Chapter Two – Money or Simple Circulation, Measure of Value - Part 13 of 14

Just as material conditions determined which commodities were singled out as the money commodity, in different times and locations, so too material conditions determined which precious metal was selected, when they became the basis of money and standard of prices. In some places it was copper, others silver and others gold. Similarly, the standard of prices in each country is different, not just because of the use of different metals, but also the use of different weights of metal as the initial measure.

“In England, for example, the ounce as a weight of metal is divided into pennyweights, grains and carats troy; but the ounce of gold as the unit of money is divided into 3 7/8 sovereigns, the sovereign into 20 shillings and the shilling into 12 pence, so that 100 pounds of 22-carat gold (1,200 ounces) equal 4,672 sovereigns and 10 shillings. But in the world market, where state frontiers disappear, such national features of the standards of money disappear as well and are replaced by measures of weight generally used for metals.” (p 73)

The use of a standard of prices, for example £1, then replaces the expression of prices in terms of a quantity of gold. If a gram of gold has the name £1, and a metre of linen is equal to 1 gram of gold, its price is given as £1, not 1 gram of gold. And, it is precisely because the label £ remains, whilst the value of this £ falls to 0.5, 0.2, 0.1 grams of gold that the expression of price of commodities rises – inflation.

Money, also, thereby, becomes money of account. If I have a store of wheat, as well as measuring it as so many bushels – use value – I measure it as so many £'s.

“The transformation of commodities into money of account in the mind, on paper or in words takes place whenever the aspect of exchange-value becomes fixed in a particular type of wealth. This transformation needs the material of gold, but only in imagination. Not a single atom of real gold is used to estimate the value of a thousand bales of cotton in terms of a certain number of ounces of gold and then to express this number of ounces in £. s. d., the names of account of the ounce. For instance, not a single ounce of gold was in circulation in Scotland before Sir Robert Peel’s Bank Act of 1845, although the ounce of gold, called £3 17s. 10/2d. as the British standard of account, served as the legal standard of price.” (p 73-4)

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