Moreover, its clear how this partial crisis could then be transformed into a general crisis. We have made no assumption about any change in the value of either the flax or labour-power. So, 10 kilos of flax still has an exchange value of £1 as before, which is why the yarn producer can now only buy 750 kilos of it. Similarly, the labour-power of a worker still has an exchange-value of £1, so that not only does the capitalist now only need 75 workers, to process the 750 kilos of flax, but, with the £75 of capital they have left, they can only afford to employ 75 workers.
If the situation facing this yarn producer also faces all other spinners, then they all will find that they cannot reproduce their capital. All will be faced with reducing their purchases of flax by 20%, and with laying off workers. (In fact, as Marx describes in Capital III, Chapter 15, what would actually tend to happen here is that, for a time, each firm would continue to produce at at least the same level, and may even increase output, in an attempt to reduce its costs, so as to grab market share; eventually the less efficient firms would go bust, so that yarn production, and the capital employed in it, would decrease not via a reduction in output by each capital, but by a reduction in the number of capitals, and a consequent concentration of the remaining capital, which also implies a rise in average efficiency in the industry, and reduction in the market value of yarn.) So, if the flax growers continue to produce at the previous level (let alone on a larger scale, as part of their own capital accumulation, and attempt to gain market advantage) which can be expected given that their production would have been set in the previous year, when they planted their seed, then the flax growers will find that they have overproduced by 20%. They too will then find that its market price falls, possibly below the cost of production, so that the capital, in wear and tear of machinery, fertiliser and labour-power cannot be reproduced.
It's not because its physically unavailable to be reproduced. It may, indeed, be available in abundance. The reason it cannot be reproduced is because the flax grower no longer has the capital in the form of exchange-value, money, to be able to buy it, just as the spinner did not have the capital, in the form of exchange-value to be able to buy the flax and labour-power, in the former quantities.
“Accumulation, however, stagnates even more. Surplus-value amassed in the form of money (gold or notes) could only be transformed into capital at a loss.” (p 494)
In other words, suppose the spinner had previously hoarded surplus value from earlier years. If they had the £50 thereby available to make up the difference, so that they bought once more 1,000 kilos of flax, and kept the 100 workers employed, they would then also make an additional loss on this further investment and production. In fact, by increasing the supply of yarn on to the market even further, they would exacerbate the crisis of overproduction, and push market prices even lower, thereby intensifying the losses and the crisis. So, they would tend to throw any such money hoards and reserves into the money market, so as at least to earn interest. But, with other capitalists doing the same thing, and capitalists cutting back their investment in productive-capital, the result is an increase in the supply of loanable money-capital along with a reduction in demand for loanable money-capital, so that interest rates fall.
“It therefore lies idle as a hoard in the banks or in the form of credit money, which in essence makes no difference at all. The same hold up could occur for the opposite reasons, if the real prerequisites of reproduction were missing (for instance if grain became more expensive or because not enough constant capital had been accumulated in kind).” (p 494)
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