The implication of Hume's theory is that neither commodities nor gold and silver have value, but that they simply come into a quantitative relation to each other.
“The fact that gold and silver are money only as the result of the function they perform in the social process of exchange is thus taken to mean that their specific value and hence the magnitude of their value is due to their social function. Gold and silver are thus things without value, but in the process of circulation, in which they represent commodities, they acquire a fictitious value. This process turns them not into money but into value: a value that is determined by the proportion of their own volume to the volume of commodities, for the two volumes must balance. Although then, according to Hume, gold and silver enter the world of commodities as non-commodities, as soon as they function as coin he transforms them into plain commodities, which are exchanged for other commodities by simple barter.” (p 164)
In fact, this barter is more akin to that in the exchange of surplus products, rather than that of the exchange of commodities. The exchange relation is then separated from value and becomes determined solely on the basis of supply and demand for different use values.
“But the world of commodities consists of an infinite variety of use-values, whose relative value is by no means determined by their relative quantities.” (p 165)
Hume believes that, because every commodity forms a quantitative proportion of all commodities, its money equivalent is an amount of gold that represents the same proportion of the total gold in the country. This ideas was developed by Montesquieu.
“The dynamic movement of commodities – a movement, which originates in the contradiction of exchange-value and use-value contained in the commodities, which is reflected in the circulation of money and epitomised in the various distinct aspects of the latter – is thus obliterated and replaced by an imaginary mechanical equalisation of the amount of precious metals present in a particular country and the volume of commodities simultaneously available.” (p 165)
Steuart criticises both Hume and Montesquieu, and arrives at basically a correct understanding of money and its circulation, Marx says, “because he does not mechanically place commodities on one side and money on the other, but really deduces its various functions from different moments in commodity exchange.” (p 165)
Marx quotes Steuart's comment,
““These uses” (of money in internal circulation) “may be comprehended under two general heads. The first, payment of what one owes; the second, buying what one has occasion for; the one and the other may be called by the general term of ready-money demands... Now the state of trade, manufactures, modes of living, and the customary expense of the inhabitants, when taken all together, regulate and determine what we may call the mass of ready-money demands, that is, of alienation.”” (p 165-6)
Marx makes this same distinction between money as means of payment, and money as means of circulation. The two together - “ready money demands” - are equivalent to the Keynesian category of the “transactional demand for money.”
Steuart goes on to note that, therefore, only a proportion of the total gold in the country can take the form of money.
““The standard price of everything” is determined by “the complicated operations of demand and competition,” which “bear no determined proportion whatsoever to the quantity of gold and silver in the country.” “What then will become of the additional quantity of coin?” – “It will be hoarded up in treasures” or converted into luxury articles. “If the coin of a country ... falls below the proportion of the produce of industry offered for sale ... inventions such as symbolical money will be fallen upon to provide an equivalent for it."” (p 166)
This is precisely what Marx describes in Capital III, in relation to the expansion of commercial credit, in times of economic expansion.
“The quantity of circulating bills of exchange, therefore, like that of bank-notes, is determined solely by the requirements of commerce; in ordinary times, there circulated in the fifties in the United Kingdom, in addition to 39 million in bank-notes, about 300 million in bills of exchange — of which 100-120 million were made out on London alone. The volume of circulating bills of exchange has no influence on note circulation and is influenced by the latter only in times of money tightness, when the quantity of bills increases and their quality deteriorates.”
(Capital III, Chapter 33)
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