This is where confusion arises, as illustrated by the Keynesians and post-Keynesians. Suppose that 2,000 such notes are put into circulation, i.e. £2,000, with each circulating ten times, representing £20,000, or twice as much as the value of gold that would have circulated, and representing 2 million hours of labour-time. They do this, because, nominally, each note represents £1, the standard of prices. However, in reality, that is impossible. They continue to represent the money equivalent to only 1 million labour hours. Each note is then, in practice, devalued by 50%, so that, in total, they represent only this 1 million hours of money equivalent. The notes themselves are not changed to read, £0.50, but continue to circulate as £1 notes, the devaluation of the standard of price is manifest in the only way it can be, which is by nominal prices of commodities themselves doubling. The Keynesians and post-Keynesians fail to grasp this, because they confuse money tokens with money itself. An example of this confusion is also given in this article by Martin Thomas.
Some coins will circulate faster and some slower, because some coins, for example, of lower denomination, will be involved in the purchase of commodities of lower value, of which the number and speed of transactions is itself much faster. A penny coin handed to a shopkeeper for a small quantity of sweets, is rapidly passed back to another customer in change, for example, and this customer then soon uses it for some other small purchase. As Marx describes, this is why it is the volume and speed of transactions that is the main determinant of the velocity of circulation of currency.
“Since moreover money always confronts commodities as a means of purchase and as such causes commodities to move merely by realising their prices, the entire movement of circulation appears to consist of money changing places with commodities by realising their prices either in separate transactions which occur simultaneously, side by side, or successively when the same coin realises the prices of different commodities one after another.” (p 100)
For the commodity owner, it represents exchange-value and this exchange-value is realised by sale in money. The commodity they have sold only becomes a use-value for the buyer, realised in their consumption of it. But, the money obtained by the seller does not have use-value as a commodity. They do not acquire it to consume it, but solely because it represents universal labour, exchange-value incarnate. Its use-value to them is that it can be immediately exchanged for any other commodity, to an equal amount of value. By having no use-value of its own, it has the use value of every other commodity, for which it can be exchanged. Unlike commodities, it remains in circulation, fulfilling this function.
“Money starts its circuit from an endless multitude of points and returns to an endless multitude of points, but the coincidence of the point of departure and the point of return is fortuitous, because the movement C—M—C does not necessarily imply that the buyer becomes a seller again. It would be even less correct to depict the circulation of money as a movement which radiates from one centre to all points of the periphery and returns from all the peripheral points to the same centre. The so-called circuit of money, as people imagine it, simply amounts to the fact that the appearance of money and its disappearance, its perpetual movement from one place to another, is everywhere visible.” (p 102)
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