Money and Capital

[bezdomni]

How are Money and Capital related?

[KC]

Hey SP, good to have you back! Although I'm not sure why you're asking such a question. Could you elaborate on what you mean here? Are you referring to the M-C-M'/C-M-C' cycles?

[ComradeOm]

Taking the question at face value, money and capital are essentially the same thing. Capital is merely money that has been invested in order to produce goods or services. So if you have ten grand stuffed under your mattress, its money; if you use that five grand to buy some machinery or a new van (for example) then its called capital

[bezdomni]

Hey SP, good to have you back! Although I'm not sure why you're asking such a question. Could you elaborate on what you mean here? Are you referring to the M-C-M'/C-M-C' cycles?


Well, I know (at least in some way) how to answer the question. I was hoping asking as simple a question as possible would result in the best discussion possible.

I am specifically interested in the flow of liquid assets in capitalist society and "the circuit of money capital" (the topic of capital Vol II, which I haven't studied nearly enough).

If we had a map (or computer database or something) that kept track of all cash flow between all individual people (which would be a fucking lot of data, I know) - we would have complete knowledge of the way that money is flowing over time. Who it typically comes from and where it typically goes to. What kinds of predictions would this allow us to make about future transactions? What insight would this kind of data give us about social relations between groups of people and even individual people?

Since we don't have that kind of knowledge, how would we predict such a collection of data would look? Would most money transfer ultimately terminate in a handful of spots, or would it be more distributed than we'd expect?

[Cumannach]

Capital is money used to make more money, instead of to purchase goods for consumption.

[bezdomni]

Capital is money used to make more money, instead of to purchase goods for consumption.

Thanks, but I'm not asking how they're different. I'm asking how they are related.

[KC]

Sorry SP, but it seems that the question you're asking is so vague that I personally don't even know how to address it, and I am worried that this thread is going to diverge into responses with multiple unrelated points unless you further clarify your question.

[Invariance]

Well, the first part of your question has largely been answered; the difference between money and money capital, is that the latter is used in the valorization process, and falls, with commodity capital and productive capital, under the heading 'industrial capital.' Likewise, the difference between a commodity as a use-value, and commodity capital is that the latter is also used in the valorization process.

Regarding the 'flow' of money, Marx introduces a simple scheme in Chapter 3 of Capital, Volume 1.

'Hence, for a given interval of time during the process of circulation, we have the following equation: the quantity of money functioning as the circulating medium = the sum of the prices of the commodities divided by the number of times coins of the same denomination turn over...Given the total number of times all the circulating coins of one denomination turn over, we can arrive at the average number of times a single coin turns over, or, in other words, the average velocity of circulation of money...The quantity of money thrown into the production process at the beginning of each day is of course determined by the sum of the prices of all commodities circulating simultaneously side by side. But within that process coins are, so to speak, made responsible for each other. If one increases its velocity of circulation, the other slows down or completely leaves the sphere of circulation...Hence, if the number of acts of circulation performed by the separate piece increases, the total number of those pieces in circulation diminishes.'The total quantity of money functioning during a given period as the circulating medium, is determined, on the one hand, by the sum of the prices of the circulating commodities, and on the other hand, by the rapidity with which the antithetical phases of the metamorphoses follow one another. On this rapidity depends what proportion of the sum of the prices can, on the average, be realised by each single coin. But the sum of the prices of the circulating commodities depends on the quantity, as well as on the prices, of the commodities. These three factors, however, state of prices, quantity of circulating commodities, and velocity of money-currency, are all variable. Hence, the sum of the prices to be realised and consequently the quantity of the circulating medium depending on that sum, will vary with the numerous variations of these three factors in combination. Of these variations we shall consider those alone that have been the most important in the history of prices.

While prices remain constant, She quantity of the circulating medium may increase owing to the number of circulating commodities increasing, or to the velocity of currency decreasing, or to a combination of the two. On the other hand the quantity of the circulating medium may decrease with a decreasing number of commodities, or with an increasing rapidity of their circulation.

With a general rise in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities in circulation decrease proportionally to the increase in their prices, or provided the velocity of currency increase at the same rate as prices rise, the number of commodities in circulation remaining constant. The quantity of the circulating medium may decrease, owing to the number of commodities decreasing more rapidly; or to the velocity of currency rise.

With a general fall in the prices of commodities, the quantity of the circulating medium will remain constant, provided the number of commodities increase proportionally to their fall in price, or provided the velocity of currency decrease in the same proportion. The quantity of the circulating medium will increase, provided the number of commodities increase quicker, or the rapidity of circulation decrease quicker, than the prices fall.

The variations of the different factors may mutually compensate each other, so that notwithstanding their continued instability, the sum of the prices to be realised and the quantity of money in circulation remain constant; consequently, we find, especially if we take long periods into consideration, that the deviations from the average level, of the quantity of money current in any country, are much smaller than we should at first sight expect, apart of course from excessive perturbations periodically arising from industrial and commercial crises, or less frequently, from fluctuations in the value of money.

The law, that the quantity of the circulating medium is determined by the sum of the prices of the commodities circulating, and the average increasing more rapidly, than prices velocity of currency may also be stated as follows: given the sum of the values of commodities, and the average rapidity of their metamorphoses, the quantity of precious metal current as money depends on the value of that precious metal. The erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the circulating medium, and that the latter depends on the quantity of the precious metals in a country; this opinion was based by those who first held it, on the absurd hypothesis that commodities are without a price, and money without a value, when they first enter into circulation, and that, once in the circulation, an aliquot part of the medley of commodities is exchanged for an aliquot part of the heap of precious metals.
So, suppose we had a system where each transaction was recorded, we would be able to see the onsets of stagnation; capitalists would cut back on the amount of capital they would throw into circulation, and therefore workers would be consuming less. A physiocrat (a school of economic thought which emphasised agriculture as the only productive area) called Francois Quesney influenced Marx in his Tableau Économique (http://homepage.newschool.edu/het//essays/youth/tableauoverview.htm). Quesney had been a student in medicine, and with the advances in knowledge of blood circulation, applied this to economics. So, with Marx, when the circulation of money 'dries up' just like blood, the economy stagnates. There are further problems with credit which Marx continues on with later.