Marx states his intention to deal only with ‘commercial and bank credit’, and not to deal with the credit system in detail, nor the ‘instruments this creates (credit money, etc.)’, nor ‘the development of state credit’.
He notes that in volume 1 (chapter 3) he had showed ‘how the function of money as means of payment develops out of simple commodity circulation, so that a relationship of creditor and debtor is formed.’ Let us remind ourselves of his argument.
In ‘direct’ commodity circulation money fulfils the function of means of purchase, i.e. it has to be present at the same time and the same place as the sale. But this is not essential for commodity exchange. With the development of commodity production arise circumstances in which the alienation of the commodity and the realisation of its price become separated in time: maybe, one type of commodity requires a longer, another shorter, time for its production; maybe one is sold locally, another far away; maybe, when the same people repeatedly carry out the same transactions, the synchronisation of money and commodity becomes unnecessarily bothersome; in other circumstances, the use of certain commodities is sold for a definite time period only (housing, for example): only after the expiry of the lease does the buyer receive the use-value of the commodity (and one of the more important commodities which is not paid for until after it has been fully delivered is labour-power).
When buying and paying become separated, money functions as a means of payment, rather than a means of purchase. Money now acts as a measure of value through the determination of the price of the commodity to be sold; and as a notional means of purchase, in the form of a promise to pay, itself sufficient to cause the commodity to change hands.
The function of money as means of payment prompts the development of credit-money, certificates of debts owed for already purchased commodities which circulate to pass on those debts to others.
Hence, with the development of capitalist production (i.e. production for the sake of circulation), and with it trade, money comes increasingly to function as means of payment: commodities are not bought with money as such but with ‘promises to pay’. Until their expiry these promises (essentially bills of exchange) circulate as means of payment and function as actual money, even though to the degree that the bills cancel each other out as debts and claims they are never actually transformed into ‘real’ money. These circulating bills form the basis of credit money, money ‘not based on monetary circulation, that of metallic or government paper money, but rather on the circulation of bills of exchange.’
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