In considering the amount of money in circulation, as currency, it was the total value of commodities to be circulated/social labour-time that was determinant. For gold money, it is then determined by the value of gold, and the velocity of circulation. For money tokens, still representing and redeemable for gold, the same law applies, but, for fiat currency, it is the amount of social labour-time, represented by each note, multiplied by its velocity of circulation. However, as indicated earlier, this is not the case with money as means of payment.
“The volume of money in circulation as means of payment is first of all determined by the amount of payments due, that is by the aggregate prices of the commodities which have been sold, not of the commodities that are to be sold as is the case with simple money circulation. But the amount thus determined is subject to modification by two factors: first by the velocity with which a coin repeats the same operation, or the number of payments which constitute a dynamic chain of payments. A pays B, then B pays C and so on.” (p 144)
Without credit, if A buys from B, C from D, E from F, then money, as currency, is required in each of these exchanges, say £100, in each case, or £300 in total. But, with credit, that is not the case, because A owes £100 to B, C to D, and E to F. Each takes place without money, as currency. If F then owes A, and B owes C, and D owes E, all these debts cancel out. An IOU for £100 presented by F to A, is handed from A to B, who passes it to C, who passes it to D, who passes it to E, who passes it to F, who then rips it up. Or, with a central clearing house, such debt instruments are simply matched against each other and netted off, leaving only the net amount to be covered by actual payment in money.
“The velocity with which the same coin can act repeatedly as means of payment depends, on the one hand, on the interconnection of the commodity-owners' relations as creditors and debtors, in which the same commodity-owner who is a creditor in relation to one person is a debtor in relation to another, and so forth; and on the other hand, on the period of time separating the various dates on which payments are due.” (p 144)
In other words, it depends upon the mesh of all these contra payments between commodity owners, and the relative amounts of those payments, one to another, as when the payment from one falls due relative to when payment to them from their debtors falls due. As Marx describes, in detail, in Capital II, not only were numerous clearing centres established, but given dates for settlement were established early on. Its also not credit that makes this possible, but that credit itself arises because of the social relations already established.
“The same coin passes through various hands not because it acts as means of payment; but it is passed on as means of payment because these hands have already been joined. A far more extensive integration of the individual into the process of circulation is accordingly signified by the velocity of money as means of payment, than by the velocity of money as coin or means of purchase.” (p 145)
The fact that commodity production and exchange begins in the towns and cities, where markets are concentrated, means that, also, all of these mesh of payments are centralised in these large urban areas, which facilitates the development of clearing houses in those locations too.
“The amount of money required as means of payment thus depends not on the aggregate amount of payments which are due to be made simultaneously, but on the degree of their concentration and on the size of the balance left over after the negative and positive amounts have been offset against one another. Special devices for this type of balancing arise even if no credit system has been evolved, as was the case in ancient Rome. But consideration of them is no more relevant here than is consideration of the usual settlement dates, which in every country become established among people of certain social strata. Here we shall merely note that scholarly investigations of the specific influence exerted by these dates on the periodic variations in the quantity of money in circulation have been undertaken only in recent times.” (p 145)
In so far as these payments are concerned, exchange-value does not take on separate form as money. Money acts only as measure of value/unit of account, “in other words money becomes purely nominal money of account. Money functioning as means of payment thus contains a contradiction: on the one hand, when payments balance, it acts merely as a nominal measure; on the other hand, when actual payments have to be made, money enters circulation not as a transient means of circulation, but as the static aspect of the universal equivalent, as the absolute commodity, in short, as money.” (p 145-6)
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