Capital III, Chapter 26 - Part 11

One of the committee members, Cayley, points out the flaw in the idea that the rate of interest rises because the value of money-capital rises due to a rising demand for it arising from an expansion of trade. He points out that an indication of an expansion of trade was the increase in the gold reserves, held by the Bank of England. However, he points out that when the reserves had been at £16 m., interest rates were around 3-4%, whereas when they had been at only £9 -10 m. interest rates had been at around 6-7%.

Its in this context that Overstone makes the comment referred to earlier, where he denies that industrialists and merchants are capitalists, believing that only money-capital is capital, and only the money-capitalists are capitalists.

Asked,

"Under a drain of bullion (of the Bank of England) is not the great strain, on the contrary, for capitalists to obtain money?" (p 426)

Overstone replies,

"No, it is not the capitalists, it is those who are not capitalists, who want to obtain money and why do they want to obtain money? ... Because through the money they obtain the command of the capital of the capitalist to carry on the business of the persons who are not capitalists." (p 426)

But, under further questioning he flounders. First, he is led to draw back from his previous statement and say,

“The parties who draw bills of exchange may be, and may not be, capitalists."(p 426)

Then he denies that bills of exchange represent the value of commodities in the same way that bank notes represent the value of gold. And, he once again shows a lack of understanding of the difference between money and capital, by seeing the discounting of bills as being a means of obtaining capital rather than money.

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