If the market price of yarn exceeds the price of production for any length of time, the surplus profits that result will lead to existing producers increasing their output, and other producers investing capital in that sphere, so that the supply of yarn rises, and its market price falls, and vice versa. But, capital has no value, and consequently no price of production, around which this market price, the rate of interest can rotate. The price of production of a commodity is its “natural price”, but there is no such natural price, for money-capital, no natural rate of interest, because capital has no value, and no price of production.
But, capital itself, as loanable money-capital, does become a commodity. It is something that is owned, and whose use value can be sold to a buyer. The use value of this capital, be it in the form actually of money-capital, or in the form of say a machine, is its ability to produce the average profit. If I loan a machine to someone, as capital, Marx makes clear, what I am loaning to them is not the machine as a machine – which is simply a commodity – but its use value as capital, the ability to produce a profit.
A machine, as a machine is a commodity. If I sell it, I obtain only its value as a commodity. Let us say, this value is £1,000. However, if I loan the machine to a capitalist the capitalist then uses the machine as capital. If the average rate of profit is 10%, this capitalist will then expect to make £100 profit from utilising this machine as capital. What I sell to the borrower of the machine, therefore, is not the machine itself, or the use value of the machine, as a machine, but its use value, as capital, to produce this £100 of profit. If I simply sold the machine as a commodity, I would obtain £1,000 in exchange for it, but by loaning the machine, as capital, I expect to receive the machine back again, plus an amount of interest. Discounting any wear and tear, I now have the original £1,000 in the shape of the machine, plus this additional amount of interest, which is the market price of the use value of £1,000 of capital.
Unlike a commodity that has value, or a price of production, therefore, there is no objectively determinable value around which the price of capital rotates. But, that does not mean that there are not objectively determinable factors which create the demand and supply for this money-capital. They were referred to above. The demand for money-capital will rise when the rate of profit is rising sharply, and encouraging an accumulation of capital. But, Marx also describes conditions where the demand for this money-capital will rise even more sharply when the opposite conditions apply.
During a period of crisis, when firms are unable to realise their profits, or even to sell their products, they will demand money-capital merely to be able to stay afloat, to pay the wages to their workers, to pay bills to their suppliers and so on. What they really are demanding is not money-capital, as such, but simply money, liquidity. But, as far as the owner of money-capital is concerned, they do not care what purpose the borrower intends for it, whether to use it as capital, for consumption, or simply as currency. What they are lending is money-capital, and its use value as capital to produce the average rate of profit. During such periods, the rate of interest rises to its highest levels, because the borrowers will pay almost any amount of interest to stay in business. Outside of these crisis conditions, however, the objective limits within which the rate of interest moves are set by the fact that the owner of money-capital will not lend it for free, and the capitalist will not pay a higher rate of interest than the rate of profit they can make from utilising it as capital.
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