Problem w/ crisis stuff, Capital ch. 3 [Money]

[Zukunftsmusik]

I have a problem understanding what Marx is getting at about credit-money and crises in chapter 3, part (b) Means of Payment. In the Penguin edition (reprint from 1990), this is on pages 235 (last paragraph) and 236.

My first and most important problem (which probably is the reason I don't understand the rest) is from first line, last paragraph on page 235:

Marx
There is a contradiction immanent in the function of money as the means of payment. When the payments balance each other, money functions only nominally as money of account, as a measure of value. But when actual payments is to be made, money does not come onto the scene as a circulating medium, in its merely transient form of an intermediary in the social metabolism, but as the individual incarnation of social labour, the independent presence of exchange-value, the universal commodity.

I understand (to an extent, at least) how these two aspects or functions of credit-money are different, but I can't really see how they are contradictory. Maybe I can't really grip this because I don't really understand what Marx means with "the individual form of social labour, the independent presence of exchange-value, the universal commodity." If someone could break this down and explain it to me, that would be great.

Marx goes on with saying that the mentioned contradiction leads to a monetary crisis. Such a crisis appears, he writes, "only where the ongoing chain of payment has been fully developed, along with an artificial system for settling them." Does he mean here the system of credit-money?

He continues (p 236):

Marx
Whenever there is a disturbance to this mechanism [...], money suddenly and immediately changes over from its merely nominal shape, money of account, into hard cash. Profane commodities can no longer replace it. The use-value of commodities become valueless, and their value vanishes in the face of their own form of value.

I can't really get my head around this. Why will the use-value of commodities vanish? What does he mean by that "their values vanishes in the face of their own form of value"? Does he by "form of value" mean "value-form", ie exchange-value? Does he mean that they lose their value when meeting their general equivalent, money? Still, if that's what he's saying, I have yet to understand hat that means.

Thanks in advance. If I haven't made myself clear enough, let me know.

[Zukunftsmusik]

bump. please, anyone?

[Blackbird123]

http://www.valuetheory.org/files/98sat1a-ger.rtf

[Blackbird123]

The universal commodity is the commodity the one commodity that expresses the value of all other commodities (ie. Money commodity=universal commodity) Yes Marx meant credit money when he said "contd.....with an artificial system of settling them"

[Zukunftsmusik]

The universal commodity is the commodity the one commodity that expresses the value of all other commodities (ie. Money commodity=universal commodity)

yes, I do know this, but I don't understand what in my OP you try to explain here :unsure:

[citizen of industry]

My interpretation is that, for example, all these companies buy from each other on credit, part (or most) of their future profits go to interest dividends, etc. i.e., fictitious capital. The contracts are signed, numbers are transfered from one account to the other without hard cash as a medium of exchange. It is just account money, and works fine until there is a crisis. "When the payments balance each other, money functions only nominally as money of account, as a measure of value."

However, in times of crisis, people demand cash money. The amount of cash in the bank is practically nothing compared to the money that exists in the bank accounts, as the cash is only used primarily by consumers for purchasing commodities. If the banks are raided, they can't come up with the cash. The companies, which formerly were using credit and account money, demand cash from their debtors, but it is scarce.


Marx goes on with saying that the mentioned contradiction leads to a monetary crisis. Such a crisis appears, he writes, "only where the ongoing chain of payment has been fully developed, along with an artificial system for settling them." Does he mean here the system of credit-money?

Yes, he is talking about credit money. Example: The bank lends money to x, who produces a commodity destined for productive consumption, which he gives to producer y on credit, who produces and commodity destined for consumption, which he gives to retailer z on credit. If z is profitable, he transfers some of his profits to y electronically (not in Marx's day) to square the accounts. In a crisis, if z can't sell, he can't pay y, who can't pay x, who can't pay the bank, who is in need of hard cash because people are withdrawing cash in a crisis, and the bank, y and x are all demanding hard cash from their debtors, and wont accept commodities or assets or stock options, etc. only the green stuff.


Whenever there is a disturbance to this mechanism [...], money suddenly and immediately changes over from its merely nominal shape, money of account, into hard cash. Profane commodities can no longer replace it. The use-value of commodities become valueless, and their value vanishes in the face of their own form of value."

Here it seems he is talking about devaluation of capital. Due to the crisis, commodities can't be sold, they are devalued. Think the "going out of business sale." Nobody accepts commodities in exchange for cash.

[Zukunftsmusik]

However, in times of crisis, people demand cash money. The amount of cash in the bank is practically nothing compared to the money that exists in the bank accounts, as the cash is only used primarily by consumers for purchasing commodities. If the banks are raided, they can't come up with the cash. The companies, which formerly were using credit and account money, demand cash from their debtors, but it is scarce.

Okay, but why do people demand cash money in times of crises?


Yes, he is talking about credit money. Example: The bank lends money to x, who produces a commodity destined for productive consumption, which he gives to producer y on credit, who produces and commodity destined for consumption, which he gives to retailer z on credit. If z is profitable, he transfers some of his profits to y electronically (not in Marx's day) to square the accounts. In a crisis, if z can't sell, he can't pay y, who can't pay x, who can't pay the bank, who is in need of hard cash because people are withdrawing cash in a crisis, and the bank, y and x are all demanding hard cash from their debtors, and wont accept commodities or assets or stock options, etc. only the green stuff.

Well that made it clearer, and surprisingly... simple.



Here it seems he is talking about devaluation of capital. Due to the crisis, commodities can't be sold, they are devalued. Think the "going out of business sale." Nobody accepts commodities in exchange for cash.

I'm afraid you have to explain this a bit further, if possible :unsure:

And I still don't grasp this:


Marx
There is a contradiction immanent in the function of money as the means of payment. When the payments balance each other, money functions only nominally as money of account, as a measure of value. But when actual payments is to be made, money does not come onto the scene as a circulating medium, in its merely transient form of an intermediary in the social metabolism, but as the individual incarnation of social labour, the independent presence of exchange-value, the universal commodity.

Simply put: Where's the contradiction?

[MEGAMANTROTSKY]

Brostana, perhaps you could try this site (http://critiqueofcrisistheory.wordpress.com/)? The issue of crises in Marxist theory is basically all he blogs about. I don't know if it will answer your question, but maybe it can be a general help to you in the future.

[citizen of industry]

The contradiction is that money arises as a circulating medium. X, Y and Z all have products, they want to trade them, but it is a hassle to exchange x for y and then y for z. Hence the universal equivilent. So C-M-C. But capitalism's purpose is increasing surplus value, so M-C-M. Given the credit system, if C-M can't be realized, crisis occurs. Because the corporations are over their head in debt, money is instead a commodity they are all seeking. It is loaned out at interest, very steep in a crisis. It is speculated on, etc.

[citizen of industry]

Regarding devaluation of capital, it is a crisis of overproduction. What is produced is higher than the social need, so there is no demand. C-M doesn't occur, so the commodities pile up unsold and become valueless, expire, or are sold undervalue. If supply exceeds demand it either doesn't get sold or is sold at a fraction of the value. This happens on a large scale during crisis, and is also a good opportunity to buy up failing enterprises, resulting in centralization.

[citizen of industry]

Why do people demand hard cash during crisis? Because they need hard cash to pay off their debtors. Because devaluation of capital is occuring so the only thing "safe" is the money commodity, which as the universal equivalent can be exchanged for anything. It doesn't rely on demand so much as commodities. Also, when the book was written everyone was on the gold standard, so money could be theoretically exchanged for gold, though banks only had a little gold in the vaults.