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the number being greater or less according to circumstances. The total number of moves made by
all the circulating coins of one denomination being given, we can arrive at the average number of
moves made by a single coin of that denomination, or at the average velocity of the currency of
money. The quantity of money thrown into the circulation at the beginning of each day is of
course determined by the sum of the prices of all the commodities circulating simultaneously side
by side. But once in circulation, coins are, so to say, made responsible for one another. If the one
increase its velocity, the other either retards its own, or altogether falls out of circulation; for the
circulation can absorb only such a quantity of gold as when multiplied by the mean number of
moves made by one single coin or element, is equal to the sum of the prices to be realised. Hence
if the number of moves made by the separate pieces increase, the total number of those pieces in
circulation diminishes. If the number of the moves diminish, the total number of pieces increases.
Since the quantity of money capable of being absorbed by the circulation is given for a given
mean velocity of currency, all that is necessary in order to abstract a given number of sovereigns
from the circulation is to throw the same number of one-pound notes into it, a trick well known to
all bankers.
Just as the currency of money, generally considered, is but a reflex of the circulation of
commodities, or of the antithetical metamorphoses they undergo, so, too, the velocity of that
currency reflects the rapidity with which commodities change their forms, the continued
interlacing of one series of metamorphoses with another, the hurried social interchange of matter,
the rapid disappearance of commodities from the sphere of circulation, and the equally rapid
substitution of fresh ones in their places. Hence, in the velocity of the currency we have the fluent
unity of the antithetical and complementary phases, the unity of the conversion of the useful
aspect of commodities into their value-aspect, and their re-conversion from the latter aspect to the
former, or the unity of the two processes of sale and purchase. On the other hand, the retardation
of the currency reflects the separation of these two processes into isolated antithetical phases,
reflects the stagnation in the change of form, and therefore, in the social interchange of matter.
The circulation itself, of course, gives no clue to the origin of this stagnation; it merely puts in
evidence the phenomenon itself. The general public, who, simultaneously with the retardation of
the currency, see money appear and disappear less frequently at the periphery of circulation,
naturally attribute this retardation to a quantitative deficiency in the circulating medium.
30
The total quantity of money functioning during a given period as the circulating medium, is
determined, on the one hand, by the sum of the prices of the circulating commodities, and on the
other hand, by the rapidity with which the antithetical phases of the metamorphoses follow one
another. On this rapidity depends what proportion of the sum of the prices can, on the average, be
realised by each single coin. But the sum of the prices of the circulating commodities depends on
the quantity, as well as on the prices, of the commodities. These three factors, however, state of
prices, quantity of circulating commodities, and velocity of money-currency, are all variable.
Hence, the sum of the prices to be realised, and consequently the quantity of the circulating
medium depending on that sum, will vary with the numerous variations of these three factors in
combination. Of these variations we shall consider those alone that have been the most important
in the history of prices.
While prices remain constant, the quantity of the circulating medium may increase owing to the
number of circulating commodities increasing, or to the velocity of currency decreasing, or to a
combination of the two. On the other hand the quantity of the circulating medium may decrease
with a decreasing number of commodities, or with an increasing rapidity of their circulation.
With a general rise in the prices of commodities, the quantity of the circulating medium will
remain constant, provided the number of commodities in circulation decrease proportionally to
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the increase in their prices, or provided the velocity of currency increase at the same rate as prices
rise, the number of commodities in circulation remaining constant. The quantity of the circulating
medium may decrease, owing to the number of commodities decreasing more rapidly; or to the
velocity of currency increasing more rapidly, than prices rise.
With a general fall in the prices of commodities, the quantity of the circulating medium will
remain constant, provided the number of commodities increase proportionally to their fall in
price, or provided the velocity of currency decrease in the same proportion. The quantity of the
circulating medium will increase, provided the number of commodities increase quicker, or the
rapidity of circulation decrease quicker, than the prices fall.
The variations of the different factors may mutually compensate each other, so that
notwithstanding their continued instability, the sum of the prices to be realised and the quantity of
money in circulation remain constant; consequently, we find, especially if we take long periods
into consideration, that the deviations from the average level, of the quantity of money current in
any country, are much smaller than we should at first sight expect, apart of course from excessive
perturbations periodically arising from industrial and commercial crises, or less frequently, from
fluctuations in the value of money.
The law, that the quantity of the circulating medium is determined by the sum of the prices of the
commodities circulating, and the average velocity of currency
31
may also be stated as follows:
given the sum of the values of commodities, and the average rapidity of their metamorphoses, the
quantity of precious metal current as money depends on the value of that precious metal. The
erroneous opinion that it is, on the contrary, prices that are determined by the quantity of the
circulating medium, and that the latter depends on the quantity of the precious metals in a
country;
32
this opinion was based by those who first held it, on the absurd hypothesis that
commodities are without a price, and money without a value, when they first enter into
circulation, and that, once in the circulation, an aliquot part of the medley of commodities is
exchanged for an aliquot part of the heap of precious metals.
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C. Coin and symbols of value
That money takes the shape of coin, springs from its function as the circulating medium. The
weight of gold represented in imagination by the prices or money-names of commodities, must
confront those commodities, within the circulation, in the shape of coins or pieces of gold of a
given denomination. Coining, like the establishment of a standard of prices, is the business of the
State. The different national uniforms worn at home by gold and silver as coins, and doffed again
in the market of the world, indicate the separation between the internal or national spheres of the
circulation of commodities, and their universal sphere.
The only difference, therefore, between coin and bullion, is one of shape, and gold can at any
time pass from one form to the other.
34
But no sooner does coin leave the mint, than it
immediately finds itself on the high-road to the melting pot. During their currency, coins wear
away, some more, others less. Name and substance, nominal weight and real weight, begin their
process of separation. Coins of the same denomination become different in value, because they
are different in weight. The weight of gold fixed upon as the standard of prices, deviates from the
weight that serves as the circulating medium, and the latter thereby ceases any longer to be a real
equivalent of the commodities whose prices it realises. The history of coinage during the middle
ages and down into the 18th century, records the ever renewed confusion arising from this cause.
The natural tendency of circulation to convert coins into a mere semblance of what they profess
to be, into a symbol of the weight of metal they are officially supposed to contain, is recognised