Money merchandise . Universal equivalent. Special merchandise in which all goods express their value. Social form of measurement of labor investment of merchandise producers. Necessary form of movement of goods.
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- 1 Functions of money
- 1 Measure of value
- 1.1 Price and value of money
- 1.2 Price pattern
- 2 Circulation medium
- 2.1 Direct exchange and movement of goods
- 2.2 Signs of value
- 3 The treasure
- 4 Payment method
- 4.1 Credit money
- 5 World money
- 1 Measure of value
- 2 Monetary circulation laws
- 3 Law of the circulation of paper money
- 4 Sources
- 5 External links
Functions of money
The functions of money , being a manifestation of its essence, make viable the relationships established by the producers of goods in the process of changing the products on the market.
Equating all commodities to gold in the form of prices facilitates a qualitatively equal expression of their value and creates the possibility of their directly quantitative equalization.
It seems to be at first instance that the goods are made comparable by money . But this is not true. Only by the fact that all commodities, as values, represent materialized human labor and, therefore, are themselves comparable, can their value be measured with a certain commodity. By serving as a price for other commodities, money itself is priceless, it cannot express its value in itself, that is, in its use value. The value of gold as money is manifested in the use value of other goods. Since gold is exchanged for the most diverse commodities, its relative value has infinite expressions in the different commodities.
The value of gold as of any other merchandise, is established by the amount of work invested in its production. Therefore, as the productivity of labor increases, the amount of work necessary to produce gold decreases , the value of gold cannot always be constant, it decreases. So there can be no invariable measure of value.
Price and value of money
The price of commodities depends, firstly, on its own value and, secondly, on the value of gold . According to the value of the given gold, the price of the merchandise changes directly proportional to its own value: as the value of the merchandise rises, its price rises and as the value decreases, its price decreases. If the value of the goods remains unchanged and the value of gold fluctuates , the prices of the goods will vary inversely proportional to the value of money : as the value of gold rises, the prices of the goods decrease and the gold value, the prices of the merchandise increase. In cases where the value of the goods and the value of gold change simultaneously , prices may vary in different directions, they may rise or fall, depending on the change in the value of the goods on the one hand, and the value of gold on the other.
The function of measuring the value of money is fulfilled as imaginary money, ideal money. To express the value of goods in money , that is, their price, it is not necessary to have gold .
Price is the monetary expression of value, but it can turn out to be a purely irrational expression that does not express value. In capitalist society, conscience and honor and even silence itself can be sold and have a price, although they have no value. The land uncultivated worthless but priceless.
As an expression of value, the price must not necessarily correspond quantitatively to the value of the goods. Such correspondence is an exception. The price fluctuates around the value depending on the correlation of demand and supply. Prices may be higher or lower than their value. Such price movement is unavoidable in mercantile production, which develops spontaneously and anarchically.
Although in particular of value measurement, money works in an ideal, imaginary way, this function of money is based on real gold, which is the product of labor and is exchanged for other commodities. If gold were not actually the product of labor, lacked value, and could not be exchanged for other commodities, it could not function ideally as a measure of value. This means that the function of money as a measure of value presupposes its operation as a real medium of exchange.
The operation of money as a measure of value presupposes the need to establish a monetary unit that serves as the basis for equating the prices of different commodities. Such a unit is a certain amount of metal that serves as a universal equivalent. In the various countries the monetary unit constitutes different amounts of metal-money. For example in Russia after the monetary reform of 1897 , the ruble was set as the monetary unit, which contained 0.77 grams of gold .
As a measure of value and as a pattern of prices, money fulfills two different functions. The measure of value is the social function of money generated by the production relations system. The function of the price standard is linked to the need to equate the various quantities of gold with each other. The money in its measurement function is the social value realization of abstract labor, and depending on price pattern is the fixed weight of the metal. As a measure of value, money serves to express the value of all commodities in the form of a certain quantity of gold.. As a price standard, measure these quantities of gold. The price pattern can change at the will of the state legislation, while the real prices, expressed in gold , are not determined by that will, but by the law of value , which governs spontaneously.
The price of the different merchandise and the price level of the entire mass of merchandise are formed in the market, in the incessant acts of buying and selling. Consequently, the process of price formation and operation as a measure of value is inexorably linked to the real process of exchange, in which money fulfills the function of a medium of circulation.
Direct exchange and movement of goods
The exchange of merchandise was produced in its beginnings in the form of direct exchange according to the M-M formula. When money arose, the form of exchange was transformed into those that began to be sold for money , and with the money obtained, the producer of merchandise he bought others he needed. In such case the process of the change was carried out according to the formula M – D – M; where M – D represents the sale of merchandise, and D – M the purchase. The money played the role of intermediary change. The exchange of merchandise took the form of the circulation of merchandise, and money served as a medium of circulation.
The direct exchange of goods and the movement of goods are not only different in form, but also in content. In the direct change, the two parts that participate are in equal conditions. By exchanging their merchandise for another, each owner seems to buy and sell simultaneously. Here the purchase and sale coincide. The buyer and seller have not yet been separated as independent economic figures.
In the movement of goods, the situation is different in that money plays the role of intermediary to exchange. In this case, all merchandise goes through two metamorphoses. the first is act M – D. the commodity is sold for money, and its value is converted from commodity to money. The second, is the act D – M is the transformation of the value of the form of money in the form of merchandise. When money has been transformed into commodities, the circulation process ends: from the sphere of circulation, they pass to the sphere of consumption.
The peculiarity of this form of exchange is that the purchase and sale are separated, making these acts independent. They no longer coincide in time or space. Such a form of exchange offers producers the possibility of selling today and buying tomorrow. They can also sell in one market and buy in another.
In the movement of goods, the difference between the movement of value and the movement of value in use is clearly revealed. The producer of merchandise runs out of use value, but he does have the value of this merchandise in the form of a certain amount of money. By owning money independently of value, the producer can use it whenever and wherever he wants. The divorce between the acts of buying and selling creates the possibility of overproduction crises. If a producer has sold his merchandise, but does not buy at the given time and place, the merchandise of other producers, this means that some producers will not be able to sell their merchandise, they will not be able to realize their value. Parts of the goods may remain unsold, making their overproduction visible. By not selling their goods, the producer will not be able to continue the production process.
Unlike commodities that by realizing their value leave the sphere of circulation, money as a means of circulation is always found in it, serving the exchange of merchandise. But the movement of goods in the sphere of circulation is the initial and determining factor, and the movement of money is the derivative, the subordinate.
In the beginning, gold fulfilled the function of bullion circulation medium depending on its weight. To avoid the need to weigh the gold in each act of exchange, small gold bars began to be given a certain standard shape and to put their own seal on them. The gold and silver as money received in the form of coins. The circulation of coins is distinguished from the circulation of bullion in that they are accepted in exchange by weight, and the currency by denomination.
In the process of operating as a medium of circulation, gold coins gradually wear out, losing their weight. However, in the market they continue to be accepted according to their denomination. Its purchasing power remains the same, and the law establishes the degree of loss of the metal that makes the gold coin useless for circulation. Thus the very circulation of money separates the real content of the currency from its nominal content. Silver and copper coins without full value appear in circulation as a substitute for full value gold coins.
The operation of currencies that do not have full value, as substitutes for those that have full value, in the conditions of circulation of gold and silver , provided the basis for the issuance of merely nominal signs of value: paper money as a substitute for money cash ( gold and silver ).
The possibility of replacing money-merchandise with signs, with symbols of value (coins without full value and paper money) arises from the very nature of the function of money as a means of circulation. In this function money plays a momentary role. It is only required to buy other merchandise. It is only necessary that the monetary signs have social importance. As the paper money is issued by the state that legislatively imprints on it, the paper money is valid only within certain states.
If the producer sells his merchandise and does not transform the money obtained into other merchandise, the money leaves the sphere of circulation and becomes a treasure. The accumulation of money and its departure for a certain time from the sphere of circulation are conditioned by the production process itself. If the producer carries out his production in small batches and it is necessary for him to acquire labor instruments, it is evident that for a certain time he must sell without buying, he must accumulate money. The acquisition of consumer items of a certain value also requires a previous accumulation of money for treasury. Therefore each producer to one degree or another treasures.
The peculiarity of money as a treasure is that it fulfills this function first and foremost as cash, while as a measure of value it fulfills it as ideal money, and as a means of circulation gold could have been replaced by its substitutes. In practice, producers usually accumulate gold, cash or paper money. However, the fictitious character of such types of treasure is discovered at the time these monetary signs are devalued, with respect to gold . Only gold is the true treasure.
Between the treasury and circulation functions there is an indestructible internal connection. By developing on the basis of the function of money as a medium of circulation, the treasury function becomes an important condition for the functioning of money as a medium of circulation. At any given moment, a certain amount of money is necessary to attend to the commercial circulation process. As the scale of production and the movement of goods increases, part of the money that is in the form of treasure begins to appear on the market and fulfill the function of a means of circulation. If the production and circulation of goods is reduced, the part of the surplus money in the sphere of circulation becomes treasure.
In the process of developing merchandise circulation, a special form of merchandise transactions appears: the purchase without prior sale of merchandise. Said mercantile operation constitutes a new link in the development of mercantile production, a closer and firmer link, frequently repeated, between producers. The producer can acquire the necessary merchandise without having previously sold his merchandise and without having money only on condition that it is deferred to the payment of the merchandise. Thus arises a special form of merchandise realization: on credit. Due to such a transaction, some producers become creditors and others become debtors.
Upon receiving the merchandise, the debtor gives the creditor in exchange a written commitment (bill of exchange) in accordance with which he agrees to pay the value of the merchandise received on credit within a certain period. When the term expires, the debtor pays the creditor in money the value of the merchandise received and the latter returns the commitment received (bill of exchange). In this case, money fulfills the function of means of payment. The money works widely as payment also outside the sphere of circulation to paying wages and any financial commitment. In all cases that money it does not appear as a momentary intermediary in the movement of merchandise M – D – M, but it performs an independent movement, passing from one owner to another, it works as a means of payment.
With the function of money as a means of payment, the so-called credit money arises and develops. The producer who sells on credit and receives the payment commitment from the buyer can use this document instead of money to pay for the merchandise purchased from a third producer. In this case, the bill is transferred in favor of a third party, who becomes the holder of the bill of exchange and can by the same mechanism make the liquidation of the merchandise purchased with a fourth producer.
Because each one who transfers the letter guarantees their subscription, the letters thereby acquire more confidence and capacity for circulation the more transfers they have. Thus the letters, being credit instruments, acquire a certain form of money generated by credit: the form of credit or commercial money .
On the basis of the circulation of bills of exchange, a more developed and perfect form of credit money appeared, the check, which is the bank bill of exchange that is paid on demand. This form of credit money has become widely used, and the circulation of bills was replaced by the circulation of banknotes.
The development of credit operations and the role of money as a means of payment created additional conditions for the development of the role of money as a means of hoarding. Producers face a new need: accumulate money in order to settle payment commitments within the established period. In this case, the money is withdrawn from circulation and becomes a treasure not as such, but as a means of payment. This means that the treasury function and the means of payment function are closely linked.
The development of mercantile production and the extension of change beyond national borders constitute a material premise for the emergence of a new function of money . In the world market, money, according to Marx’s expression , strips off its national uniform and appears in the form of precious metals.
When money was gold in some countries and silver in others , a double measure of value prevailed in the world market. Today, this peculiarity of the functioning of world money has disappeared, since in almost all parts only gold fulfills the function of measuring value. In circulation on a world scale, money works primarily as a universal means of payment and a universal means of purchase, with the peculiarity that the function of means of payment predominates. This is explained by the fact that world trade is a large wholesale trade, where goods are sold on credit or vice versa, the buyer anticipates the money .
In the world circulation money works as a social materialization of wealth, since these can freely pass from one country to another in the form of an equivalent, of gold .
Each nation needs a certain gold reserve for its international payments. Therefore, money in the form of treasure is a reserve fund of world money. Such money fulfills this function by also circulating paper money, when the treasury is not a spontaneous regulator of internal circulation.
Monetary circulation laws
For the realization of goods in the sphere of circulation, at any given moment, a certain amount of money is required. The amount of money needed for circulation depends first of all on the sum of the prices of the goods in circulation. The higher the sum of the prices, the more money will be needed, keeping the other conditions the same, and vice versa. The second factor of importance that influences the amount of money in circulation is the speed of circulation of money (coins). In the circulation process, the same currency can be used in a few business operations. The faster the circulation of the coins, the less quantity is needed in the sphere of circulation.
The amount of money in circulation also depends on the proportions of the credit. To carry out the merchandise sold on credit, you do not need money at the given time. At the same time, at any given moment, settlements are made between the producers corresponding to the operations carried out by them on credit, which requires a certain amount of money. Finally, some payment commitments are reimbursed by means of accounts to order, mutually crediting the extended bills of exchange.
Paper money circulation law
If such an amount of paper money is released into circulation that is equal to the amount of gold money needed for circulation, paper money works the same as gold money, and has the same purchasing power. But the situation changes if more paper money is put into circulation than gold money . This is because paper money, because it has no internal value, unlike gold, cannot be converted into treasure. Paper money continues to function in circulation even if it has been issued in larger quantities than the circulation requires.
With the need for gold currency for circulation, the value of paper money depends on its quantity. Consequently, the specific law of the circulation of paper money arises from its relation to gold , which it represents. “And this law is simply that the issuance of paper money must be limited to that amount in which without it, the gold (or silver) represented symbolically by that paper would necessarily circulate.” Marx expressed .