“Or, S buys from F raw materials for 1 milliard in money, and means of subsistence for 1 milliard in money. F buys goods from S for 1 milliard [in money]. In this case 1 milliard flows back to S, but only because it was assumed that in addition to the 1 milliard in money he receives from the landlord, and the 1 milliard in goods that he still has to sell, he had over and above this another 1 milliard in money which he himself had thrown into circulation. Instead of 1 milliard circulating the goods between him and the farmer, on this assumption 2 milliards would have been used for it. Then 1 milliard returns to S. For he makes purchases from the farmer for 2 milliards in money. The latter buys 1 milliard from him, for which he pays him back half the money he had received from him.” (p 334)
In essence, either S buys in two stages, so that he pays out ₣1 billion for food, which flows back to him as farmers then buy manufactured goods, and he then uses this same ₣1 billion to buy means of production, or else he makes one purchase of ₣2 billion for food and material, for which he must hand over ₣2 billion in money, and of which he then only gets back ₣1 billion, when the farmer buys manufactured goods.
In the second case, ₣2 billion rather than ₣1 billion of money must be in circulation, to bring about the circulation of the same ₣3 billion of commodities - ₣1 billion manufactures, ₣1 billion food, ₣1 billion raw material.
In the first case, S has no money other than what they receive from L. They buy food with it, and it returns to them as F buys manufactured goods. But, S then uses this money to buy material so that at the end they again have no money.
In the second case, S have ₣1 billion in addition to the ₣1 billion received from L. They thereby throw this additional ₣1 billion into circulation to buy material, and this capital flows back to them as F buy manufactured goods, so that at the end they again have ₣1 billion in money.
“In the first case S makes purchases from F for 2 milliards, and F from S for 1 milliard. So in both cases the balance in F’s favour is 1 milliard. But this balance is paid to him in such a way that his own money flows back to him, because S first buys 1 milliard from F, then F 1 milliard from S, and finally S 1 milliard from F. In these transactions 1 milliard has circulated 3 milliards. But in the aggregate the value in circulation (if the money is real money) has been 4 milliards, 3 milliards in commodities and 1 milliard in money. The amount of money originally thrown into circulation (to pay F) and circulating was never more than 1 milliard—that is, never more than the balance which S had to pay to F. Because F bought from him to the amount of 1 milliard before he buys from F to the amount of 1 milliard for the second time, S can pay his balance with this 1 milliard.” (p 335)
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