When the Bank of England was established, therefore, all of those interests of usury, that had built up their monopoly of hoarded money over millennia, the goldsmith that had sole control over minting coins and in lending to government, did all they could to oppose it. For a long time, the Bank's notes were only accepted below their nominal value.
A lot of the illusions in the power of credit, Marx says, flowed from the writing of Saint-Simon, and his followers like Emile Pereire. In his earlier writing, Saint-Simon, like the Physiocrats, saw the producer not as the farm labourer, but the capitalist farmer, not the factory worker but the industrial capitalist.
“All his former writings are, indeed, mere encomiums of modern bourgeois society in contrast to the feudal order, or of industrialists and bankers in contrast to marshals and juristic law-manufacturers of the Napoleonic era. What a difference compared with the contemporaneous writings of Owen!” (p 605)
Engels interjects at this point.
“Marx would surely have modified this passage considerably, had he reworked his manuscript. It was inspired by the role of the ex-followers of Saint-Simon under France's Second Empire where just at the time that Marx wrote the above, the world redeeming credit fantasies of this school through the irony of history were being realised in the form of a tremendous swindle on a scale never seen before. Later Marx spoke only with admiration of the genius and encyclopaedic mind of Saint Simon. When in his earlier works the latter ignores the antithesis between the bourgeoisie and the proletariat which was just then coming into existence in France when he includes among the travailleurs that part of the bourgeoisie which was active in production, this corresponds to Fourier's conception of attempting to reconcile capital and labour and is explained by the economic and political situation of France in those days. The fact that Owen was more far sighted in this respect is due to his different environment, for he lived in a period of industrial revolution and of acutely sharpening class antagonisms.” (Note 24, p 605)
The followers of Saint-Simon argued that bankers could always provide money-capital for capitalists cheaper than they could secure it themselves, by securing the money of the idle rich. Marx, however, points out that it is wrong to see the funds secured by banks as the money of the idle rich. It is idle money, in the sense that it is not being used for other purposes, but it is money that comes from active productive and commercial capital, as well as the temporary savings of workers.
Marx writes,
“But it should always be borne in mind that, in the first place, money — in the form of precious metal — remains the foundation from which the credit system, by its very nature, can never detach itself. Secondly, that the credit system presupposes the monopoly of social means of production by private persons (in the form of capital and landed property), that it is itself, on the one hand, an immanent form of the capitalist mode of production, and on the other, a driving force in its development to its highest and ultimate form.” (p 606)
However, its not clear that the first statement is true. Precious metal as the money commodity only acts as the physical manifestation of value, as its universal equivalent form. It fulfils that function so far as individuals require the security of knowing that what they hold or have a claim to itself possesses that value. But, today, modern fiat currencies have no direct relation to precious metal, as witnessed by the daily wide variations of gold and silver prices measured in pounds, dollars, euros and yen.
Money, as universal equivalent form of value is merely a claim to a portion of total social labour-time, and credit money is just another form of such a claim. The floating exchange rates of different countries, do not vary because of some relation to the value of precious metal but partly because of the different levels of productivity and prices between countries. A dollar still gives its owner a claim to a share of total global social labour-time, whether it is to be exchanged for commodities in the US or Japan. The exchange rate then simply reflects the difference between what that quantity of labour-time represents in the US as opposed to Japan.
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