Capital III, Chapter 32 - Part 10

So, its clear that the movements of loan capital are determined by the movements of real capital, both productive-capital and commodity-capital, but are not synonymous with it. On the contrary, as Marx pointed out earlier, they can often move in the opposite direction.

“In times of stringency, the demand for loan capital is a demand for means of payment and nothing else; it is by no means a demand for money as a means of purchase. At the same time, the rate of interest may rise very high, regardless whether real capital, i.e., productive and commodity capital, exists in abundance or is scarce.” (p 515)

At such times, businesses do not require money-capital to advance for additional purchases. They already have unsold commodities, without producing more; they have unused means of production without buying more. They need loan capital to make up for the fact that they have not been able to reproduce the capital they have consumed, but now need to pay for it.

As described earlier, where producers and merchants have securities to put up as collateral, their demand for loan capital is only a demand for money, because they are exchanging a claim on capital in one form – the security – for a claim on capital in another – the money. But, if they have no collateral, to exchange against the loan, this is a demand for money-capital.

“This is the point where both sides of the controversy on the prevalent theory of crises are at the same time right and wrong. Those who say that there is merely a lack of means of payment, either have only the owners of bona fide securities in mind, or they are fools who believe that it is the duty and power of banks to transform all bankrupt swindlers into solvent and respectable capitalists by means of pieces of paper. Those who say that there is merely a lack of capital, are either just quibbling about words, since precisely at such times there is a mass of inconvertible capital as a result of over-imports and over-production, or they are referring only to such cavaliers of credit who are now, indeed, placed in the position where they can no longer obtain other people’s capital for their operations and now demand that the bank should not only help them to pay for the lost capital, but also enable them to continue with their swindles.” (p 515-6)

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