Money is the only commodity

Reading Marx’s Capital – Vol 1, Class 3

Money is the Only Commodity

When you listen to an introduction that says nearly everyone who gave up Capital gave up in Chapter 3 and Chapter 3 is the current topic, it doesn’t bode well, but here goes.

In the last lesson, we ended with money as the matrix, the concealing form that disguised the underlying labour and moved us away from the reality of production.

In this chapter, things go even deeper, and money is not only something that moves us away from the producers, but, as it takes on new roles, money is no longer a helper in the exchange of commodities, it is the only commodity.

Chapter 3: Money, or the Circulation of Commodities

Measure of Values

Money has two functions: a measure of value and a means of circulation. As a measure of value, money is the necessary form of appearance of labour time.

As a measure of value and as a standard of price, money performs two quite different functions. It is the measure of value as the social incarnation of human labour; it is the standard of price as a quantity of metal with a fixed weight.
Capital: Critique of Political Economy v. 1 (Classics S.), page 192

Money gives something a price. We need to take things to the market to exchange, but under the previously explained system, things don’t have a value until they are in a relationship with something else.

So how can you tell a value without taking something to market? We need a notional value and money is the thing that “lends its tongue”.

This giving of a price is an ideal act, we don’t need money/gold to change hands in order to have a price, and this is the difference between what money is made of (gold) and the symbol of money.

A problem that the value of gold changes, but the important thing is the relative value, i.e. the price, can change, but as long as the relative values are consistent, this is not really a problem.

The value names of commodities express both the weights of metal and the value of a commodity. “Price is the money name of the labour objectified in a commodity” (page 195).

But price and value can differ.

The magnitude of value of a commodity, therefore, expresses a necessary relation to social labour time which is inherent in the process by which its value is created. With the transformation of the magnitude of value into price this necessary relation appears as the exchange ratio between a single commodity and the money commodity which exists outside it. This relation, however, may express the magnitude of value of a commodity and the greater or lesser amount of money for which it can be sold under the given circumstances.
Capital, page 196

In other words, the price isn’t the same at all times, it can vary with supply and demand, though of course, the value (that x costs more than y) is still a product of socially necessary labour.

Things get even stranger when price is seen to harbour a quantitative incongruity in that in some instances (sale of conscience, honour or undeveloped land) it can have a price, but no value (value being socially necessary labour time spent on it.

This means that the price of something may be known or agreed, but because of fluctuations and that it has been uncoupled from value, the only way you can really tell the value of something is when a transaction has been completed and the money has changed hands.

The Means of Circulation

This section serves as a good illustration of Marx’s dialectical method as he makes “the further development of the commodity does not abolish these contradictions, but gives them room to move” (page 198). The idea of movement or motion as a “social metabolism” and we start to think about commodities and money and the relationship between them.

The Metamorphasis of Commodities

The first process of exchange can be represented as C – M – C (Commodity to Money to Commodity).

Commodity to Money

A whole set of difficulties has to be overcome before I can convert my commodity into money. The primary one is a problem of demand, reflected today by our consumer society. For me to sell something, someone else has to have a need for it. It has to have a use value for someone else.

Capitalism balances itself through supply and demand. If demand is high, prices go up, if supply is too great, they go down. This can still be expressed in terms of socially necessary labour – when supply is too great, “the effect is the same as if each individual…had expended more labour time on his particular product than was socially necessary” (page 202).

Money to Commodity

“Money is the absolutely alienable commodity because it is all other commodities divested of their shape” (page 205). A different set of power relations is involved in the money to commodity side of the equation. If I have money I can buy whatever I like.

But just because someone has sold, does not mean they need to by. In the commodity for commodity exchange, there is a buyer and seller as two sides of the transaction, commodities change hands. With a money intermediary, there is circulation, but not necessarily equilibrium in that sales = purchases. “Money splits up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s (page 209).

Again, this causes problems, if someone holds money, the circulation process stops, and if it stops, you have people with unsold commodities

The Circulation of Money

Commodities enter into circulation and drop out, but the role of money is to stay in circulation; it functions as a lubricant.

The total quantity of money required is a function of the sum of the prices of commodities in circulation and the velocity of circulation.

Coin The Symbol of Value

In the beginning, the price of the gold in the coin is the same as the value of the gold in the coin. Going back to an earlier section, it’s no coincidence that some of the monetary values have their history in weights; a pound was a pound of gold.

The only difference between gold and bullion lies in their physical configuration, and gold can at any time pass from one form to another. For a coin, the road to the mint is also the road to the melting pot.
Capital, page 222

But as ever, things don’t remain that simple. In a purely physical sense, coins wear down, and as they do so, their weight, and therefore the amount of metal they contain, becomes less.

The fact that the circulation of money itself splits the nominal content of coins away from their real content, dividing their metallic existance from their functional existance implies the latent possibility of replacing metallic money with tokens made of some other material, ie symbols which would perform the function of coins.
Capital, page 222-223

Gradually there is the replacement of gold with symbols. It has a practical cause, gold is difficult to work with, it breaks down, it’s difficult to get the exact amounts right. So it makes sense to move to such things as paper money. But at the early stages, it remains a symbol, “only insofar as paper money represents gold, which like all commodities, has value, is it a symbol of value” (page 225).

Is this a logical or a historical argument? The power of theState is critical.


There is only one money, as a measure of value gold is fine, as a means of circulation it is not. When it comes to circulation, there are some things that need addressing.


“When sales are not supplemented by subsequent purchasing money is immobolised … transformed from coin into money” (page 227). Some of this is for sensible reasons, we need to save enough money to do some things.

But money can also be compulsive and it removes distinctions between commodities, more importantly, it removes qualitative differences along with this.

Its owner is master of all he desires … since money does not reveal what has been transformed into it, everything, commodity or not is convertible into money. Everything becomes saleable and purchasable.
Capital, page 229

Even worse, from a Marxist perspective, money takes the socially necessary labour from the individual and allows this “social power to become the private power of private individuals” (page 230).

The accumulation of physical goods has limits (you can only use so many use values!) the accumulation of money does not. This might be the first time an economy has encountered this limitlessness.

Means of Payment

Payment traditionally is immediate, which was the need for hoarding, but things can be made more efficient by expanding the methods and timings of payment. The buyer and seller can become creditor and debtor.

This brings an important change for money:

Money no longer mediates the process. It brings to an end by emerging independently, as the absolute form of existence of exchange value, in other words, the universal commodity.
Capital, page 234

So the reason for the selling of commodities has travelled a long way

  • for the seller, it was to turn his commodity into money to satisfy a need
  • for the hoarder, it was to preserve the monetary form of a commodity
  • for the debtor, it is to be able to pay

“The value form of the commodity, money has now become the self-sufficient purpose of the sale owing to a social necessity springing from the conditions of the process of circulation itself” (page 234). So money has become central to the system.

We have moved from C – M – C to M – C – M forms of circulation.

And with this move, why would I lend money to get the same amount back? This would make sense under the C – M – C system, where money was a transition, when but now money is the beginning and end point, I would want to make money out of the process.

Now that time has entered the system,  (exchanges no longer have to be made directly) people don’t even have to produce anymore, they can hold money and lend it out for a profit.

But as accounts and credit are extended out, it requires confidence, as we’ve seen with the 2008 crisis. In this situation, “the use-values of commodities become valueless… the bourgeois … has just delcared that money is a purely imaginary creation, “Commodities alone are money’ he said. But now the opposite cry resounds over the markets of the world: only money is a commodity” (page 236).

The 2008 liquidity crisis stemmed from people only having faith in money, commodities (houses etc) were not trusted, only money, the universal commodity, was trusted as a true measure of value, and as only money was trusted, people wanted to hold onto it and it was up to governments, the State, to try and free things up with QE, etc.

World Money

Again, the State has an important role to play. Initially, money linked to gold reserves, since around the 1970s, gold no longer the standard, instead we use statistics around productivity and this data constructs a fiction of a national economy, which has an effect on the currency.

The imaginary element, the fetishism is built into it (socially necessary), so the question becomes, what do we do about it, how do we confront it?

Summing it Up

This chapter takes me through another step in the alienation of labour from money and a step towards making everything less real.

In the barter system, the value of this was expressed in whether it had a use value for the owner, in which case the person who made it would know if it was useful or not, or an exchange value for the owner, in which case the value would be what they could get for it.

But money comes in and acts as an intermediary, taking away the directness of that exchange. We can still see value in that we get money for it, but that is a market value, which might be very different from the personal values we attach to things.

The trouble is, the market value is the visible one and it becomes the de facto measure of value. What doesn’t have a price to some extent loses reality.

The step in this chapter is to make money more central, and eventually, money becomes an end in itself, as first people hoard (so they can save to buy something worth more money than they initially have), then borrow creating creditors and debtors. The repaying of debt represents new territory in alienation because when you sell a commodity to repay a debt, you don’t get anything in exchange at the end of it.

This has created a new market, the money market. So this thing that was meant to represent commodities has become an end in itself. No longer do people even have to be producers, they can deal in money itself.

Money, which started off as the imaginary representation of value has become more real than the things it is representing. This is shown at its most raw in a financial crisis – people don’t want assets, they don’t want commodities, they want imaginary money.

Social necessity has decreed the imaginary is the real.


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