What this means is that capital itself, i.e. the use value of capital, its ability to self-expand, can now be sold as a commodity. When the owner of money or of a machine lends this money or machine, what they are lending is this use value of capital, its ability to self expand in value. The loan amounts to the sale of this use value for a given amount of time, and the rate of interest is the price for this use value. As Marx says, one difference between the rate of interest and the rate of profit, is that when capital is advanced, the capitalist has no real knowledge of when it will return with a profit, but when money-capital is loaned, the lender always knows when it will return, and what the amount of interest it will produce will be.
What makes interest-bearing capital different under capitalism, compared to its manifestation in all previous modes of production, is the fact that it is the development of an average rate of industrial profit, which makes it possible for capital itself to be sold as a commodity. All industrial capital, be it productive-capital or commercial capital, can claim the average rate of profit. All industrial capital, therefore, whether it produces surplus value itself or not, has this use value of being able to self expand by this average rate of profit. So, anyone who has capital can lend it to someone else, and can charge a price for this use value, i.e. a rate of interest.
In previous modes of production, there was no average industrial rate of profit, and so capital could not be sold as a commodity. What defines interest-bearing capital under capitalism, and subordinates it to industrial capital, is precisely this. If the average rate of industrial profit is 10%, then capitalists will not borrow capital at a 10% rate of interest, because if they do, then all of their profit is wiped out, and there would have been no point in borrowing the money to begin with. So, this always puts a limit on the rate of interest that industrial capitalists will be prepared to pay, and so limits the level of demand for money-capital. It is only where money is sought, not to use as money-capital, but simply as money, i.e. as currency that this does not apply. So, for example, as Marx says, when a crisis erupts, one phase of the crisis is what he calls a crisis of the second form, which is a crisis of payments.
Capitalism creates commercial credit along with its own development. This commercial credit means that capitalists do not require money itself to undertake transactions between them. This in itself is a major benefit to capital, because it reduces the cost of producing money – particularly when money still took the form of precious metal coins. Commercial credit means that transactions are speeded up. But, in a crisis, as some buyers default on payments, every business begins to demand payment in cash, and stops giving credit. That in itself causes the demand for money to rise, which leads to rising interest rates. A classic example of that was the 1847 crisis, which was the result of a rising demand for money for circulation due to rising food prices following a failure of the food crop, combined with a demand for money to cover calls on the purchase of railway shares, as a stock market bubble inflated, whilst the Bank of England curtailed the supply of currency due to the requirements of the 1844 Bank Act, which resulted in a credit crunch.
This creation of commercial credit is itself one way in which the power of the money lenders is curtailed, because, now the capitalists can bypass them. But, when a payments crisis erupts, and businesses need money itself to pay their bills and stay afloat, they are prepared to pay any rate of interest in order to do so. This is the same conditions that apply with Usurer's Capital. The usurer does not lend money to be used as money-capital, but merely to be used as currency, and this same phenomenon can be seen periodically when such crises erupt, and generally in relation to those who must borrow money as currency, rather than to act as money-capital. The consumer who must borrow to pay their bills to meet their requirements for consumption, for example, finds themselves paying usurious rates of interest to a bank for unauthorised overdrafts, to credit card companies, store card providers, and to pay day lenders, or loan sharks.
All of these forms of interest-bearing capital can be found in previous modes of production, which gives the appearance that interest-bearing capital under capitalism is simply a continuation of these existing forms. It also gives this appearance that interest is the natural fruit of capital, because it appears that this capital self-expands without any reference to production whatsoever. The payday lender who lends money to a desperate borrower obtains the interest on their money without it ever entering any process of production or exchange of commodities. Indeed, if a money-lender lends money to a capitalist, the money-lender is not bothered whether they use it productively or not. For them the circuit consists of M-M`, and the whole circuit that may or may not take place between these two points is of no concern to them. The capitalist may use the money productively or to fund their own consumption, and even if they use it productively they may not make a profit. Either way, at the end of the loan period the lender demands their money back along with the interest on it.
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