Chapter 2.2, Medium of Exchange, a) The Metamorphosis of Commodities - Part 4 of 8

Mill, Say, and Ricardo proceeded as though this was what continued to exist, despite the intermediation of money, and circulation of commodities, and so removed the existence of contradiction from their analysis. But, the owner of linen, who has sold it and obtained money, which they now hand over to buy wine, depends upon that money ultimately flowing back to them, i.e. the value of their own commodity, linen, again being realised. Their sale of linen, in the past, to obtain money, was not a single act, but simply a moment within a continuous circuit of production and exchange.

Under barter, they would have exchanged linen directly for wine, and so achieved that. But, now, having obtained money, they exchange it for wine. Now, the wine producer must exchange this money for commodities, from a farmer and a tailor, or any number of other commodity producers, who, in turn, pass this money on to the farmer and the tailor, on its route back to the linen producer. There is absolutely no reason why it must actually do so.

The wine producer, having obtained money from the linen producer, may simply hold on to it, and not spend it; they may spend only part of it; they may spend all of it, but only after a delay. As Marx describes in Capital II, and as I have set out in my book, Marx and Engels Theories of Crisis, all these things can cause the circuit of capital, and circulation of commodities to break down.

Although gold is a commodity, and also becomes the money commodity, it is quite wrong to view the exchange of commodity for money/gold as simply an exchange of two commodities, C – C, as under barter. Gold is a commodity, and where gold is produced as a commodity, its value is determined as with any other commodity, by the labour-time required or its production. The actual labour used for gold production now becomes the proxy for abstract labour. The value of gold, thus determined, forms the basis of its exchange-value to every other commodity, and its this that enables it to act as money commodity. But, gold as commodity is not the same as gold as money, as described earlier.

“... the value of gold is already given in the prices of commodities. It would therefore be entirely wrong to assume that within the framework of circulation, the relation of gold and commodities is that of direct barter and that consequently their relative value is determined by their exchange as simple commodities.” (p 90)

Firstly, the nominal prices of commodities are determined by gold as nominal money/universal equivalent. Only then, if the commodity finds sufficient demand, at this price, is it actually exchanged for real gold as commodity.

“but in so far as it is the price of the commodity that is realised in gold, the commodity is exchanged for gold as money and not as a commodity, i.e., for gold as the materialisation of general labour-time. But the quantity of gold for which the commodity is exchanged in the process of circulation is in both cases determined not by means of exchange, but the exchange is determined by the price of the commodity, by its exchange-value calculated in terms of gold.” (p 91)

Marx inserts a note to the usual effect that this does not mean that market prices for commodities may not fluctuate above or below their value, as a result of short-term movement and imbalances in supply and demand.

When the wine producer sells wine which was not a use value for them, and obtains money, they obtain a use value in a durable form. Money is always use value, because it is the universal equivalent, and can be used to buy any other commodity, and so obtain its use value. One reason that precious metals are chosen to act as the money commodity is their durability. When the wine producer obtains gold, they do not have to worry that it will perish, be eaten by mice and so on. Its use value persists undaunted, and its precisely for this reason that its owner does not need to use it immediately. Again, this difference between money and money tokens is one that must be understood to understand inflation, because money tokens certainly can lose use value, depreciation, simply as a consequence of time.

“The golden chrysalis state forms an independent phase in the life of the commodity, in which it can remain for a shorter or longer period. The separation and independence of the acts of purchase and sale is a general feature of the labour which creates exchange-value, whereas in barter the exchange of one discrete use-value is directly tied to the exchange of another discrete use-value.” (p 91-2)

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