Monday, 22 December 2014

Capital II, Chapter 20 - Part 36

Simple commodity circulation differs from barter because of the mediating role of money within the process of exchange. Similarly, the national output is not simply a matter of mutual exchange between Department 1 and 2, but is mediated by billions of acts of buying and selling, in which money changes hands.

But, in aggregate, as we have seen, the consequence of all these transactions is a mass exchange between Department 1 and 2, with the former providing the latter with necessary means of production and the latter providing the former with consumer goods. Within the context of this mass social exchange, we have seen how it is possible to break the different components of the physical output down into its value components of c+v+s, as Marx did in Volume 1.

So, for example, of Department 2 output, of £3,000, £2,000 constitutes c, £500 v, and another £500 s. Of the physical product then, two-thirds could be equated with c, and one sixth each to v and s. Similarly, with Department 1, it broke down £4,000 c, £1,000 v, and £1,000 s. Two thirds of its output was needed to replace its constant capital, and one sixth each to replace the variable capital and surplus value.

On this basis, it becomes apparent that one third of Department 1's output is exchanged for two-thirds of Department 2's output. The one third of Department 1 output that is exchanged is equal to that portion of its output that is equal to the new value created, i.e. equal to v+s, and the two-thirds of Department 2 output that is exchanged for it, is equal to that portion of its output that is equal to c.

Looking at it from the perspective of these physical components is central to Marx’s analysis and explanation here. In setting it out this way, Marx can then argue in relation to the physical output that is exchanged.

“The entire constant capital-value contained in the commodity mass II representing a value of 3,000 is therefore comprised in 2,000 c, and neither 500 v nor 500 s hold an atom of it. The same is true of v and s respectively. 

In other words, the entire share of commodity mass II that represents constant capital-value and therefore is reconvertible either into its bodily or its money-form, exists in 2,000 c. Everything referring to the exchange of the constant value of commodities II is therefore confined to the movement of 2,000 II c. And this exchange can be made only with I (1,000 v+ 1,000 s). 

Similarly, as regards class I, everything that bears in the exchange of the constant capital-value of that class is to be confined to a consideration of 4,000 I c.” (p 456) 

In other words, using the same method he used in Volume I, it is as though the two-thirds of output is equal to the value of c, containing only constant capital, that the one sixth equivalent of the variable capital contained no constant capital at all etc. This way of looking at things simplifies the important exchange to be considered here between II(c) and I(v+s).

Sunday, 21 December 2014

Labour's Immigration Policy Is A Mess - Part 2

In the 19th century, the main political forces were those of the landlord class, represented by the Tories, entrenched in the House of Lords, but still largely dominant in the Commons, until male workers obtained the vote, and those of the industrial capitalists represented by the Liberals. It was manifest in many conflicts, such as over the Abolition of the Corn Laws. The Tories supported the Corn Laws, controls over the import of cheaper foreign Corn, because they saw it as reducing agricultural prices, and thereby rents paid to landlords. The Liberals opposed the Corn Laws for the opposite reason. They wanted to reduce the rents paid by capitalist farmers to landlords, and thereby also to reduce all rents. Moreover, they wanted lower corn prices, because it meant lower food prices, a sizeable component of the time of workers expenditure. Reduce the cost of food, and you thereby reduce the value of labour-power, which means that wages can be cut, and so profits rise.

In addition, the flour was not just used for food production. Marx sets out in Capital that it was used extensively in the textile industry as size, to give weight to yarn. He sets out how the reduction in the price of corn, thereby saved textile firms thousands of pounds each year in size, and by reducing the value of its constant capital, thereby raised the rate of profit.

The workers lined up in this class battle behind the industrial capitalists, and made up a sizeable contingent of the Liberal Party. A large part of the propaganda of Marxists at the time had to be to set out that whilst, the policy of free trade was progressive compared to the policy of protection, neither were socialist solutions. Marx, for example, in his Speech On The Issue of Free Trade, set out the way both protection and free trade were utilised by capital against the workers, but concluded that he was in favour of Free Trade, because it was the more rational capitalist solution, the more revolutionary solution, precisely because it drove the contradictions of capital to a higher level.

This rejection of nationalism, and the recognition that the interests of British workers could only be furthered, and could not be separated from the furtherance of the interests of workers in general, no matter in what country they lived, is central to developing a response to the kinds of nationalistic and racist policies propounded by UKIP, and the Tory right. Yet it is absent from current Labour thinking. Instead we have the Labour front bench telling us that we should embrace nationalism and patriotism – once described as the last refuge of the scoundrel – and its emblem, even though its clear what reactionary views many of those who drape themselves in that emblem espouse.

When it comes to responding to the reactionary views over Europe, instead of confidently promoting the kind of internationalist views put forward by Pete Curran above, instead they again frame their responses in nationalistic terms, only able to justify pro-EU positions on the basis that they are “good for Britain”, or at best good for British workers, as though, in the end, there can be any policies that are good for British workers that are not good for all workers, or worse that Labour should only support policies that are good for British workers, even if that is at the expense of workers in general!

Saturday, 20 December 2014

Oil Price. Good For The Economy, Terrible For Financial Markets - Part 2

In Part 1, I set out the basic outline of why the fall in the oil price is good for the global economy, but terrible for financial markets. In the days after that post, a number of the points made were clearly illustrated by events.

Firstly, it was argued, in relation to oil and other primary products, that “those economies that have remained dependent on their sale as the main source of national income, will be badly affected, as that income drops.” A clear example of that was given in the sharp drop in the value of the Russian Rouble. Its possible to argue that the previous value of the Rouble was much too high, as I've set out in Oil and The Rouble being based purely on the petro-dollar earnings of the economy. Such a situation was seen in the 1970's, with the development of North Sea Oil, and the surge in global oil prices, with the formation of OPEC, which provided large amounts of revenue for small economies, so that the value of their currency was inflated.

This led to the so called “Dutch Disease”, whereby the high level of the currency made it difficult to export manufactured commodities from the economy, and simultaneously facilitated their import. It undermined the domestic economy, and made it even more dependent upon the sale of oil. One answer to this problem, is to use these petro-dollars to build up cash reserves, and to reduce the value of the domestic currency by selling it to buy dollars. The dollars need to be used, and so are then recirculated to buy US bonds, and other financial assets. In other words, a surplus on the country's current account is offset by a deficit on the capital account. This is one source, of the build up of an excess supply of loanable money-capital in the period from the 1980's onwards, which acted to continually push down global interest rates, and also to push up the prices of US financial assets.

It was not just small northern European economies that enjoyed this surge of revenue. An even greater fortune was amassed in the Gulf states, where the production costs of oil were even lower, and where, therefore, the surplus profits, and differential rent to be obtained, by the feudal landowners was even greater. With relatively tiny populations, and economies dependent upon large numbers of migrant workers, the Gulf states were able to buy off their domestic populations from these huge revenues, whilst amassing large quantities of mostly US financial assets. Where oil income was used for economic development, it was often for the development not of manufacturing, which would have placed an even greater reliance on the immigration of foreign workers, but on the development of a financial services industry within the country.

Secondly, it was argued that,

Those that have used the higher than average profits only to build up cash hoards – usually in the shape of sovereign wealth funds, often invested in the US and Europe – will begin to need to draw down on those funds to cover the deficits in their domestic budgets, as their income from trade falls.”

A look at the production costs for a barrel of oil across the various economies demonstrates this problem. A country like Saudi Arabia may be able to produce oil profitably at prices as low as $10 a barrel, whereas North Sea oil production is already making losses, with the potential for job losses, at prices lower than $60 a barrel. Whilst, an independent Scotland, would have been placed in a dire economic situation, as a small economy dependent upon oil revenues for a lot of its economic activity, and even more so for its government finance, this is not the case for the UK economy as a whole, given its more diversified economic base. The fall in oil prices is bad news for George Osborne, because it means his tax revenue from North Sea oil production, as well as from VAT on petrol – though not from Fuel Duty, which is a fixed amount – will fall significantly, but it would have been disastrous news for the Treasury Secretary of an independent Scotland, or indeed, for one responsible for an independently financed Scotland.

Britain, may, therefore, appear to have a bigger problem from lower oil prices than Saudi Arabia, given the latter's ability to produce oil profitably at much lower levels, but this is not the case. Because, Saudi Arabia, is dependent on oil revenues to an even greater extent than is Scotland, although it can produce oil profitably at these levels, that does not help the position of its state finances. Saudi Arabia's state budget requires oil prices of around $100 a barrel in order to be in surplus. At the current level, Saudi Arabia, runs a significant budget deficit. An independent Scotland, currently would need to borrow huge sums on the global money markets, to cover the gaping hole in its finances that the drop in oil prices creates. Saudi Arabia, however, can simply dip into its huge money hoard, built up over the last 30 or so years. Indeed, Russia, with its $413 billion of foreign currency reserves, and other reserves held as foreign financial assets, thought to be around $2-3 trillion, can do the same, rather than needing to immediately cut its spending.

But, this illustrates another point made in Part 1. Not only does this mean that the previous flow of petro-dollars into the global money markets ceases, but also,

Many will need to draw down their money hoards thereby increasing demand for loanable money-capital, causing global interest rates to rise.”

This also illustrates the third point, which is that for all those economies for which oil represents an input cost to far greater degree than it represents a revenue, the fall in oil prices represents good news. George Osborne may lose several billion pounds in tax from the fall in the oil price, but British capital, which sees the amount it must advance to cover its energy costs, its transport costs, or for the important petro-chemical industry, its raw material costs, fall significantly this represents not just a significant boost to the rate of profit, but a release of capital that can be used for further accumulation, and consequent economic growth. The same applies for all of the consumers, who have revenue released for spending on a range of other commodities, the demand for which will thereby rise, especially as the prices of those commodities falls too, in response to the fall in their own input costs. What Osborne loses in North Sea and petrol taxes, he more than makes up for in the increase in VAT on the sale of these other commodities, as well as in income taxes resulting from the higher level of economic growth resulting from lower oil prices. In the US, the fall in the oil price, is estimated to have put an additional $1 trillion into consumers pockets, that can be used for the purchase of other commodities.

The extent to which the fall in the oil price will have an economic contractionary effect offsetting this expansionary effect is hard to tell. It is wrong, for example, to assume that just because some particular production is unprofitable, it must close down. As I've set out elsewhere, for primary products, large capitals have to adopt a long time-scale. They have to build up cash reserves during periods of high prices, so as to run them down during periods of low prices. A producer of oil, therefore, may continue to produce even if the current price per barrel does not cover the total cost of production per barrel, provided that the current revenue exceeds the current variable costs, and so makes a contribution to the fixed costs of production.

For smaller producers, especially where they have used loaned money-capital, rather than their own, and where, therefore, they must continue to make interest and capital repayments, the lack of adequate financial reserves, will mean they go bust. But, even this does not mean that the production and supply gets taken out. When the firm goes bust, all of the sunk costs – the costs of exploration, of sinking wells and so on – get written off. To the extent that they were financed from loaned money-capital, it is the bank or other financial institution that loses their money, to the extent it was financed by bondholders or shareholders, it is they that lose their loaned money-capital, i.e. the fictitious capital.

But, the real capital still exists, i.e.. the oil wells, mines, quarries etc. Their value may have been significantly depreciated as a result of this process, and consequently some new, usually much larger capital, picks it up for more or less nothing, as it buys the company lock, stock and barrel. As Marx sets out, it is not the physical destruction of capital that facilitates a recovery of the rate of profit, and economic growth – that would be ridiculous because a capital that is physically destroyed can produce nothing, including profit! - but only the destruction of its value.

“A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.” 

(Theories of Surplus Value, Part 2, p 496)

So long, therefore, that this new capital can sell a barrel of oil at a price that covers its current production cost, it is enabled to make profits, and because the value of the fixed capital has been massively reduced, its rate of profit, is thereby significantly increased.

As Marx puts it,

“This is one of the reasons why large enterprises frequently do not flourish until they pass into other hands, i. e., after their first proprietors have been bankrupted, and their successors, who buy them cheaply, therefore begin from the outset with a smaller outlay of capital.” 

(Capital III, Chapter 6, p 114)

This may well be the case with North Sea and other deep water oil production, therefore. However, it is not necessarily the case for oil produced by fracking. Often the fixed costs of such production may not be so great, because a lot of this production can take place without the need for exploration. Existing oil deposits, that were previously thought to have been economically exhausted, are simply subjected to these new technologies so as to extract remaining oil. However, it is then the current costs, which tend to be much higher than for conventional drilling. In order to fracture the rock and extract the oil, not only is more expensive, more sophisticated equipment required, but there is a considerable cost in respect of auxiliary materials, in the shape of the chemicals that must be pumped into the rock to cause the fracturing. Its not clear, therefore, that even where the fixed costs of production are written off, that many such facilities would be profitable at prices below $60 per barrel.

Given the extent to which these capitals have been established on the basis of loaned capital raised in the junk bond markets, it is no wonder that these bonds have been selling off rapidly. I will look at this in more detail in the next posts.

Northern Soul Classics - Tune Up - Junior Walker

Reminiscent of the Keele All Nighters.  If you want to know the roots of Northern Soul dancing, look no further than the film footage.

Friday, 19 December 2014

Fictitious Capital - Part 3

Considering the circuit of capital, as M – C... P... C' – M', the three forms of industrial capital are identifiable. Money-capital exists as M, which is transformed into the commodities which comprise the productive-capital, P, which is transformed into commodity-capital, C', which again is transformed into money-capital. But, the interest bearing-capital exists outside this circuit. This interest bearing capital exists as a sum of money-capital, which is not used to buy productive-capital, but which is instead loaned to a productive-capitalist, who requires to employ its use value. The fictitious nature of this capital arises because although it seems to possess the capacity of all capital to self-expand, because it is only loaned if it attracts interest, in reality, it has no such power. It is only able to attract interest, because real capital does self-expand, and produces profits.

The circuit of this interest bearing capital appears as simply M – M', so that it is loaned out, and appears to miraculously return as a greater sum, enhanced by the interest, like Jack's magic beans. But, in reality, it is M – M – C... P … C' – M' – M+i. The fact that this capital is fictitious is evidenced by the fact that the interest-bearing capital that is loaned at the start of this circuit is not an additional separate capital, from the money-capital, which is used to purchase productive-capital, but is the same capital that simply functions twice, once in the hands of the money lending capitalist, and once in the hands of the productive-capitalist who borrows it.

Yet, it is precisely from this that fictitious capital takes on its appearance as capital, and consequently gives the appearance that one and the same capital has multiplied itself not just once, but several times over! By giving the appearance that capital has been increased, it gives the illusion that wealth itself has increased, even though usually the opposite is the case, because the expansion of this fictitious capital goes along with an expansion of debt.

When A lends the lathe with a value of £10,000 to productive-capitalist B, the only capital in existence is £10,000, in the shape of the lathe, which participates in the production process, and thereby obtains its share of total surplus value, equal to £1,000 of profits. But, in return for the loan of this £10,000 of capital-value, A obtains a loan certificate, indicating that B owes them £10,000 plus interest. For A, this certificate appears as capital, and wealth for two reasons. Firstly, it appears as capital because as a result of earning interest, it appears to self expand its value, and secondly, it appears both as capital and wealth, because this certificate can itself be used as collateral. On the basis of the ownership of this certificate, A could borrow against it, to themselves obtain a loan of £10,000, for example.

It appears, therefore, that £20,000 of capital exists - £10,000 in the shape of the machine, and £10,000 in the shape of this loan certificate - where before only £10,000 existed, in the shape of the machine. Yet, the reality is that only £10,000 of capital exists here, in the shape of the machine as productive-capital. If B used the machine borrowed from A only to produce use values required for their own consumption, the machine would act only as a machine, and not as capital. It would produce no surplus value. All that B could give back to A would be the machine itself. They would have generated no surplus value out of which to give A any interest.

Similarly, if B borrowed £10,000 from A, rather than a machine, and simply used this money to cover their purchase of means of consumption, no surplus value would be created. In fact, because they would have consumed the commodities bought with that £10,000, they would not even be able to repay the original capital sum to A, let alone any interest. There is nothing specific about the £10,000, as a loan, therefore, which enables it to self-expand its value. Interest is not some inherent characteristic of loanable capital.

The interest is only payable, if the loaned capital is used as actual real capital, as productive-capital, which generates surplus value. If A decides to liquidate the loan of the machine, that would require that B hand it over to them. But, as simply a return of the machine, all it provides for A, is then its original value, without any interest. Moreover, having had the machine returned to them, the fictitious capital itself disappears. If B is no longer in possession of the machine, A must similarly scrap the loan note raised upon it. It is then clear that this loan note did not represent real capital, and that the only real capital in existence was that represented by the machine.

If A wants to obtain the interest they would have received on the loan of the machine, the only way they can now do this is by becoming a productive-capitalist themselves. They must put the machine to work as capital, and thereby create a surplus value. They can then obtain the interest out of this surplus value, just as previously B would have paid the interest to A, and would have retained the rest of the surplus value themselves, as a profit of enterprise. But, again, it is clear here that the only capital that actually exists, is the £10,000 of productive capital in the form of the machine.

Thursday, 18 December 2014

House Prices Fall The Most On Record

According to Rightmove, asking prices for houses fell by the most ever on record last month. Nationally, they fell by 3.3%, which if they continued to fall at that rate would mean a fall of more than 40%, or about the same extent of fall that occurred in 1990. In London and East Anglia they fell by more than 5%, which over a year would be a fall of more than 60%, or equivalent to the falls seen after 2008 in the US, Ireland and Spain.

All this is despite the best possible conditions for house prices. Interest rates remain at low levels not seen for 300 years, and the government has been providing guarantees to lenders for loans, along with numerous other measures to keep the huge house price bubble inflated. Its now clear that interest rates are rising sharply on a global level. That is first affecting emerging market economies. Their bond yields have risen sharply, and official interest rates in Turkey, Russia, Brazil, India, South Africa and elsewhere have been ramped up to around 12%. In Russia, also affected by the fall in the price of oil, it has increased its interest rates from 12.5% to 17% overnight, as the Rouble fell.

Temporarily, this selling of emerging market bonds has caused a rush of hot money into the US, UK, and Eurozone bonds, but just like the warning of a tsunami is that the sea gets sucked up off the beach, before the wall of water arrives, so with these interest rates. When the currencies of the emerging markets have fallen sufficiently, and their interest rates risen sufficiently, that wall of hot money will fly out of the US, UK, and EU and into the emerging markets in search of these higher rates, and the potential of currency gains. Interest rates in the US, UK and EU will then rise sharply.

Already, the US Federal Reserve has given notice to markets that it will raise official interest rates in March or April of next year. The markets, and stock market cheerleaders do not want to hear that message, and continue to believe that the US will not raise rates until after June next year, if at all, but that is because they have become addicted to lax monetary policy to keep financial market bubbles inflated. But, the fall in the price of oil has already exposed the potential for a new sub-prime crisis, as the large scale borrowing by small and medium energy companies to finance fracking in the US and elsewhere via junk bonds, has already led to a freezing up of that market, and the start of a new credit crunch.

Its not just the new fracking companies. Recent analysis shows that North Sea oil production is now unprofitable at these prices. The likelihood is that many of these companies will go bust, and their debts will go into default. That is exactly the same kind of scenario that existed ahead of the financial crisis of 2008.

Moreover, as I have pointed out previously, the House Price Indices put out by the estate agents and building societies are a sham.  Asking prices are pretty meaningless, because a house can be put up for sale at any price. What it actually gets sold for is a completely different matter. The Asking price indices are based on the price that houses are initially listed at, and takes no account of any reductions of the asking price in subsequent months even, let alone, how much the house is actually sold for. All the evidence is that selling prices are around 30% below original asking prices, outside London, and even in London, it appears that the bubble is beginning to burst.

Moreover, the other metrics used such as the length of time properties are on estate agents books are also phoney. For one thing, houses that are on the books of one agent for 6 months or more, often get taken off not because they have been sold, but because the seller gets fed up and tries their luck with another agent. I know of many houses around me, where the seller has gone through three or more agents one after another, before they eventually sold their houses, again usually for around 30% what they originally listed for. Sellers would have saved themselves a lot of time and effort had they just set the asking price 30% lower in the first place.

The agents have other tricks up their sleeves too. At auctions, where bids are below the reserve price, the agents themselves put in bids to try to push the price up. Where sellers look to be becoming fed up with the agent for lack of progress, it is not unusual for the agent to suddenly announce a potential buyer, only for that buyer to subsequently disappear. At times of year like now, when agents know that demand slows, it is again not unknown for the amount of houses on their books to be suddenly reduced.

This seems to have increased considerably over recent months, as there has been a preponderance of houses that have been designated as sold subject to contract, only for the sale to fall through and the house be once more back on the market. Some of this is undoubtedly due also to the fact that the banks have tightened their lending criteria, and many people discover that their income is not sufficient to meet the monthly repayments, even before interest rates rise.

There has also been a notable increase in the number of repossessed houses being put up for sale. They are usually not listed as being a repossession, because such terms start to spook the market, and show up in the official figures. Instead, such sales are nowadays described as “corporate sales”, which simply means that the bank has foreclosed on the loan, but sold off the asset to a specialised property company for disposal.

All of this means that the conditions for a new more serious financial crash are being put in place. Interest rates are rising globally, credit in the high yield section of the market has already frozen up, financial asset prices are at astronomical levels, those levels are based on multiple levels of fictitious capital, which is hugely inflated, and unsound.

This is a huge Ponzi Scheme, the likes of which has not been seen before in history. It is a house of cards that must come tumbling down.   

Capital II, Chapter 20 - Part 35

11) Replacement of the Fixed Capital 

“In the analysis of the exchanges of the annual reproduction the following presents great difficulty. If we take the simplest form in which the matter may be presented, we get:

I) 4,000 c + 1,000 v + l,000 s = 3000

II) 2,000 c + 500 v + 500 s = 9,000.” (p 453)

The reason it poses a difficulty is that this formula is based on an equality that seems to disappear once you introduce the idea of the value of the wear and tear of equipment. The value of wear and tear of fixed capital is transferred to the value of the final product, and recovered in its price. However, the fixed capital continues to function and is only replaced some time later. Consideration then shows why this appears to breach the equality condition of the previous formula. Department 1 (v+s) bought £2,000 of consumer goods from Department 2. They were able to do this because Department 2 bought £2,000 of means of production from Department 1.

However, suppose of Department 2's production £200 of value comprises £200 of wear and tear of machinery. This will mean that the machinery continues to function, and as seen previously, Department 2 will then hoard the £200 of the proceeds from the sale of its commodities, to fund their eventual replacement. However, the consequence of this is that Department 2 only spends £1,800 buying means of production from Department 1. Department 1 is then £200 short of money revenue with which to buy consumer goods.

Marx sets about explaining how this apparent problem is resolved. In setting this out, Marx uses the terms “wear and tear” and “depreciation” interchangeably. I am following his practice here because it is simply easier to talk about depreciation. However, what is really meant here is wear and tear not depreciation. As set out elsewhere, except in special circumstances, depreciation does not transfer value. On the contrary, because it involves a reduction in use value, outside the production process, it represents a reduction in value, and capital loss.

What is being analysed here is the instruments of labour, big and small, from the tiniest tool to the largest mine, railway or factory. The raw and auxiliary materials are not involved here because they are wholly consumed, once they enter the production process. Of the actual instruments of labour, some of them too will be consumed during the year, and as we are considering the national product of a year's labour, they too can be discounted. Finally, some of the instruments of labour will require extensive repairs to continue functioning, some may even require entire parts and components to be replaced.

“These parts belong in one category with the elements of fixed capital which are to be replaced within one year.” (p 453)

The circulating capital, in the form of the raw and auxiliary materials, as well as the labour-power consumed, must be continually reproduced, changed from the money form back into the form of productive capital. It doesn't matter if these materials are bought in large quantities infrequently, or small quantities frequently. If they are bought in large amounts less frequently, so that a stock of material builds up, waiting to be used, this does not change matters either.

Here, a larger sum of capital has been advanced at the start to purchase these means of production, and as seen previously, the capital so advanced returns as the commodities produced as a result are sold. The capital as it returns, accumulates ready to make the next purchase.

“It is not a revenue-capital; it is productive capital suspended in the form of money.” (p 454)

But, this is not the case with the fixed capital. It is wholly employed in the production process, but only that part of it used up in wear and tear transfers its value to the end product. When the commodity is sold, the money equivalent of that wear and tear is realised, in the price of the commodity, along with all the other components of its value. But, the money equivalent of the wear and tear then separates off, and is hoarded until it is needed to replace the fixed capital entirely.

“This money then serves to replace the fixed capital (or its elements, since its various elements have different durabilities) in kind and thus really to renew this component part of the productive capital. This money is therefore the money-form of a part of the constant capital-value, namely of its fixed part. The formation of this hoard is thus itself an element of the capitalist process of reproduction; it is the reproduction and storing up — in the form of money — of the value of fixed capital, or its several elements, until the fixed capital has ceased to live and in consequence has given off its full value to the commodities produced and must now be replaced in kind.” (p 455)