Chapter 3 – Money, or the Circulation of Commodities
This chapter is concerned primarily with the various functions of money.
Money is the product of exchange, developing in accordance with the needs of exchange.
Measure of value – the commodity in terms of which the value of other commodities is expressed.
Means of circulation – in order to exchange one commodity for another the value of the first commodity has to be realised in the form of money and the money then realised in the use-value of the second commodity.
The circulation of commodities has the form C-M-C.
This is quiet different from the simple exchange of use-values C-C.
The separation of purchase and sale introduces the possibility that the whole system can break down: a commercial crisis, for every sale is conditional on previous purchases since the buyer must have money.
Means of purchase – while commodities enter and leave circulation, money remains within circulation. Thus a given quantity of money is necessary and sufficient to maintain the circulation of commodities.
Many economists (Monetarists) believe that the quantity of money determines the level of prices. Marx argues that with commodity money it is circulation that determines the movement of money and not vice versa, hence it is the level of prices that determines the quantity of money required.
Marx argues that token money can replace commodity money in the function of means of circulation, in which function it represents commodity money symbolically. With token money, if too much money is issued the currency will be devalued and price will rise.
Hoarding increases the quantity of money required.
The separation of sale from payment and the rise of credit money reduce the quantity required.