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　　Theconverseistruewhentheproceedsfromtheenterprisediminish。Themarket-valueofthispaperisinpartspeculative，sinceitisdeterminednotonlybytheactualincome，butalsobytheanticipatedincome，whichiscalculatedinadvance。Butassumingtheexpansionoftheactualcapitalasconstant，orwherenocapitalexists，asinthecaseofstatedebts，theannualincometobefixedbylawandotherwisesufficientlysecured，thepriceofthesesecuritiesrisesandfallsinverselyastherateofinterest。Iftherateofinterestrisesfrom5%to10%，thensecuritiesguaranteeinganincomeof&pound；5willnowrepresentacapitalofonly&pound；50。Conversely，iftherateofinterestfallsto21/2%；

　　thesamesecuritieswillrepresentacapitalof&pound；200。Theirvalueisalwaysmerelycapitalisedincome，thatis，theincomecalculatedonthebasisofafictitiouscapitalattheprevailingrateofinterest。Therefore，whenthemoney-marketistightthesesecuritieswillfallinpricefortworeasons:first，becausetherateofinterestrises，andsecondly，becausetheyarethrownonthemarketinlargequantitiesinordertoconvertthemintocash。Thisdropinpricetakesplaceregardlessofwhethertheincomethatthispaperguaranteesitsownerisconstant，asisthecasewithgovernmentbonds，orwhethertheexpansionoftheactualcapital，whichitrepresents，asinindustrialenterprises，ispossiblyaffectedbydisturbancesinthereproductionprocess。Inthelatterevent，thereisonlystillanotherdepreciationaddedtothatmentionedabove。Assoonasthestormisover，thispaperagainrisestoitsformerlevel，insofarasitdoesnotrepresentabusinessfailureorswindle。Itsdepreciationintimesofcrisisservesasapotentmeansofcentralisingfortunes。[2]

　　Totheextentthatthedepreciationorincreaseinvalueofthispaperisindependentofthemovementofvalueoftheactualcapitalthatitrepresents，thewealthofthenationisjustasgreatbeforeasafteritsdepreciationorincreaseinvalue。”The。publicstocksandcanalandrailwayshareshadalreadybythe23rdofOctober，1847，beendepreciatedintheaggregatetotheamountof&pound；114，752，225。”Morris，GovernoroftheBankofEngland，testimonyintheReportonCommercialDistress，1847-48[No。3800]。

　　Unlessthisdepreciationreflectedanactualstoppageofproductionandoftrafficoncanalsandrailways，orasuspensionofalreadyinitiatedenterprises，orsquanderingcapitalinpositivelyworthlessventures，thenationdidnotgrowonecentpoorerbytheburstingofthissoapbubbleofnominalmoney-capital。

　　Allthispaperactuallyrepresentsnothingmorethanaccumulatedclaims，orlegaltitles，tofutureproductionwhosemoneyorcapitalvaluerepresentseithernocapitalatall，asinthecaseofstatedebts，orisregulatedindependentlyofthevalueofrealcapitalwhichitrepresents。

　　Inallcountriesbasedoncapitalistproduction，thereexistsinthisforemanenormousquantityofso-calledinterest-bearingcapital，ormoneyedcapital。Andbyaccumulationofmoney-capitalnothingmore，inthemain，isconnotedthananaccumulationoftheseclaimsonproduction，anaccumulationofthemarket-price，theillusorycapital-valueoftheseclaims。

　　Apartofthebanker’scapitalisnowinvestedinthisso-calledinterest-bearingpaper。Thisisitselfaportionofthereservecapital，whichdoesnotperformanyfunctionintheactualbusinessofbanking。Themostimportantportionofthispaperconsistsofbillsofexchange，thatis，promisestopaymadebyindustrialcapitalistsormerchants。Forthemoney-lenderthesebillsofexchangeareinterest-bearing，inotherwords，whenhebuysthem，hedeductsinterestforthetimewhichtheystillhavetorun。Thisiscalleddiscounting。Itdependsontheprevailingrateofinterest，howmuchofadeductionismadefromthesumrepresentedbythebillofexchange。

　　Finally，thelastpartofthecapitalofabankerconsistsofhismoneyreserveingoldandnotes。Thedeposits，unlesstiedupbyagreementforacertaintime，arealwaysatthedisposalofthedepositors。Theyareinastateofcontinualfluctuation。Butwhileonedepositordrawsonhisaccount，anotherdeposits，sothatthegeneralaveragesumtotalofdepositsfluctuateslittleduringperiodsofnormalbusiness。

　　Thereservefundsofthebanks，incountrieswithdevelopedcapitalistproduction，alwaysexpressontheaveragethequantityofmoneyexistingintheformofahoard，andaportionofthishoardinturnconsistsofpaper，meredraftsupongold，whichhavenovalueinthemselves。Thegreaterportionofbanker’scapitalis，therefore，purelyfictitiousandconsistsofclaimsbillsofexchange，governmentsecuritieswhichrepresentspentcapital，andstocksdraftsonfuturerevenue。Anditshouldnotbeforgottenthatthemoney-valueofthecapitalrepresentedbythispaperinthesafesofthebankerisitselffictitious，insofarasthepaperconsistsofdraftsonguaranteedrevenuee。g。，governmentsecurities，ortitlesofownershiptorealcapitale。g。，stocks，andthatthisvalueisregulateddifferentlyfromthatoftherealcapital，whichthepaperrepresentsatleastinpart；or，whenitrepresentsmereclaimsonrevenueandnocapital，theclaimonthesamerevenueisexpressedincontinuallychangingfictitiousmoney-capital。Inadditiontothis，itmustbenotedthatthisfictitiousbanker’scapitalrepresentslargely，nothisowncapital，butthatofthepublic，whichmakesdepositswithhim，eitherinterest-bearingornot。

　　Depositsarealwaysmadeinmoney，ingoldornotes，orindraftsuponthese。Withtheexceptionofthereservefund，whichcontractsorexpandsinaccordancewiththerequirementsofactualcirculation，thesedepositsareinfactalwaysinthehandsoftheindustrialcapitalistsandmerchants，ontheonehand，whosebillsofexchangearetherebydiscountedandwhothusreceiveadvances；ontheotherhand，theyareinthehandsofdealersinsecuritiesexchangebrokers，orinthehandsofprivatepartieswhohavesoldtheirsecurities，orinthehandsofthegovernmentinthecaseoftreasurynotesandnewloans。Thedepositsthemselvesplayadoublerole。Ontheonehand，aswehavejustmentioned，theyareloanedoutasinterest-bearingcapitalandare，therefore，notinthesafesofthebanks，butfiguremerelyontheirbooksascreditsofthedepositors。Ontheotherhand，theyfunctionmerelyassuchbookentries，insofarasthemutualclaimsofthedepositorsarebalancedbychequesontheirdepositsandcanbewrittenoffagainsteachother。Inthisconnection，itisimmaterialwhetherthesedepositsareentrustedtothesamebanker，whocanthusbalancethevariousaccountsagainsteachother，orwhetherthisisdoneindifferentbanks，whichmutuallyexchangechequesandpayonlythebalancestooneanother。

　　Withthedevelopmentofinterest-bearingcapitalandthecreditsystem，allcapitalseemstodoubleitself，andsometimestrebleitself，bythevariousmodesinwhichthesamecapital，orperhapseventhesameclaimonadebt，appearsindifferentformsindifferenthands。[3]Thegreaterportionofthis”money-capital”ispurelyfictitious。Allthedeposits，withtheexceptionofthereservefund，aremerelyclaimsonthebanker，which，however，neverexistasdeposits。Totheextentthattheyserveinclearing-housetransactions，theyperformthefunctionofcapitalforthebankers-afterthelatterhaveloanedthemout。Theypayoneanothertheirmutualdraftsuponthenon-existingdepositsbybalancingtheirmutualaccounts。

　　AdamSmithsayswithregardtotheroleplayedbycapitalintheloaningofmoney:”Eveninthemoneyedinterest，however，themoneyis，asitwere，butthedeedofassignmentwhichconveysfromonehandtoanotherthosecapitalswhichtheownersdonotcaretoemploythemselves。Thosecapitalsmaybegreaterinalmostanyproportionthantheamountofthemoney，whichservesastheinstrumentoftheirconveyance，thesamepiecesofmoneysuccessivelyservingformanydifferentloans，aswellasformanydifferentpurchases。A，forexample，lendstoW&pound；1，000，withwhichWimmediatelypurchasesofB&pound；1，000worthofgoods。B，havingnooccasionforthemoneyhimself，lendstheidenticalpiecestoX，withwhichXimmediatelypurchasesofCanother&pound；1，000worthofgoods。C，inthesamemanner，andforthesamereason，lendsthemtoY，whoagainpurchasesgoodswiththemofD。Inthismannerthesamepieces，eitherofcoinorofpaper，may，inthecourseofafewdays，serveastheinstrumentofthreedifferentloans，andofthreedifferentpurchases，eachofwhichis，invalue，equaltothewholeamountofthosepieces。Whatthethreemoneyedmen，A，BandC，assigntothethreeborrowers，W，XandY，isthepowerofmakingthosepurchases。Inthispowerconsistboththevalueandtheuseoftheloans。

　　Thestocklentbythethreemoneyedmenisequaltothevalueofthegoodswhichcanbepurchasedwithit，andisthreetimesgreaterthanthatofthemoneywithwhichthepurchasesaremade。Thoseloans，however，maybeallperfectlywellsecured，thegoodspurchasedbythedifferentdebtorsbeingsoemployed，as，induetime，tobringback，withaprofit，anequalvalueeitherofcoinorofpaper。Andasthesamepiecesofmoneycanthusserveastheinstrumentofdifferentloanstothree，orforthesamereason，tothirtytimestheirvalue，sotheymaylikewisesuccessivelyserveastheinstrumentofrepayment。[AnInquiryintotheNatureandCauseso/theWealthofNations，Aberdeen，London，1848，p。236——Ed。]

　　BookII，Chap。IV。

　　Sincethesamepieceofmoneycanbeusedforvariouspurchases，correspondingtoitsvelocityofcirculation，itcansimilarlybeusedforvariousloans，sincethepurchaseslakeitfromonepersontoanother，andaloanisbutatransferfromonepersontoanotherwithoutthemediationofapurchase。

　　Toeveryseller，moneyrepresentsthetransformedshapeofhiscommodities。

　　Nowadays，wheneveryvalueisexpressedascapital-value。itrepresentsinthevariousloansvariouscapitalsinsuccession。Thisissimplyanotherwayofexpressingtheearlierstatementthatitcansuccessivelyrealisevariouscommodity-values。Atthesametimeitservesasamediumofcirculation，inordertotransfertherealcapitalsfrompersontoperson。Inthecaseofloans，itdoesnotpassfrompersontopersonasamediumofcirculation。

　　Aslongasitremainsinthehandsofthelender，itisinhishandsnotamediumofcirculation，butthevalueexistenceofhiscapital。Andinthisformhetransfersitwhenlendingittoanother。IfAhadlentthemoneytoB，andBtoC，withoutthemediationofpurchases，thesamemoneywouldnotrepresentthreecapitals，butonlyone——asinglecapital-value。

　　Thenumberofcapitalswhichitactuallyrepresentsdependsonthenumberoftimesthatitfunctionsasthevalue-formofvariouscommodity-capitals。

　　ThesamethingthatAdamSmithsaysaboutloansingeneralalsoappliestodeposits，whicharemerelyanothernamefortheloanswhichthepublicmakestothebankers。Thesamepiecesofmoneymayserveastheinstrumentsforanynumberofdeposits。”Itisunquestionablytruethatthe&pound；1，000whichyoudepositatAtodaymaybereissuedtomorrow，andformadepositatB。Thedayafterthat，reissuedfromB，itmayformadepositatC……andsoontoinfinitude；

　　andthatthesame&pound；1，000inmoneymay，thus，byasuccessionoftransfers，multiplyitselfintoasumofdepositsabsolutelyindefinite。Itispossible，therefore，thatnine-tenthsofallthedepositsintheUnitedKingdommayhavenoexistencebeyondtheirrecordinthebooksofthebankerswhoarerespectivelyaccountableforthem……ThusinScotland，forinstance，currencyhasneverexceeded&pound；3million，thedepositsinthebanksareestimatedat&pound；27million。Unlessarunonthebanksbemade，thesame&pound；4，000

　　would，ifsentbackuponitstravels，cancelwiththesamefacilityasumequallyindefinite。Asthesame&pound；1，000，withwhichyoucancelyourdebttoatradesmantoday，maycancelhisdebttothemerchanttomorrow，themerchant’sdebttothebankthedayfollowing，andsoonwithoutend；

　　sothesame&pound；1，000maypassfromhandtohand，andbanktobank，andcancelanyconceivablesumofdeposits。”TheCurrencyTheoryReviewed，pp。62-63。

　　Justaseverythinginthiscreditsystemisdoubledandtrebledandtransformedintoamerephantomoftheimagination，soitiswiththe”reservefund，”whereonewouldatlasthopetograspontosomethingsolid。

　　LetuslistenoncemoretoMr。Morris，GovernoroftheBankofEngland:”ThereservesoftheprivatebankersareinthehandsoftheBankofEnglandintheshapeofdeposits……Anexportofgoldactsexclusively，inthefirstinstance，uponthereserveoftheBankofEngland；butitwouldalsobeactinguponthereservesofthebankers，inasmuchasitisawithdrawalofaportionofthereserveswhichtheyhaveintheBankofEngland。Itwouldbeactinguponthereservesofallthebankersthroughoutthecountry。”

　　CommercialDistress，1847-48，Nos。3639，3642。Ultimately，then，thereservefundsactuallymergewiththereservefundoftheBankofEngland。[4]However，thisreservefundalsohasadoubleexistence。ThereservefundofthebankingdepartmentisequaltothesurplusofnoteswhichtheBankisauthorisedtoissueoverandabovethenotesincirculation。Thelegalmaximumofthenoteissueis&pound；14millionforwhichnobullionreserveisrequired；itistheapproximateamountowedbythestatetotheBank

　　plustheamountoftheBank’ssupplyofpreciousmetal。IfthesupplyofpreciousmetalintheBankamountsto&pound；14million，theBankcanthusissue&pound；28millioninnotes，andif&pound；20millionoftheseareincirculation，thereservefundofthebankingdepartmentis&pound；8

　　million。These&pound；8million’sworthofnotesarethenlegallythebanker’scapitalatthedisposaloftheBank，andatthesametimethereservefundforitsdeposits。Now，ifadrainofgoldtakesplace，wherebythesupplyofpreciousmetalintheBankisreducedby&pound；6million——requiringthedestructionofanequivalentnumberofnotes——thereserveofthebankingdepartmentwouldfallfrom&pound；8millionto&pound；2million。

　　Ontheonehand，theBankwouldraiseitsrateofinterestconsiderably；

　　ontheotherhand，thebankshavingdepositswithit，andtheotherdepositors，wouldobservealargedecreaseinthereservefundcoveringtheirowncreditsintheBank。In4857，thefourlargeststockbanksofLondonthreatenedtocallintheirdeposits，andtherebybankruptthebankingdepartment，unlesstheBankofEnglandwouldsecurea”governmentletter”suspendingtheBankActof1844。[5]Inthiswaythebankingdepartmentcouldfail，asin4847，whileanynumberofmillionse。g。，8millionin1847areheldinitsissuedepartmenttoguaranteetheconvertibilityofthecirculatingnotes。Butthisisagainillusory。”Thatlargeportionofdepositsforwhichthebankersthemselveshavenoimmediatedemandpassesintothehandsofthebill-brokers，whogivetothebankerinreturncommercialbillsalreadydiscountedbythemforpersonsinLondonandindifferentpartsofthecountryasasecurityforthesumadvancedbythebanker。Thebill-brokerisresponsibletothebankerforpaymentofthismoneyatcall；andsuchisthemagnitudeofthesetransactions，thatMr。Neave，thepresentGovernoroftheBank[ofEngland]，statedinevidence，慦eknowthatonebrokerhad5million，andwewereledtobelievethatanotherhadbetween8and10million；therewasonewith4，anotherwith31/2，andathirdwithabove8。Ispeakofdepositswiththebrokers。’”ReportofCommitteeonBankActs，1857-58，p。5，Section8。”TheLondonbill-brokerscarriedontheirenormoustransactionswithoutanycashreserve，relyingontherunoffoftheirbillsfallingdue，orinextremity，onthepowerofobtainingadvancesfromtheBankofEnglandonthesecurityofbillsunderdiscount。”Ibid。，p。VIII，Section17。”Twobill-brokinghousesinLondonsuspendedpaymentin1847；bothafterwardsresumedbusiness。In1857，bothsuspendedagain。Theliabilitiesofonehousein1847were，inroundnumbers，&pound；2，683，000，withacapitalof&pound；180，000；theliabilitiesofthesamehouse，in1857，were&pound；5，300，000，thecapitalprobablynotmorethanone-fourthofwhatitwasin1847。Theliabilitiesoftheotherfirmwerebetween&pound；3，000，000and&pound；4，000，000

　　ateachperiodofstoppage，withacapitalnotexceeding&pound；45，000。”Ibid。，p。XXI，Section52。

　　FOOTNOTES[1]”Thelabourerpossessescapital-value，whichisarrivedatbyconsideringthemoney-valueorhisannualwageasincomefrominterest……Capitalising……

　　theaveragedailywageat4%，weobtaintheaveragevalueofamaleagriculturallabourertobe:GermanAustria，4，500taler；Prussia，4，500；England，3，750；

　　France，2，000；innerRussia，750taler。”VonReden，VergleichendeKulturstatistik，Berlin，1848，p。434。

　　[2][ImmediatelyaftertheFebruaryRevolution，whencommoditiesandsecuritieswereextremelydepreciatedandutterlyunsaleable，aSwissmerchantinLiverpool，Mr。B。Zwilchenbart——whotoldthistomyfather——cashedallhisbelongings，travelledwithcashinhandtoParisandsoughtoutRothschild，offeringtoparticipateinajointenterprisewithhim。Rothschildlookedathimfixedly，rushedtowardshim，grabbedhimbyhisshouldersandasked:”Avez-vousdel’’argentsurvous？”——”Oui，M。Lebaron。”——”Alorsvous&ecirc；tesmonhomme！””Haveyoumoneyinyourpossession？”——”Yes，Baron。”——”Thenyouaremyman！”——Andtheydidathrivingbusinesstogether——F。E。]

　　[3][Thisdoublingandtreblingofcapitalhasdevelopedconsiderablyfurtherinrecentyears，forinstance，throughfinancialtrusts，whichalreadyoccupyaheadingoftheirowninthereportoftheLondonStockExchange。

　　Acompanyisorganisedforthepurchaseofacertainclassofinterest-bearingofforeigngovernmentsecurities，EnglishmunicipalorAmericanpublicbonds，railwaystocks，etc。Thecapital，forexample，&pound；2million，israisedbystocksubscriptions。TheBoardofDirectorsbuysupthevaluesinquestionorspeculatesmoreorlessactivelytherein，andafterdeductingtheexpensesdistributesamongthestockholderstheannualinterestasdividends。Furthermore，somestockcompanieshaveadoptedthecustomofdividingthecommonstockintotwoclasses，preferredanddeferred。Thepreferredreceiveafixedrateofinterest，say，5%，providedthatthetotalprofitpermitsit；ifthereisanythingleftafterthat，thedeferredreceiveit。Inthismanner，the”solid”investmentofcapitalinpreferredsharesismoreorlessseparatedfromactualspeculation——withdeferredshares。Sinceafewlargeenterpriseshavebeenunwillingtoadoptthisnewcustom，theexpedienthasbeenresortedtooforganisingnewcompanieswhichinvestamillionorseveralmillionpoundssterlinginsharesoftheformercompaniesandthenissuenewsharesamountingtothenominalvalueofthepurchasedshares，buthalfofthemareissuedaspreferredandtheotherhalfasdeferred。Insuchcasestheoriginalsharesaredoubled，sincetheyserveasabasisforanewissueofshares——F。E。]

　　[4][TowhatextentthishasintensifiedsincethenisshownbythefollowingofficialtabulationofthebankreservesofthefifteenlargestLondonbanksinNovember1892，takenfromtheDailyNewsofDecember15，1892:

　　NameofBankLiabilitiesCashReservesPercentagesCity&pound；9，317，629&pound；746，5518。01

　　CapitalandCounties11，392，7441，307，48311。47

　　Imperial3，987，400447，15711。22

　　Lloyds23，800，9372，966，80612。46

　　Lon。AndWestminster24，671，5593，818，88515。50

　　Lon。AndS。Western5，570，268812，35314。58

　　LondonJointStock12，127，9931，288，97710。62

　　LondonandMidland8，814，4991，127，28012。79

　　LondonandCounty37，111，0353，600，3749。70

　　National11，163，8291，426，22512。77

　　NationalProvincial。41，907，3844，614，78041。01

　　ParrsandtheAlliance12，794，4891，532，70711。98

　　Prescott&amp；Co4，041，058538，51713。07

　　UnionofLondon。，15，502，6182，300，08414。84

　　Williams，Deacon&amp；Manchester&amp；Co。10，452，3811，317，62812。60

　　Total&pound；232，655，823&pound；27，845，80711。97Ofthistotalreserveofalmost28million，atleast25millionaredepositedintheBankofEngland，andatmost3millionareincashinthesafesofthe15banksthemselves。ButthecashreserveofthebankingdepartmentoftheBankofEnglandamountedtolessthan16millionduringthatsamemonthofNovember1892——F。E。]

　　[5]ThesuspensionoftheBankActof1844

　　permitstheBanktoissueanyquantityofbank-notesregardlessofthegoldreservebackinginitspossession；thus，tocreateanarbitraryquantityoffictitiouspapermoney-capital，andtouseitforthepurposeofmakingloanstobanks，exchangebrokers，andthroughthemtocommerce——[F。

　　E。]

　　Capital，Vol。3，Chapter30KarlMarxCAPITALVol。III

　　THEPROCESSOF

　　CAPITALISTPRODUCTIONASAWHOLEPartV

　　DIVISIONOFPROFITINTOINTERESTANDPROFIT

　　OFENTERPRISE。

　　INTEREST-BEARINGCAPITALCHAPTER30

　　Money-CapitalandRealCapital。

　　I。

　　Theonlydifficultquestions，whichwearenowapproachinginconnectionwiththecreditsystem，arethefollowing:

　　First:Theaccumulationoftheactualmoney-capital。Towhatextentisit，andtowhatextentisitnot，anindicationofanactualaccumulationofcapital，i。e。，ofreproductiononanextendedscale？

　　Istheso-calledplethoraofcapital——anexpressionusedonlywithreferencetotheinterest-bearingcapital，i。e。，moneyedcapital——onlyaspecialwayofexpressingindustrialover-production，ordoesitconstituteaseparatephenomenonalongsideofit？Doesthisplethora，orexcessivesupplyofmoney-capital，coincidewiththeexistenceofstagnatingmassesofmoneybullion，goldcoinandbank-notes，sothatthissuperabundanceofactualmoneyistheexpressionandexternalformofthatplethoraofloancapital？

　　Secondly:Towhatextentdoesascarcityofmoney，i。e。，ashortageofloancapital，expressashortageofrealcapitalcommodity-capitalandproductivecapital？Towhatextentdoesitcoincide，ontheotherhand，withashortageofmoneyassuch，ashortageofthemediumofcirculation？

　　Insofaraswehavehithertoconsideredthepeculiarformofaccumulationofmoney-capitalandofmoneywealthingeneral，ithasresolveditselfintoanaccumulationofclaimsofownershipuponlabour。Theaccumulationofthecapitalofthenationaldebthasbeenrevealedtomeanmerelyanincreaseinaclassofstatecreditors，whohavetheprivilegeofafirmclaimuponacertainportionofthetaxrevenue。[6]Bymeansofthesefacts，wherebyevenanaccumulationofdebtsmayappearasanaccumulationofcapital，theheightofdistortiontakingplaceinthecreditsystembecomesapparent。Thesepromissorynotes，whichareissuedfortheoriginallyloanedcapitallongsincespent，thesepaperduplicatesofconsumedcapital，servefortheirownersascapitaltotheextentthattheyaresaleablecommoditiesandmay，therefore，bereconvertedintocapital。

　　Titlesofownershiptopublicworks，railways，mines，etc；，areindeed，aswehavealsoseen，titlestorealcapital。Buttheydonotplacethiscapitalatone抯disposal。Itisnotsubjecttowithdrawal。Theymerelyconveylegalclaimstoaportionofthesurplus-valuetobeproducedbyit。Butthesetitleslikewisebecomepaperduplicatesoftherealcapital；

　　itisasthoughabillofladingweretoacquireavalueseparatefromthecargo，bothconcomitantlyandsimultaneouslywithit。Theycometonominallyrepresentnon-existentcapital。Fortherealcapitalexistssidebysidewiththemanddoesnotchangehandsasaresultofthetransferoftheseduplicatesfromonepersontoanother。Theyassumetheformofinterest-bearingcapital，notonlybecausetheyguaranteeacertainincome，butalsobecause，throughtheirsale，theirrepaymentascapital-valuescanbeobtained。Totheextentthattheaccumulationofthispaperexpressestheaccumulationofrailways，mines，steamships，etc。，tothatextentdoesitexpresstheextensionoftheactualreproductionprocess——justastheextensionof，forexample，ataxlistonmovablepropertyindicatestheexpansionofthisproperty。Butasduplicateswhicharethemselvesobjectsoftransactionsascommodities，andthusabletocirculateascapital-values，theyareillusory，andtheirvaluemayfallorrisequiteindependentlyofthemovementofvalueoftherealcapitalforwhichtheyaretitles。

　　Theirvalue，thatis，theirquotationontheStockExchange，necessarilyhasatendencytorisewithafallintherateofinterest——insofarasthisfall，independentofthecharacteristicmovementsofmoney-capital，isduemerelytothetendencyfortherateofprofittofall；therefore，thisimaginarywealthexpands，ifforthisreasonalone，inthecourseofcapitalistproductioninaccordancewiththeexpressedvalueforeachofitsaliquotpartsofspecificoriginalnominalvalue。[7]

　　Gainandlossthroughfluctuationsinthepriceofthesetitlesofownership，andtheircentralisationinthehandsofrailwaykings，etc。，become，bytheirverynature，moreandmoreamatterofgamble，whichappearstotaketheplaceoflabourastheoriginalmethodofacquiringcapitalwealthandalsoreplacesnakedforce。Thistypeofimaginarymoneywealthnotonlyconstitutesaveryconsiderablepartofthemoneywealthofprivatepeople，butalsoofbanker抯capital，aswehavealreadyindicated。

　　Inordertoquicklysettlethisquestion，letuspointoutthatonecouldalsomeanbytheaccumulationofmoney-capitaltheaccumulationofwealthinthehandsofbankersmoney-lendersbyprofession，actingasmiddlemenbetweenprivatemoney-capitalistsontheonehand，andthestate，communities，andreproducingborrowersontheother。Fortheentirevastextensionofthecreditsystem，andallcreditingeneral，isexploitedbythemastheirprivatecapital。Thesefellowsalwayspossesscapitalandincomesinmoney-formorindirectclaimsonmoney。Theaccumulationofthewealthofthisclassmaytakeplacecompletelydifferentlythanactualaccumulation，butitprovesatanyratethatthisclasspocketsagooddealoftherealaccumulation。

　　Letusreducethescopeoftheproblembeforeus。Governmentsecurities，likestocksandothersecuritiesofallkinds，arespheresofinvestmentforloanablecapital——capitalintendedforbearinginterest。Theyareformsofloaningsuchcapital。Buttheythemselvesarenottheloancapital，whichisinvestedinthem。Ontheotherhand，insofarascreditplaysadirectroleinthereproductionprocess，whattheindustrialistormerchantneedswhenhewishestohaveabilldiscountedoraloangrantedisneitherstocksnorgovernmentsecurities。Whatheneedsismoney。He，therefore，pledgesorsellsthoseSecuritiesifhecannotsecuremoneyinanyotherway。Itistheaccumulationofthisloancapitalwithwhichwehavetodealhere，andmoreparticularlyaccumulationofloanablemoney-capital。

　　Wearenotconcernedherewithloansofhouses，machines，orotherfixedcapital。Norareweconcernedwiththeadvancesindustrialistsandmerchantsmaketooneanotherincommoditiesandwithinthecompassofthereproductionprocess；althoughwemustalsoinvestigatethispointbeforehandinmoredetail。Weareconcernedexclusivelywithmoneyloans，whicharemadebybankers，asmiddlemen，toindustrialistsandmerchants。

　　Letusthen，tobeginwith，analysecommercialcredit，thatis，thecreditwhichthecapitalistsengagedinreproductiongivetooneanother。

　　Itformsthebasisofthecreditsystem。Itisrepresentedbythebillofexchange，apromissorynotewithadefinitetermofpayment，i。e。，adocumentofdeferredpayment。Everyonegivescreditwithonehandandreceivescreditwiththeother。Letuscompletelydisregard，forthepresent，banker抯credit，whichconstitutesanentirelydifferentsphere。Totheextentthatthesebillsofexchangecirculateamongthemerchantsthemselvesasmeansofpaymentagain，byendorsementfromonetoanother——without，however，themediationofdiscounting——itismerelyatransferoftheclaimfromAtoBanddoesnotchangethepictureintheleast。Itmerelyreplacesonepersonbyanother。Andeveninthiscase，theliquidationcantakeplacewithouttheinterventionofmoney。SpinnerA，forexample，hastopayabilltocottonbrokerB，andthelattertoimporterC。Now，ifCalsoexportsyarn，whichhappensoftenenough，hemaybuyyarnfromAonabillofexchangeandthespinnerAmaypaythebrokerBwiththebroker抯ownbillwhichwasreceivedinpaymentfromC。Atmost，abalancewillhavetobepaidinmoney。Theentiretransactionthenconsistsmerelyintheexchangeofcottonandyarn。Theexporterrepresentsonlythespinner，andthecottonbroker，thecottonplanter。

　　Twothingsarenowtobenotedinthecircuitofthispurelycommercialcredit。

　　First:Thesettlementofthesemutualclaimsdependsuponthereturnflowofcapital，thatis，onC——M，whichismerelydeferred。Ifthespinnerhasreceivedabillofexchangefromacottongoodsmanufacturer，thenmanufacturercanpayifthecottongoodswhichhehasonthemarkethavebeensoldintheinterim。Ifthecornspeculatorhasabillofexchangedrawnuponhisagent，theagentcanpaythemoneyifthecornhasbeensoldintheinterimattheexpectedprice。Thesepayments，therefore，dependonthefluidityofreproduction，thatis，theproductionandconsumptionprocesses。Butsincethecreditsaremutual，thesolvencyofonedependsuponthesolvencyofanother；forindrawinghisbillofexchange，onemayhavecountedeitheronthereturnflowofthecapitalinhisownbusinessoronthereturnflowofthecapitalinathirdparty抯businesswhosebillofexchangeisdueinthemeantime。Asidefromtheprospectofreturnflowofcapital，paymentcanonlybepossiblebymeansofreservecapitalatthedisposalofthepersondrawingthebillofexchange，inordertomeethisobligationsincasethereturnflowofcapitalshouldbedelayed。

　　Secondly:Thiscreditsystemdoesnotdoawaywiththenecessityforcashpayments。Foronething，alargeportionofexpensesmustalwaysbepaidincash，e。g。，wages，taxes，etc。Furthermore，capitalistB，whohasreceivedfromCabillofexchangeinplaceofcashpayment，mayhavetopayabillofhisownwhichhasfallenduetoDbeforeC抯

　　billbecomesdue，andsohemusthavereadycash。Acompletecircuitofreproductionasthatassumedabove，i。e。，fromcottonplantertocottonspinnerandbackagain，canonlyconstituteanexception；itwillbeconstantlyinterruptedatmanypoints。WehaveseeninthediscussionofthereproductionprocessVolII，PartIIIthattheproducersofconstantcapitalexchange，inpart，constantcapitalamongthemselves。Asaresult，thebillsofexchangecan，moreorless，balanceeachotherout。Similarly，intheascendinglineofproduction，wherethecottonbrokerdrawsonthecottonspinner，thespinneronthemanufacturerofcottongoods，themanufacturerontheexporter，theexporterontheimporterperhapsofcottonagain。

　　Butthecircuitoftransactions，and，therefore，theturnaboutoftheseriesofclaims，doesnottakeplaceatthesametime。Forexample，theclaimofthespinnerontheweaverisnotsettledbytheclaimofthecoal-dealeronthemachine-builder。Thespinnerneverhasanycounter-claimsonthemachine-builder，inhisbusiness，becausehisproduct，yarn，neverentersasanelementinthemachine-builder抯reproductionprocess。Suchclaimsmust，therefore，besettledbymoney。

　　Thelimitsofthiscommercialcredit，consideredbythemselves，are1thewealthoftheindustrialistsandmerchants，thatis，theircommandofreservecapitalincaseofdelayedreturns；2thesereturnsthemselves。

　　Thesereturnsmaybedelayed，orthepricesofcommoditiesmayfallinthemeantimeorthecommoditiesmaybecomemomentarilyunsaleableduetoastagnantmarket。Thelongerthebillsofexchangerun，thelargermustbethereservecapital，andthegreaterthepossibilityofadiminutionordelayofthereturnsthroughafallinpricesoraglutonthemarket。

　　And，furthermore，thereturnsaresomuchlesssecure，themoretheoriginaltransactionwasconditioneduponspeculationontheriseorfallofcommodity-prices。

　　Butitisevidentthatwiththedevelopmentoftheproductivepoweroflabour，andthusofproductiononalargescale:1themarketsexpandandbecomemoredistantfromtheplaceofproduction；2creditsmust，therefore，beprolonged；3thespeculativeelementmustthusmoreandmoredominatethetransactions。Productiononalargescaleandfordistantmarketsthrowsthetotalproductintothehandsofcommerce；butitisimpossiblethatthecapitalofanationshoulddoubleitselfinsuchamannerthatcommerceshoulditselfbeabletobuyuptheentirenationalproductwithitsowncapitalandtosellitagain。Creditis，therefore，indispensablehere；credit，whosevolumegrowswiththegrowingvolumeofvalueofproductionandwhosetimedurationgrowswiththeincreasingdistanceofthemarkets。Amutualinteractiontakesplacehere。Thedevelopmentoftheproductionprocessextendsthecredit，andcreditleadstoanextensionofindustrialandcommercialoperations。

　　Whenweexaminethiscreditdetachedfrombanker抯credit，itisevidentthatitgrowswithanincreasingvolumeofindustrialcapitalitself。Loancapitalandindustrialcapitalareidenticalhere。Theloanedcapitaliscommodity-capitalwhichisintendedeitherforultimateindividualconsumptionorforthereplacementoftheconstantelementsofproductivecapital。

　　Whatappearshereasloancapitalisalwayscapitalexistinginsomedefinitephaseofthereproductionprocess，butwhichbymeansofpurchaseandsalepassesfromonepersontoanother，whileitsequivalentisnotpaidbythebuyeruntilsomelaterstipulatedtime。Forexample，cottonistransferredtothespinnerforabillofexchange，yarntothemanufacturerofcottongoodsforabillofexchange，cottongoodstothemerchantforabill，fromwhosehandstheygototheexporterforabill，andthen，forabilltosomemerchantinIndia，whosellsthegoodsandbuysindigoinstead，etc。Duringthistransferfromhandtohandthetransformationofcottonintocottongoodsiseffected，andthecottongoodsarefinallytransportedtoIndiaandexchangedforindigo，whichisshippedtoEuropeandthereentersintothereproductionprocessagain。Thevariousphasesofthereproductionprocessarepromotedherebycredit，withoutanypaymentonthepartofthespinnerforthecotton，themanufacturerofcottongoodsfortheyarn，themerchantforthecottongoods，etc。Inthefirststagesoftheprocess，thecommodity，cotton，goesthroughitsvariousproductionphases，andthistransitionispromotedbycredit。Butassoonasthecottonhasreceivedinproductionitsultimateformasacommodity，thesamecommodity-capitalpassesonlythroughthehandsofvariousmerchantswhopromoteitstransportationtodistantmarkets，andthelastofwhomfinallysellsthesecommoditiestotheconsumerandbuysothercommoditiesintheirstead，whicheitherbecomeconsumedorgointothereproductionprocess。Itisnecessary，then，todifferentiatebetweentwostageshere:

　　Inthefirststage，creditpromotestheactualsuccessivephasesintheproductionofthesamearticle；inthesecond，creditmerelypromotesthetransferofthearticle，includingitstransportation，fromonemerchanttoanother，inotherwords，theprocessC——M。Butherealsothecommodityisatleastintheprocessofcirculation，thatis，inaphaseofthereproductionprocess。

　　Itfollows，then，thatitisneveridlecapitalwhichisloanedhere，butcapitalwhichmustchangeitsforminthehandsofitsowner；itexistsinaformthatforhimismerelycommodity-capital，i。e。，capitalwhichmustberetransformed，and，tobeginwith，atleastconvertedintomoney。Itis，therefore，themetamorphosisofcommoditiesthatisherepromotedbycredit；notmerelyC——M，butalsoM——Candtheactualproductionprocess。Alargequantityofcreditwithinthereproductivecircuitbanker抯

　　creditexcepteddoesnotsignifyalargequantityofidlecapital，whichisbeingofferedforloanandisseekingprofitableinvestment。Itmeansratheralargeemploymentofcapitalinthereproductionprocess。Credit，then，promoteshere1asfarastheindustrialcapitalistsareconcerned，thetransitionofindustrialcapitalfromonephaseintoanother，theconnectionofrelatedanddovetailingspheresofproduction；2asfarasthemerchantsareconcerned，thetransportationandtransitionofcommoditiesfromonepersontoanotheruntiltheirdefinitesaleformoneyortheirexchangeforothercommodities。

　　Themaximumofcreditishereidenticalwiththefullestemploymentofindustrialcapital，thatis，theutmostexertionofitsreproductivepowerwithoutregardtothelimitsofconsumption。Theselimitsofconsumptionareextendedbytheexertionsofthereproductionprocessitself。Ontheonehand，thisincreasestheconsumptionofrevenueonthepartoflabourersandcapitalists，ontheotherhand，itisidenticalwithanexertionofproductiveconsumption。

　　Aslongasthereproductionprocessiscontinuousand，therefore，thereturnflowassured，thiscreditexistsandexpands，anditsexpansionisbasedupontheexpansionofthereproductionprocessitself。Assoonasastoppagetakesplace，asaresultofdelayedreturns，gluttedmarkets，orfallenprices，asuperabundanceofindustrialcapitalbecomesavailable，butinaforminwhichitcannotperformitsjunctions。Hugequantitiesofcommodity-capital，butunsaleable。Hugequantitiesoffixedcapital，butlargelyidleduetostagnantreproduction。Creditiscontracted1

　　becausethiscapitalisidle，i。e。，blockedinoneofitsphasesofreproductionbecauseitcannotcompleteitsmetamorphosis；2becauseconfidenceinthecontinuityofthereproductionprocesshasbeenshaken；

　　3becausethedemandforthiscommercialcreditdiminishes。Thespinner，whocurtailshisproductionandhasalargequantityofunsoldyarninstock，doesnotneedtobuyanycottononcredit；themerchantdoesnotneedtobuyanycommoditiesoncreditbecausehehasmorethanenoughofthem。

　　Hence，ifthereisadisturbanceinthisexpansionoreveninthenormalflowofthereproductionprocess，creditalsobecomesscarce；itismoredifficulttoobtaincommoditiesoncredit。However，thedemandforcashpaymentandthecautionobservedtowardsalesoncreditareparticularlycharacteristicofthephaseoftheindustrialcyclefollowingacrash。

　　Duringthecrisisitself，sinceeveryonehasproductstosell，cannotsellthem，andyetmustselltheminordertomeetpayments，itisnotthemassofidleandinvestment-seekingcapital，butratherthemassofcapitalimpededinitsreproductionprocess，thatisgreatestjustwhentheshortageofcreditismostacuteandthereforetherateofdiscounthighestforbanker抯credit。Thecapitalalreadyinvestedisthen，indeed，idleinlargequantitiesbecausethereproductionprocessisstagnant。Factoriesareclosed，rawmaterialsaccumulate，finishedproductsfloodthemarketascommodities。Nothingismoreerroneous，therefore，thantoblameascarcityofproductivecapitalforsuchacondition。Itispreciselyatsuchtimesthatthereisasuperabundanceofproductivecapital，partlyinrelationtothenormal，buttemporarilyreducedscaleofreproduction，andpartlyinrelationtotheparalysedconsumption。

　　Letussupposethatthewholeofsocietyiscomposedonlyofindustrialcapitalistsandwage-workers。Letusfurthermoredisregardpricefluctuations，whichpreventlargeportionsofthetotalcapitalfromreplacingthemselvesintheiraverageproportionsandwhich，owingtothegeneralinterrelationsoftheentirereproductionprocessasdevelopedinparticularbycredit，mustalwayscallforthgeneralstoppagesofatransientnature。Letusalsodisregardtheshamtransactionsandspeculations，whichthecreditsystemfavours。Then，acrisiscouldonlybeexplainedastheresultofadisproportionofproductioninvariousbranchesoftheeconomy，andasaresultofadisproportionbetweentheconsumptionofthecapitalistsandtheiraccumulation。Butasmattersstand，thereplacementofthecapitalinvestedinproductiondependslargelyupontheconsumingpowerofthenon-producingclasses；whiletheconsumingpoweroftheworkersislimitedpartlybythelawsofwages，partlybythefactthattheyareusedonlyaslongastheycanbeprofitablyemployedbythecapitalistclass。Theultimatereasonforallrealcrisesalwaysremainsthepovertyandrestrictedconsumptionofthemassesasopposedtothedriveofcapitalistproductiontodeveloptheproductiveforcesasthoughonlytheabsoluteconsumingpowerofsocietyconstitutedtheirlimit。

　　Areallackofproductivecapital，atleastamongcapitalisticallydevelopednations，canbesaidtoexistonlyintimesofgeneralcropfailures，eitherintheprincipalfoodstuffsorintheprincipalindustrialrawmaterials。

　　However，inadditiontothiscommercialcreditwehaveactualmoneycredit。Theadvancesoftheindustrialistsandmerchantsamongoneanotherareamalgamatedwiththemoneyadvancesmadetothembythebankersandmoney-lenders。Indiscountingbillsofexchangetheadvanceisonlynominal。

　　Amanufacturersellshisproductforabillofexchangeandgetsthisbilldiscountedbysomebill-broker。Inreality，thelatteradvancesonlythecreditofhisbanker，whointurnadvancestothebrokerthemoney-capitalofhisdepositors。Thedepositorsconsistoftheindustrialcapitalistsandmerchantsthemselvesandalsoofworkersthroughsavings-banks——

　　aswellasground-rentrecipientsandotherunproductiveclasses。Inthiswayeveryindividualindustrialmanufacturerandmerchantgetsaroundthenecessityofkeepingalargereservefundandbeingdependentuponhisactualreturns。Ontheotherhand，thewholeprocessbecomessocomplicated，partlybysimplymanipulatingbillsofexchange，partlybycommoditytransactionsforthesolepurposeofmanufacturingbillsofexchange，thatthesemblanceofaverysolventbusinesswithasmoothflowofreturnscaneasilypersistevenlongafterreturnsactuallycomeinonlyattheexpensepartlyofswindledmoney-lendersandpartlyofswindledproducers。Thusbusinessalwaysappearsalmostexcessivelysoundrightontheeveofacrash。Thebestproofofthisisfurnished，forinstance，bytheReportsonBankActsof1857and1858，inwhichallbankdirectors，merchants，inshortalltheinvitedexpertswithLordOverstoneattheirhead，congratulatedoneanotherontheprosperityandsoundnessofbusiness-justonemonthbeforetheoutbreakofthecrisisinAugust1857。And，strangelyenough，TookeinhisHistoryofPricessuccumbstothisillusiononceagainashistorianforeachcrisis。Businessisalwaysthoroughlysoundandthecampaigninfullswing，untilsuddenlythedebacletakesplace。

　　Werevertnowtotheaccumulationofmoney-capital。

　　Noteveryaugmentationofloanablemoney-capitalindicatesarealaccumulationofcapitalorexpansionofthereproductionprocess。Thisbecomesmostevidentinthephaseoftheindustrialcycleimmediatelyfollowingacrisis，whenloancapitalliesaroundidleingreatquantities。Atsuchtimes，whentheproductionprocessiscurtailedproductionintheEnglishindustrialdistrictswasreducedbyone-thirdafterthecrisisof1847，whenthepricesofcommoditiesareattheirlowestlevel，whenthespiritofenterpriseisparalysed，therateofinterestislow，whichinthiscaseindicatesnothingmorethananincreaseinloanablecapitalpreciselyasaresultofcontractionandparalysationofindustrialcapital。Itisquiteobviousthatasmallerquantityofacirculationmediumisrequiredwhenthepricesofcommoditieshavefallen，thenumberoftransactionsdecreased，andthecapitallaidoutforwagesreduced；that，ontheotherhand，noadditionalmoneyisrequiredtofunctionasworld-moneyafterforeigndebtshavebeenliquidatedeitherbytheexportofgoldorasaresultofbankruptcies；

　　that，finally，thevolumeofbusinessconnectedwithdiscountingbillsofexchangediminishesinproportionwiththereducednumberandmagnitudesofthebillsofexchangethem-selves。Hencethedemandforloanablemoney-capital，eithertoactasamediumofcirculationorasameansofpaymenttheinvestmentofnewcapital慽sstilloutofthequestion，decreasesandthiscapital，therefore，becomesrelativelyabundant。Undersuchcircumstances，however，thesupplyofloanablemoney-capitalalsoincreases，asweshalllatersee。

　　Thus，thesituationafterthecrisisof1847wascharacterisedby”alimitationoftransactionandagreatsuperabundanceofmoney。”CommercialDistress，1847-48，EvidenceNo。1664。Therateofinterestwasverylowbecauseofthe”almostperfectdestructionofcommerceandthealmosttotalwantofmeansofemployingmoney”loc。cit。，p。45，testimonyofHodgson，DirectoroftheRoyalBankofLiverpool。WhatnonsensethesegentlemenconcoctedandHodgsonis，moreover，oneofthebestofthem

　　inordertoexplainthesefacts，canbeseenfromthefollowingremark:”Thepressure”1847”arosefromtherealdiminutionofthemoneyedcapitalofthecountry，causedpartlybythenecessityofpayingingoldforimportsfromallpartsoftheworld，andpartlybytheabsorptionoffloatingintofixedcapital。”[1。c。，p。39。]Howtheconversionoffloatingcapitalintofixedcapitalreducesthemoney-capitalofacountryisunintelligible。

　　For，inthecaseofrailways，e。g。，inwhichcapitalwasmainlyinvestedatthattime，neithergoldnorpaperisusedforviaductsandrails，andthemoneyfortherailwaystocks，totheextentthatithadbeendepositedsolelyinpayment，performedexactlythesamefunctionsasanyothermoneydepositedinbanksandevenincreasedtheloanablemoney-capitaltemporarily，asalreadyshownabove；buttotheextentthatithadactuallybeenspentforconstruction，itcirculatedinthecountryasamediumofpurchaseandofpayment。Onlyinsofarasfixedcapitalcannotbeexported，sothatwiththeimpossibilityofitsexporttheavailablecapitalsecuredfromreturnsforexportedarticlesalsodropsoutofthepicture-includingthereturnsincashorbullion-onlytothatextentcouldthemoney-capitalbeaffected。ButatthattimeEnglishexportarticleswerealsopiledupinhugequantitiesontheforeignmarketswithoutbeingabletobesold。

　　Itistrue，thefloatingcapitalofthemerchantsandmanufacturersofManchester，etc。，whohadaportionoftheirnormalbusinesscapitaltiedupinrailwaystocksandwerethereforedependentuponborrowedcapitalforrunningtheirbusiness，hadbecomefixed，andthey，therefore，hadtosuffertheconsequences。Butitwouldhavebeenthesame，ifthecapitalbelongingtotheirbusiness，butwithdrawnfromit，hadbeeninvested，say，inminesinsteadofrailways-miningproductslikeiron，coal，copperbeingthemselvesinturnfloatingcapital。Theactualreductionofavailablemoney-capitalthroughcropfailures，cornimports，andgoldexportsconstituted，naturally，aneventthathadnothingtodowiththerailwayswindle——”Almostallmercantilehouseshadbeguntostarvetheirbusinessmoreorless……bytakingpartoftheircommercialcapitalforrailways。”——”Loanstosogreatanextentbycommercialhousestorailways[loc。cit。，p。

　　42]inducedthemtoleantoomuchupon……banksbythediscountofpaper，wherebytocarryontheircommercialoperations”thesameHodgson，loc。

　　cit。，p。67。”InManchestertherehavebeenimmenselossesinconsequenceofthespeculationinrailways”R。Gardner，previouslycitedinVol。I，Ch。XIII，3，c，andinseveralotherplaces；EvidenceNo。4884，loc。

　　cit。。

　　Oneoftheprincipalcausesofthecrisisof1847wasthecolossalfloodingofthemarketandthefabulousswindleintheEastIndiantradewithcommodities。

　　Buttherewerealsoothercircumstanceswhichbankruptedveryrichfirmsinthisline:”Theyhadlargemeans，butnotavailable。ThewholeoftheircapitalwaslockedupinestatesintheMauritius，orindigofactories，orsugarfactories。Havingincurredliabilitiestotheextentof&pound；500，000-600，000，theyhadnoavailableassetstopaytheirbills，andeventuallyitprovedthattopaytheirbillstheywereentirelydependentupontheircredit。”

　　Ch。Turner，bigEastIndianmerchantinLiverpool，No。730，loc。cit。

　　SeealsoGardnerNo。4872，loc。cit。:”ImmediatelyaftertheChinatreaty，sogreataprospectwasheldouttothecountryofagreatextensionofourcommercewithChina，thatthereweremanylargemillsbuiltwithaviewtothattradeexclusively，inordertomanufacturethatclassofclothwhichisprincipallytakenfortheChinamarket，andourpreviousmanufactureshadtheadditionofallthose。”——”4874。Howhasthattradeturnedout？——Mostruinous，almostbeyonddescription；Idonotbelieve，thatofthewholeoftheshipmentsthatweremadein1844and1845toChina，abovetwo-thirdsoftheamounthaveeverbeenreturned；inconsequenceofteabeingtheprincipalarticleofrepaymentandoftheexpectationthatwasheldout，we，asmanufacturers，fullycalculateduponagreatreductioninthedutyontea。”——Andnow，naivelyexpressed，comesthecharacteristiccredooftheEnglishmanufacturer:”Ourcommercewithnoforeignmarketislimitedbytheirpowertopurchasethecommodity，butitislimitedinthiscountrybyourcapabilityofconsumingthatwhichwereceiveinreturnforourmanufactures。”Therelativelypoorcountries，withwhomEnglandtrades，are，ofcourse，abletopayforandconsumeanyamountofEnglishproducts，butunfortunatelywealthyEnglandcannotassimilatetheproductssentinreturn。”4876。Isentoutsomegoodsinthefirstinstance，andthegoodssoldatabout45percentloss，fromthefullconvictionthattheprice，atwhichmyagentscouldpurchasetea，wouldleavesogreataprofitinthiscountryastomakeupthedeficiency……butinsteadofprofit，Ilostinsomeinstances25andupto50percent。”——”4877。Didthemanufacturersgenerallyexportontheirownaccount？——Principally；

　　themerchants，Ithink，verysoonsawthatthethingwouldnotanswer，andtheyratherencouragedthemanufacturerstoconsignthantakeadirectinterestthemselves。”——In1857，ontheotherhand，thelossesandfailuresfellmainlyuponthemerchants，sincethemanufacturersleftthemthetaskoffloodingtheforeignmarkets”ontheirownaccount。”

　　Anexpansionofmoney-capital，whicharisesoutofthefactthat，inviewoftheexpansionofbankingsee，below，theexampleofIpswich，whereinthecourseofafewyearsimmediatelypreceding1857thedepositsofthecapitalistfarmersquadrupled，whatwasformerlyaprivatehoardorcoinreserveisalwaysconvertedintoloanablecapitalforadefinitetime，doesnotindicateagrowthinproductivecapitalanymorethantheincreasingdepositswiththeLondonstockbankswhenthelatterbegantopayinterestondeposits。Aslongasthescaleofproductionremainsthesame，thisexpansionleadsonlytoanabundanceofloanablemoney-capitalascomparedwiththeproductive。Hencethelowrateofinterest。

　　Afterthereproductionprocesshasagainreachedthatstateofprosperitywhichprecedesthatofover-exertion，commercialcreditbecomesverymuchextended；thisforms，indeed，the”sound”basisagainforareadyflowofreturnsandextendedproduction。Inthisstatetherateofinterestisstilllow，althoughitrisesaboveitsminimum。Thisis，infact，theonlytimethatitcanbesaidalowrateofinterest，andconsequentlyarelativeabundanceofloanablecapital，coincideswitharealexpansionofindustrialcapital。Thereadyflowandregularityofthereturns，linkedwithextensivecommercialcredit，ensuresthesupplyofloancapitalinspiteoftheincreaseddemandforit。andpreventstheleveloftherateofinterestfromrising。Ontheotherhand，thosecavalierswhoworkwithoutanyreservecapitalorwithoutanycapitalatallandwhothusoperatecompletelyonamoneycreditbasisbegintoappearforthefirsttimeinconsiderablenumbers。Tothisisnowaddedthegreatexpansionoffixedcapitalinallforms，andtheopeningofnewenterprisesonavastandfar-reachingscale。Theinterestnowrisestoitsaveragelevel。Itreachesitsmaximumagainassoonasthenewcrisissetsin。Creditsuddenlystopsthen，paymentsaresuspended，thereproductionprocessisparalysed，andwiththepreviouslymentionedexceptions，asuperabundanceofidleindustrialcapitalappearssidebysidewithanalmostabsoluteabsenceofloancapital。

　　Onthewhole，then，themovementofloancapital，asexpressedintherateofinterest，isintheoppositedirectiontothatofindustrialcapital。

　　Thephasewhereinalowrateofinterest，butabovetheminimum，coincideswiththe”improvement”andgrowingconfidenceafteracrisis，andparticularlythephasewhereintherateofinterestreachesitsaveragelevel，exactlymidwaybetweenitsminimumandmaximum，aretheonlytwoperiodsduringwhichanabundanceofloancapitalisavailablesimultaneouslywithagreatexpansionofindustrialcapital。Butatthebeginningoftheindustrialcycle，alowrateofinterestcoincideswithacontraction，andattheendoftheindustrialcycle，ahighrateofinterestcoincideswithasuperabundanceofindustrialcapital。Thelowrateofinterestthataccompaniesthe”improvement”

　　showsthatthecommercialcreditrequiresbankcreditonlytoaslightextentbecauseitisstillself-supporting。

　　Theindustrialcycleisofsuchanaturethatthesamecircuitmustperiodicallyreproduceitself，oncethefirstimpulsehasbeengiven。[8]Duringaperiodofslack，productionsinksbelowthelevel，whichithadattainedintheprecedingcycleandforwhichthetechnicalbasishasnowbeenlaid。Duringprosperity——themiddleperiod——itcontinuestodeveloponthisbasis。Intheperiodofover-productionandswindle，itstrainstheproductiveforcestotheutmost，untilitexceedsthecapitalisticlimitsoftheproductionprocess。

　　Itisclearthatthereisashortageofmeansofpaymentduringaperiodofcrisis。Theconvertibilityofbillsofexchangereplacesthemetamorphosisofcommoditiesthemselves，andsomuchmoresoexactlyatsuchtimesthemoreaportionofthefirmsoperatesonpurecredit。Ignorantandmistakenbanklegislation，suchasthatof1844-45，canintensifythismoneycrisis。

　　Butnokindofbanklegislationcaneliminateacrisis。

　　Inasystemofproduction，wheretheentirecontinuityofthereproductionprocessrestsuponcredit，acrisismustobviouslyoccur-atremendousrushformeansofpayment——whencreditsuddenlyceasesandonlycashpaymentshavevalidity。Atfirstglance，therefore，thewholecrisisseemstobemerelyacreditandmoneycrisis。Andinfactitisonlyaquestionoftheconvertibilityofbillsofexchangeintomoney。Butthemajorityofthesebillsrepresentactualsalesandpurchases，whoseextensionfarbeyondtheneedsofsocietyis，afterall，thebasisofthewholecrisis。Atthesametime，anenormousquantityofthesebillsofexchangerepresentsplainswindle，whichnowreachesthelightofdayandcollapses；furthermore，unsuccessfulspeculationwiththecapitalofotherpeople；finally，commodity-capitalwhichhasdepreciatedoriscompletelyunsaleable，orreturnsthatcannevermoreberealisedagain。Theentireartificialsystemofforcedexpansionofthereproductionprocesscannot，ofcourse，beremediedbyhavingsomebank，liketheBankofEngland，givetoalltheswindlersthedeficientcapitalbymeansofitspaperandhavingitbuyupallthedepreciatedcommoditiesattheiroldnominalvalues。Incidentally，everythinghereappearsdistorted，sinceinthispaperworld，therealpriceanditsrealbasisappearnowhere，butonlybullion，metalcoin，notes，billsofexchange，securities。Particularlyincentreswheretheentiremoneybusinessofthecountryisconcentrated，likeLondon，doesthisdistortionbecomeapparent；

　　theentireprocessbecomesincomprehensible；itislesssoincentresofproduction。

　　Incidentallyinconnectionwiththesuperabundanceofindustrialcapitalwhichappearsduringcrisesthefollowingshouldbenoted:commodity-capitalisinitselfsimultaneouslymoney-capital，thatis，adefiniteamountofvalueexpressedinthepriceofthecommodities。Asuse-valueitisadefinitequantumofobjectsofutility，andthereisasurplusoftheseavailableintimesofcrises。Butasmoney-capitalassuch，aspotentialmoney-capital，itissubjecttocontinualexpansionandcontraction。Ontheeveofacrisis，andduringit，commodity-capitalinitscapacityaspotentialmoney-capitaliscontracted。Itrepresentslessmoney-capitalforitsownerandhiscreditorsaswellassecurityforbillsofexchangeandloansthanitdidatthetimewhenitwasboughtandwhenthediscountsandmortgagesbasedonitweretransacted。Ifthisisthemeaningofthecontentionthatthemoney-capitalofacountryisreducedintimesofstringency，thisisidenticalwithsayingthatthepricesofcommoditieshavefallen。Suchacollapseinpricesmerelybalancesouttheirearlierinflation。

　　Theincomesoftheunproductiveclassesandofthosewholiveonfixedincomesremaininthemainstationaryduringtheinflationofpriceswhichgoeshandinhandwithover-productionandover-speculation。Hencetheirconsumingcapacitydiminishesrelatively，andwithittheirabilitytoreplacethatportionofthetotalreproductionwhichwouldnormallyenterintotheirconsumption。Evenwhentheirdemandremainsnominallythesame，itdecreasesinreality。

　　Itshouldbenotedinregardtoimportsandexports，that，oneafteranother，allcountriesbecomeinvolvedinacrisisandthatitthenbecomesevidentthatallofthem，withfewexceptions，haveexportedandimportedtoomuch，sothattheyallhaveanunfavourablebalanceofpayments。Thetrouble，therefore，doesnotactuallyliewiththebalanceofpayments。

　　Forexample，Englandsuffersfromadrainofgold。Ithasimportedtoomuch。Butatthesametimeallothercountriesareover-suppliedwithEnglishgoods。Theyhavethusalsoimportedtoomuch，orhavebeenmadetoimporttoomuch。Thereis，indeed，adifferencebetweenacountrywhichexportsoncreditandthosewhichexportlittleornothingoncredit。Butthelatterthenimportoncredit；andthisisonlythennotthecasewhencommoditiesaresenttothemonconsignment。ThecrisismayfirstbreakoutinEngland，thecountrywhichadvancesmostofthecreditandtakestheleast，becausethebalanceofpayments，thebalanceofpaymentsdue，whichmustbesettledimmediately，isunfavourable，eventhoughthegeneralbalanceoftradeisfavourable。Thisisexplainedpartlyasaresultofthecreditwhichithasgranted，andpartlyasaresultofthehugequantityofcapitalloanedtoforeigncountries，sothatalargequantityofreturnsflowbacktoitincommodities，inadditiontotheactualtradereturns。

　　However，thecrisishasattimesfirstbrokenoutinAmerica，whichtakesmostofthecommercialandcapitalcreditfromEngland。ThecrashinEngland，initiatedandaccompaniedbyagolddrain，settlesEngland抯balanceofpayments，partlybyabankruptcyofitsimportersaboutwhichmorebelow，partlybydisposingofaportionofitscommodity-capitalatlowpricesabroad，andpartlybythesaleofforeignsecurities，thepurchaseofEnglishsecurities，etc。Nowcomestheturnofsomeothercountry。Thebalanceofpaymentswasmomentarilyinitsfavour；butnowthetimelapsenormallyexistingbetweenthebalanceofpaymentsandbalanceoftradehasbeeneliminatedoratleastreducedbythecrisis:allpaymentsarenowsuddenlysupposedtobemadeatonce。Thesamethingisnowrepeatedhere。Englandnowhasareturnflowofgold，theothercountryagolddrain。Whatappearsinonecountryasexcessiveimports，appearsintheotherasexcessiveexports，andviceversa。Butover-importsandover-exportshavetakenplaceinallcountrieswearenotspeakinghereaboutcropfailures，etc。，butaboutageneralcrisis；thatisover-productionpromotedbycreditandthegeneralinflationofpricesthatgoeswithit。

　　In1857，thecrisisbrokeoutintheUnitedStates。AflowofgoldfromEnglandtoAmericafollowed。ButassoonasthebubbleinAmericaburst，thecrisisbrokeoutinEnglandandthegoldflowedfromAmericatoEngland。

　　ThesametookplacebetweenEnglandandthecontinent。Thebalanceofpaymentsisintimesofgeneralcrisisunfavourabletoeverynation，atleasttoeverycommerciallydevelopednation，butalwaystoeachcountryinsuccession，asinvolleyfiring，i。e。，assoonaseachone抯turncomesformakingpayments；andoncethecrisishasbrokenout，e。g。，inEngland，itcompressestheseriesofthesetermsinto&amp；veryshortperiod。Itthenbecomesevidentthatallthesenationshavesimultaneouslyover-exportedthusover-producedandover-importedthusover-traded，thatpriceswereinflatedinallofthem，andcreditstretchedtoofar。Andthesamebreak-downtakesplaceinallofthem。Thephenomenonofagolddrainthentakesplacesuccessivelyinallofthemandprovespreciselybyitsgeneralcharacter1thatgolddrainisjustaphenomenonofacrisis，notitscause；2thatthesequenceinwhichithitsthevariouscountriesindicatesonlywhentheirjudgement-dayhascome，i。e。，whenthecrisisstartedanditslatentelementscometotheforethere。

　　ItischaracteristicoftheEnglisheconomicwriters——andtheeconomicliteratureworthmentioningsince1830resolvesitselfmainlyintoaliteratureoncurrency，credit，andcrises——thattheylookupontheexportofpreciousmetalsintimesofcrisis，inspiteoftheturnintheratesofexchange，onlyfromthestandpointofEngland，asapurelynationalphenomenon，andresolutelyclosetheireyestothefactthatallotherEuropeanbanksraisetheirrateofinterestwhentheirbankraisesitsownintimesofcrisis，andthat，whenthecryofdistressoverthedrainofgoldisraisedintheircountrytoday，itistakenupinAmericatomorrowandinGermanyandFrancethedayafter。

　　In1847，”theengagementsrunninguponthiscountryhadtobemet”[mostlyforcorn]。”Unfortunately，theyweremettoagreatextentbyfailures”

　　[wealthyEnglandsecuredreliefbybankruptciesinitsobligationstowardthecontinentandAmerica]，”buttotheextenttowhichtheywerenotmetbyfailures，theyweremetbytheexportationofbullion。”ReportofCommitteeonBankActs，1857。Inotherwords，insofarasacrisisinEnglandisintensifiedbybanklegislation，thislegislationisameansofcheatingthecorn-exportingcountriesinperiodsoffamine，firstontheircornandthenonthemoneyforthecorn。Aprohibitionontheexportofcornduringsuchperiodsforcountrieswhicharethemselveslabouringmoreorlessunderscarcities，is，therefore，averyrationalmeasuretothwartthisplanoftheBankofEnglandto”meetobligations”forcornimports”bybankruptcies。”ItisafterallmuchbetterthatthecornproducersandspeculatorsloseaportionoftheirprofitforthegoodoftheirowncountrythantheircapitalforthegoodofEngland。

　　Itfollowsfromtheabovethatcommodity-capital，duringcrisesandduringperiodsofbusinessdepressioningeneral，losestoalargeextentitscapacitytorepresentpotentialmoney-capital。Thesameistrueoffictitiouscapital，interest-bearingpaper，insofarasitcirculatesonthestockexchangeasmoney-capital。Itspricefallswithrisinginterest。

　　Itfalls，furthermore，asaresultofthegeneralshortageofcredit，whichcompelsitsownerstodumpitinlargequantitiesonthemarketinordertosecuremoney。Itfalls，finally，inthecaseofstocks，partlyasaresultofthedecreaseinrevenuesforwhichitconstitutesdraftsandpartlyasaresultofthespuriouscharacteroftheenterpriseswhichitoftenenoughrepresents。Thisfictitiousmoney-capitalisenormouslyreducedintimesofcrisis，andwithittheabilityofitsownerstoborrowmoneyonitonthemarket。However，thereductionofthemoneyequivalentsofthesesecuritiesonthestockexchangelisthasnothingtodowiththeactualcapitalwhichtheyrepresent，butverymuchindeedwiththesolvencyoftheirowners。

　　FOOTNOTES[6]Thepublicfundisnothingbutimaginarycapital，whichrepresentsthatportionoftheannualrevenue，whichissetasidetopaythedebt。Anequivalentamountofcapitalhasbeenspent；itisthiswhichservesasadenominatorfortheloan，butitisnotthiswhichisrepresentedbythepublicfund；

　　forthecapitalnolongerexists。Newwealthmustbecreatedbytheworkofindustry；aportionofthiswealthisannuallysetasideinadvanceforthosewhohaveloanedthatwealthwhichhasbeenspent；thisportionistakenbymeansoftaxesfromthosewhoproduceit，andisgiventothecreditorsofthestate，and，accordingtothecustomaryproportionbetweencapitalandinterestinthecountry，animaginarycapitalisassumedequivalenttothatwhichcouldgiverisetotheannualincomewhichthesecreditorsaretoreceive。Sismondi，Nouveauxprincipes[Seconde&eacute；dition，Paris，1827]，II，p。230。

　　[7]Aportionoftheaccumulatedloanablemoney-capitalisindeedmerelyanexpressionofindustrialcapital。Forinstance，whenEngland，in1857，hadinvested180millioninAmericanrailwaysandotherenterprises，thisinvestmentwastransactedalmostcompletelybytheexpertofEnglishcommoditiesforwhichtheAmericansdidnothavetomakepaymentinreturn。TheEnglishexporterdrewbillsofexchangeforthesecommoditiesonAmerica，whichtheEnglishstocksubscribersboughtupandwhichweresenttoAmericaforpurchasingthestocksubscriptions。

　　[8][AsIhavealreadystatedelsewhere[Englishedition:Vol。I——Ed。]，achangehastakenplaceheresincethelastmajorgeneralcrisis。Theacuteformoftheperiodicprocesswithitsformerten-yearcycle，appearstohavegivenwaytoamorechronic，longdrawnout，alternationbetweenarelativelyshortandslightbusinessimprovementandarelativelylong，indecisivedepression-takingplaceinthevariousindustrialcountriesatdifferenttimes。Butperhapsitisonlyamatterofaprolongationofthedurationofthecycle。Intheearlyyearsofworldcommerce，1845-47，itcanbeshownthatthesecycleslastedaboutfiveyears；from1847to1867thecycleisclearlytenyears；isitpossiblethatwearenowinthepreparatorystageofanewworldcrashofunparalleledvehemence？Manythingsseemtopointinthisdirection。Sincethelastgeneralcrisisof1867manyprofoundchangeshavetakenplace。Thecolossalexpansionofthemeansoftransportationandcommunication——oceanliners，railways，electricaltelegraphy，theSuezCanal——hasmadearealworld-marketafact。TheformermonopolyofEnglandinindustryhasbeenchallengedbyanumberofcompetingindustrialcountries；infinitelygreaterandvariedfieldshavebeenopenedinallpartsoftheworldfortheinvestmentofsurplusEuropeancapital，sothatitisfarmorewidelydistributedandlocalover-speculationmaybemoreeasilyovercome。Bymeansofallthis，mostoftheoldbreeding-groundsofcrisesandopportunitiesfortheirdevelopmenthavebeeneliminatedorstronglyreduced。Atthesametime，competitioninthedomesticmarketrecedesbeforethecartelsandtrusts，whileintheforeignmarketitisrestrictedbyprotectivetariffs，withwhichallmajorindustrialcountries，Englandexcepted，surroundthemselves。

　　Buttheseprotectivetariffsarenothingbutpreparationsfortheultimategeneralindustrialwar，whichshalldecidewhohassupremacyontheworld-market。

　　Thuseveryfactor，whichworksagainstarepetitionoftheoldcrises，carrieswithinitselfthegermofafarmore’powerfulfuturecrisis——F。E。]

　　Capital，Vol。3，Chapter31KarlMarxCAPITALVol。III

　　THEPROCESSOF

　　CAPITALISTPRODUCTIONASAWHOLEPartV

　　DIVISIONOFPROFITINTOINTERESTANDPROFIT

　　OFENTERPRISE。

　　INTEREST-BEARINGCAPITALCHAPTER31

　　MoneyCapitalandRealCapital。

　　II。

　　Wearestillnotfinishedwiththisquestion:towhatextentdoestheaccumulationofcapitalintheformofloanablemoney-capitalcoincidewithactualaccumulation，i。e。，theexpansionofthereproductionprocess。

　　Thetransformationofmoneyintoloanablemoney-capitalisamuchsimplermatterthanthetransformationofmoneyintoproductivecapital。Buttwothingsshouldbedistinguishedhere:

　　1themeretransformationofmoneyintoloancapital；

　　2thetransformationofcapitalorrevenueintomoney，whichistransformedintoloancapital。

　　Itisonlythelatterpointwhichcaninvolveapositiveaccumulationofloancapitalconnectedwithanactualaccumulationofindustrialcapital。