Marx begins by noting that despite the intention that the Bank Act of 1844 transform the bullion reserve into means of circulation by seeking to compensate for a drain of gold by contracting the means of circulation and for an influx by expanding the means of circulation, it has never been successful in doing this. In the crisis of 1857 the quantity of notes in circulation exceeded the gold reserve by a daily average of £488,830; in all other occasions since 1844, however, the quantity of notes in circulation has never reached the maximum that the Bank was authorised to issue.
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With regard to the international movement of precious metals, Marx makes the following points.
| 1 | One needs to distinguish between the international trade in precious metals between countries, and that trade resulting from the movement of metal from where it is produced. |
| 2 | Among the non-producing countries, precious metals flow constantly back and forth. Any ultimate inflow or outflow is thus a net balance. ‘The matter is always conceived as if an excess import or export of precious metal were simply the effect and expression of the import and export relationship for commodities, whereas it also expresses a relationship between the import and export of precious metal that is independent of commodity trade.’ |
| 3 | In general, the balance of preponderance of imports over exports is reflected by changes in the central bank’s metal reserves. This, however, depends on the extent of the centralisation of the banking system, on, in other words, to what degree the central bank’s reserves consist of the total amount of stockpiled metal; it also depends on the degree to which imported metal is used for purposes of circulation, or for luxury use. |
| 4 | ‘An export of metal takes the form of a “drain” if the movement of decline persists for a long period, so that the decline presents itself as a general tendency and the national bank’s metal reserve is significantly depressed below its average level, until something like its average minimum is reached.’ |
| 5 | The metal reserve of a central bank has the following functions. First, it is a reserve fund for international payments (what Marx calls ‘a reserve fund of world money’); second, a reserve fund for expanding and contracting domestic metal circulation; and, third, a reserve fund for payment of deposits and convertibility of notes. ‘It can therefore also be affected by conditions that bear on only one of these three functions.’ |
| 6 | Marx notes that business-cycle crises (presumably in Britain) tend to occur after a drain in gold has occurred, and then stopped. |
| 7 | Once a business crisis has passed, gold and silver are once again distributed in their previously existing proportions (the relative size of each country’s hoard being dependent on that country’s position in the world market). Once this redistribution is established, there occurs (again presumably in Britain) first a growth in the reserve, and then a drain. |
| 8 | ‘A drain of metal is generally the symptom of a change in the state of foreign trade, and this change is in turn an advance warning that conditions are again approaching a crisis.’ |
More (pdf: 84 KB): capital_v3_ch35
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