The difference between exchanges where money acts as the means of circulation of commodities, and where credit takes its place, is that the instigator of the exchange is reversed. Where money acts as the means of circulation, the buyer must instigate the exchange. They advance money to buy the commodity. For example, the clothes maker must have £100 in money, and must advance it to the farmer for the purchase of the wool. Only then, at some time later, can the farmer return this £100 to the clothes maker, in exchange for the suit.
But, where credit takes the place of money, as the means of circulating commodities, it is the seller that takes the initiative. Now, it is the farmer who, as before, already has £100 of value, tied up in wool, that initiates the trade. They advance the wool to the clothes maker, who then uses it to produce clothes, and then returns the £100 of value to the farmer, in the metamorphosed shape of the suit.
With money acting as means of circulation, £200 of value needed to exist - £100 as wool, and £100 as gold money exchanged for it. But, with credit, only the £100 of value already existing in the shape of the wool is required. The significance of this for capitalist production and accumulation is obvious.
In passing, its important to note, that whether this exchange is conducted using money or credit, the difference with the situation under barter, is also obvious, and as Marx sets out in Theories of Surplus Value, demonstrates why Say's Law is wrong, and so why Ricardo and others were wrong in believing that crises of overproduction were impossible.
In conditions of barter, the farmer takes his £100 of wool to market, and exchanges it for a £100 suit. The commodity suit has been bought by the commodity wool. However, if the farmer sells the £100 of wool to the clothes maker for £100, promising to come back and buy a £100 suit a month later, there is no guarantee they will actually do so. They may, during the month, decide to spend the £100 on some other commodity, or simply decide to save the money. In that case, the suit will not be exchanged with the wool. It will have been overproduced. Indeed, what is true of the suit may be true for a range of commodities, as sellers of commodities, having already obtained money for them, fail to complete the second act of the exchange, of money for commodity, and instead hold on to the money.
“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2 p 505)
Or they may decide they want to buy commodities but not in the same quantity, or at the same price.
“No grounds exist therefore for assuming that the possibility of selling a commodity at its value corresponds in any way to the quantity of the commodity I bring to market. For the buyer, my commodity exists, above all, as use-value. He buys it as such. But what he needs is a definite quantity of iron. His need for iron is just as little determined by the quantity produced by me as the value of my iron is commensurate with this quantity.
It is true that the man who buys has in his possession merely the converted form of a commodity—money—i.e., the commodity in the form of exchange-value, and he can act as a buyer only because he or others have earlier acted as sellers of commodities which now exist in the form of money. This, however, is no reason why he should reconvert his money into my commodity or why his need for my commodity should be determined by the quantity of it that I have produced. Insofar as he wants to buy my commodity, he may want either a smaller quantity than I supply, or the entire quantity, but below its value. His demand does not have to correspond to my supply any more than the quantity I supply and the value at which I supply it are identical.”
(Theories of Surplus Value 3)
Where the two acts of the exchange of commodities is separated by the intervention of money or credit, there is no reason why the second act of the exchange will be completed, or completed in full. The fact that two equivalent values exist does not at all mean that, in the market, the commodities that represent these values will actually exchange at those values, because, as Marx states above, this depends not only on the supply, but also on the demand, and the demand is a function not of value, but of use value.
Suppose the situation was reversed. The clothes maker comes to market with a suit. They sell it for £100, to the farmer. A month later, the clothes maker meets the farmer, who has brought £100 of wool to market, which comprises 100 kilos of wool. However, there is no reason the clothes maker will buy it. They may now only require 80 kilos of wool, which would leave the farmer with an overproduction of 20 kilos, and £20 of value they could not realise. Or, as Marx suggests, the clothes maker may say to the farmer, “I actually don't need the 100 kilos of wool, at the price of £100, but I would buy it from you for £80.”
As Marx says, the separation of sale and purchase that arises with commodity production and exchange, creates one of the bases of a breakdown of the reproduction process, and under capitalism, which expands the production of use values massively, without regard for the ability of the market to expand to absorb them, creates the inevitability of crisis. I have described this in more detail in my book, Marx and Engels' Theories of Crisis.
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