation Hoard functions in circulation Money stored, released Money stored, released Like foreign exchange reserves today Like foreign exchange reserves today So misers are misguided obstacles to circulation So misers are misguided obstacles to circulation

Money as Means of Payment With “credit money” purchase preceeds payment With “credit money” purchase preceeds payment Payment follows later Payment follows later e.g., commerical credit, credit cards e.g., commerical credit, credit cards Separation = new potential for crisis Separation = new potential for crisis e.g., debt crisis of 80s & 90s e.g., debt crisis of 80s & 90s

World Money In 19th C, int’l money was bullion/metal In 19th C, int’l money was bullion/metal In late 20th C int’l money is credit In late 20th C int’l money is credit  gold has been demonitized  although gold bugs still want it back Marx’s discussion of credit provides basis for analysis of International Monetary System & IMF Marx’s discussion of credit provides basis for analysis of International Monetary System & IMF

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