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Kap. 29
Die Bestandteile des Bankkapitals; fiktives Kapital: Staatsschuld, kapitalisierter Arbeitslohn, die Aktie
Behind us stands a ruling on the bankers' 'currency' and 'capital': the money form of revenue against the money form of capital, the same coin circulating in both, and a squeeze met with means of payment rather than with additional real capital — though money capital in the banker's sense is genuinely scarce, and in a drain of gold the metal demanded is capital in its money form. What must now be settled is what the banking capital built out of such claims actually is: a list of ordinary assets, and then a form under which every steady income is read backwards into a capital behind it. By the end, state debt, wages and shares will have been tested against that form, and the difference between a real title and a real capital fixed.
Es ist nun nötig, näher anzusehn, woraus das Bankkapital besteht.
the question: what is banking capital

We now need to look more closely at what banking capital is actually made of.

Wir haben eben gesehn, daß Fullarton u.a. den Unterschied zwischen Geld als Zirkulationsmittel und Geld als Zahlungsmittel (auch als Weltgeld, soweit der Goldabfluß in Betracht kommt) verwandeln in einen Unterschied zwischen Zirkulation (currency) und Kapital.
currency versus capital: the muddle

We have just seen how Fullarton and others take the difference between money as a means of circulation and money as a means of payment — and also as world money, where a drain of gold is at issue — and turn it into a difference between circulation ('currency') and capital.

Die sonderbare Rolle, die das Kapital hier spielt, bringt es mit sich, daß ebenso sorgfältig wie die aufgeklärte Ökonomie einzuprägen suchte, daß Geld nicht Kapital ist, ebenso sorgfältig diese Bankiersökonomie einprägt, daß in der Tat Geld das Kapital par excellence ist.
money as capital par excellence

Capital plays such a strange role here that the two sides mirror each other. Enlightened economics took great pains to drive it home that money is not capital. This banker's economics takes just as much pains to drive it home that money really is capital par excellence.

Bei den spätern Untersuchungen zeigen wir, daß hierbei aber Geldkapital verwechselt wird mit moneyed capital in dem Sinn des zinstragenden Kapitals, während im ersteren Sinn das Geldkapital stets nur eine Durchgangsform des Kapitals ist, als unterschieden von den andern Formen des Kapitals, dem Warenkapital und produktiven Kapital.
money capital versus moneyed capital

In the investigations that come later we show that what happens here is a confusion of money capital with moneyed capital, in the sense of interest-bearing capital. Money capital in that first sense is always no more than one transitional form of capital, different from capital's other forms, commodity capital and productive capital.

Das Bankkapital besteht 1. aus barem Geld, Gold oder Noten, 2. Wertpapieren. Diese können wir wieder in zwei Teile teilen Handelspapiere, Wechsel, die schwebend sind, von Zeit zu Zeit verfallen und in deren Diskontierung das eigentliche Geschäft des Bankiers gemacht wird; und öffentliche Wertpapiere, wie Staatspapiere, Schatzscheine, Aktien aller Art, kurz zinstragende Papiere, die sich aber wesentlich von den Wechseln unterscheiden. Hierzu können auch Hypotheken gerechnet werden. Das aus diesen sachlichen Bestandteilen sich zusammensetzende Kapital scheidet sich wieder in das Anlagekapital des Bankiers selbst und in die Depositen, die sein banking capital oder geborgtes Kapital bilden. Bei den Banken mit Notenausgabe kommen noch die Noten hinzu. Die Depositen und Noten lassen wir zunächst außer acht. Soviel ist klar, daß es an den wirklichen Bestandteilen des Bankierkapitals - Geld, Wechsel, Depotpapiere - nichts ändert, ob diese verschiednen Elemente sein eignes Kapital repräsentieren oder Depositen, das Kapital andrer Leute. Dieselbe Einteilung bliebe, so wohl wenn er bloß mit eignem Kapital sein Geschäft betriebe, wie wenn bloß mit bei ihm deponierten Kapital.
banking capital's tangible components

Banking capital consists of: (1) cash, gold or notes; (2) securities. The securities fall into two groups again. First, commercial paper — bills of exchange that are still outstanding, falling due from time to time, and whose discounting is the banker's real business. Second, public securities — government bonds, treasury bills, shares of every kind, in short interest-bearing paper, which is essentially different from bills of exchange. Mortgages can be counted in here too. The capital put together out of these tangible parts then divides again into the banker's own invested capital and the deposits that make up his banking capital, or borrowed capital. Banks that issue notes have notes on top of that. We leave deposits and notes aside for the moment.

One thing is clear: it makes no difference to what the banker's capital actually consists of — money, bills, interest-bearing paper — whether these various elements represent his own capital or deposits, the capital of other people. The same division would still hold if he ran his business with his own capital alone, or only with capital deposited with him.

Die Form des zinstragenden Kapitals bringt es mit sich, daß jede bestimmte und regelmäßige Geldrevenue als Zins eines Kapitals erscheint, sie mag aus einem Kapital entspringen oder nicht. Erst wird das Geldeinkommen in Zins verwandelt, und mit dem Zins findet sich dann auch das Kapital, woraus es entspringt. Ebenso erscheint mit dem zinstragenden Kapital jede Wertsumme als Kapital, sobald sie nicht als Revenue verausgabt wird; nämlich als Hauptsumme (principal) im Gegensatz zum möglichen oder wirklichen Zins, den sie tragen kann.
every revenue read as interest

The form of interest-bearing capital brings it about that any definite and regular money revenue appears as the interest on a capital, whether it springs from a capital or not. First the money income is turned into interest, and once we have the interest, we also have the capital it springs from. In the same way, with interest-bearing capital, any sum of value appears as capital as soon as it is not spent as revenue; it appears as the principal, in contrast to the possible or actual interest it can bear.

Die Sache ist einfach: Gesetzt, der Durchschnittszinsfuß sei 5% jährlich. Eine Summe von 500 Pfd.St. würde also jährlich, wenn in zinstragendes Kapital verwandelt, 25 Pfd.St. einbringen. Jede feste jährliche Einnahme von 25 Pfd.St. wird daher als Zins eines Kapitals von 500 Pfd.St. betrachtet. Dies ist und bleibt jedoch eine rein illusorische Vorstellung, außer in dem Fall, daß die Quelle der 25 Pfd.St., sei diese nun ein bloßer Eigentumstitel resp. Schuldforderung oder sei sie ein wirkliches Produktionselement, wie etwa ein Grundstück, direkt übertragbar ist oder eine Form erhält, worin sie übertragbar wird. Nehmen wir als Beispiele Staatsschuld und Arbeitslohn.
the illusion, and its exception

The matter is simple. Suppose the average rate of interest is 5 per cent a year. A sum of £500, turned into interest-bearing capital, would then bring in £25 a year. So any fixed annual income of £25 is taken as the interest on a capital of £500. But this is and remains a purely illusory notion — except in one case: where the source of the £25 is directly transferable, or takes a form in which it becomes transferable, whether that source is a mere title of ownership or a claim, or an actual element of production such as a piece of land. Let us take the national debt and wages as our examples.

Der Staat hat seinen Gläubigern jährlich ein gewisses Quantum Zins für das geborgte Kapital zu zahlen. Der Gläubiger kann hier nicht seinem Schuldner aufkündigen, sondern nur die Forderung, seinen Besitztitel darüber, verkaufen. Das Kapital selbst ist aufgegessen, verausgabt vom Staat. Es existiert nicht mehr. Was der Staatsgläubiger besitzt, ist 1. ein Schuldschein auf den Staat, sage von 100 Pfd.St.; 2. gibt dieser Schuldschein ihm den Anspruch auf die jährlichen Staatseinnahmen, d.h. das jährliche Produkt der Steuern, für einen gewissen Betrag, sage 5 Pfd.St. oder 5%; 3. kann er diesen Schuldschein von 100 Pfd.St. beliebig an andre Personen verkaufen. Ist der Zinsfuß 5%, und dazu Sicherheit des Staats vorausgesetzt, so kann der Besitzer A den Schuldschein in der Regel zu 100 Pfd.St. an B verkaufen; denn für B ist es dasselbe, ob er 100 Pfd.St. zu 5% jährlich ausleiht, oder ob er durch Zahlung von 100 Pfd.St. sich einen jährlichen Tribut vom Staat zum Betrage von 5 Pfd.St. sichert. Aber in allen diesen Fällen bleibt das Kapital, als dessen Abkömmling (Zins) die Staatszahlung betrachtet wird, illusorisch, fiktives Kapital. Nicht nur, daß die Summe, die dem Staat geliehen wurde, überhaupt nicht mehr existiert. Sie war überhaupt nie bestimmt, als Kapital verausgabt, angelegt zu werden, und nur durch ihre Anlage als Kapital hätte sie in einen sich erhaltenden Wert verwandelt werden können. Für den Originalgläubiger A repräsentiert der ihm zufallende Teil der jährlichen Steuer Zins von seinem Kapital, wie dem Wucherer der ihm zufallende Teil des Vermögens des Verschwenders, obgleich in beiden Fällen die geliehene Geldsumme nicht als Kapital verausgabt ward. Die Möglichkeit, den Schuldschein auf den Staat zu verkaufen, repräsentiert für A den möglichen Rückfluß der Hauptsumme. Was den B angeht, so ist von seinem Privatstandpunkt aus sein Kapital als zinstragendes Kapital angelegt. Der Sache nach ist er bloß an die Stelle von A getreten und hat dessen Schuldforderung auf den Staat gekauft. Diese Transaktionen mögen sich noch so sehr vervielfältigen, das Kapital der Staatsschuld bleibt ein rein fiktives, und von dem Moment an, wo die Schuldscheine unverkaufbar würden, fiele der Schein dieses Kapitals weg. Nichtsdestoweniger, wie wir gleich sehn werden, hat dies fiktive Kapital seine eigne Bewegung.
state debt: a capital that was eaten

The state has to pay its creditors a certain amount of interest every year for the capital it borrows. The creditor here cannot give notice to his debtor; he can only sell the claim, his title of ownership over it. The capital itself has been eaten up, spent by the state. It no longer exists. What the state's creditor holds is, first, a promissory note on the state, say for £100. Second, this note gives him a claim on the state's annual revenue, that is, on the year's product of the taxes, for a certain amount, say £5 or 5 per cent. Third, he can sell this note to anyone he likes. If the rate of interest is 5 per cent, and the state's security is assumed, then the holder A can as a rule sell the note to B for £100; for it comes to the same thing for B whether he lends out £100 at 5 per cent a year, or whether by paying out £100 he secures himself an annual tribute from the state of £5.

But in all these cases the capital whose offshoot — its interest — the state's payment is taken to be remains illusory, fictitious capital. It is not only that the sum lent to the state no longer exists at all. It was never intended at any point to be spent and invested as capital, and only by being invested as capital could it have been turned into a value that maintains itself. For the original creditor A, the share of the annual tax that falls to him represents interest on his capital, just as for the usurer the share of the spendthrift's wealth that falls to him does — although in neither case was the money sum lent spent as capital. For A, the possibility of selling the note on the state represents the possible return of his principal. As for B, from his own private standpoint his capital is invested as interest-bearing capital. In substance he has merely stepped into A's place and bought A's claim on the state.

However much these transactions multiply, the capital of the national debt remains a purely fictitious one, and from the moment the notes became unsaleable, the semblance of this capital would fall away. All the same, as we shall see shortly, this fictitious capital has a movement of its own.

Im Gegensatz nun zum Kapital der Staatsschuld, wo ein Minus als Kapital erscheint - wie das zinstragende Kapital überhaupt die Mutter aller verrückten Formen ist, so daß z.B. Schulden in der Vorstellung des Bankiers als Waren erscheinen können -, wollen wir nun die Arbeitskraft betrachten. Der Arbeitslohn wird hier als Zins aufgefaßt und daher die Arbeitskraft als das Kapital, das diesen Zins abwirft. Ist z.B. der Arbeitslohn eines Jahrs = 50 Pfd.St. und steht der Zinsfuß auf 5%, so gilt die jährliche Arbeitskraft als gleich einem Kapital von 1.000 Pfd.St. Die Verrücktheit der kapitalistischen Vorstellungsweise erreicht hier ihre Spitze, indem statt die Verwertung des Kapitals aus der Exploitation der Arbeitskraft zu erklären, umgekehrt die Produktivität der Arbeitskraft daraus erklärt wird, daß Arbeitskraft selbst dies mystische Ding, zinstragendes Kapital ist. In der zweiten Hälfte des 17. Jahrhunderts (z.B. bei Petty) war dies eine Lieblingsvorstellung, die aber auch heutzutage in allem Ernst teils von Vulgärökonomen, teils und hauptsächlich von deutschen Statistikern gebraucht wird.1 Es treten hier leider zwei, diese gedankenlose Vorstellung unangenehm durchkreuzende Umstände ein, erstens, daß der Arbeiter arbeiten muß, um diesen Zins zu erhalten, und zweitens, daß er den Kapitalwert seiner Arbeitskraft nicht durch Übertragung versilbern kann. Vielmehr ist der jährliche Wert seiner Arbeitskraft gleich seinem jährlichen Durchschnittslohn, und was er ihrem Käufer durch seine Arbeit zu ersetzen hat, ist dieser Wert selbst plus dem Mehrwert, der Verwertung desselben. Im Sklavensystem hat der Arbeiter einen Kapitalwert, nämlich seinen Kaufpreis. Und wenn er vermietet wird, hat der Mieter erstens den Zins des Kaufpreises zu zahlen und obendrein den jährlichen Verschleiß des Kapitals zu ersetzen.
wages capitalized: the peak of absurdity

In contrast to the capital of the national debt, where a minus appears as capital — interest-bearing capital being the mother of every crazy form, so that debts, for instance, can appear in the banker's mind as commodities — let us now look at labour-power. Here the wage is conceived as interest, and so labour-power is conceived as the capital that throws off this interest. If, for example, a year's wage is £50, and the rate of interest stands at 5 per cent, then one year's labour-power counts as equal to a capital of £1,000. The madness of the capitalist way of conceiving things reaches its peak here: instead of explaining the valorization of capital out of the exploitation of labour-power, the productivity of labour-power is explained the other way round, by the fact that labour-power itself is this mystical thing, interest-bearing capital. In the second half of the seventeenth century (in one writer of the period, for example) this was a favourite notion, but it is used in all seriousness today as well, partly by vulgar economists and mainly by German statisticians.

Unfortunately two circumstances cut disagreeably across this thoughtless notion. First, the worker has to work in order to get this interest. Second, he cannot turn the capital value of his labour-power into money by transferring it. Rather, the annual value of his labour-power equals his average annual wage, and what he has to replace to its buyer through his labour is this value itself plus the surplus-value, the valorization of that value. Under the slave system the worker does have a capital value, namely his purchase price. And when he is hired out, the hirer has first to pay the interest on the purchase price and on top of that to replace the annual depreciation of the capital.

Die Bildung des fiktiven Kapitals nennt man kapitalisieren. Man kapitalisiert jede regelmäßig sich wiederholende Einnahme, indem man sie nach dem Durchschnittszinsfuß berechnet, als Ertrag, den ein Kapital, zu diesem Zinsfuß ausgeliehen, abwerfen wurde; z.B. wenn die jährliche Einnahme = 100 Pfd.St. und der Zinsfuß = 5%, so wären die 100 Pfd.St. der jährliche Zins von 2.000 Pfd.St., und diese 2.000 Pfd.St. gelten nun als der Kapitalwert des juristischen Eigentumstitels auf die 100 Pfd.St. jährlich. Für den, der diesen Eigentumstitel kauft, stellen die 100 Pfd.St. jährliche Einnahme dann in der Tat die Verzinsung seines angelegten Kapitals zu 5% vor. Aller Zusammenhang mit dem wirklichen Verwertungsprozeß des Kapitals geht so bis auf die letzte Spur verloren, und die Vorstellung vom Kapital als einem sich durch sich selbst verwertenden Automaten befestigt sich.
capitalization, and the automaton

The formation of fictitious capital is called capitalizing. Any regularly repeating income is capitalized by reckoning it, at the average rate of interest, as the yield that a capital lent out at this rate would bring in. For example, if the annual income is £100 and the rate of interest 5 per cent, then the £100 would be the annual interest on £2,000, and this £2,000 now counts as the capital value of the legal title of ownership to that annual £100. For the person who buys this title of ownership, the annual £100 then does in fact represent the interest on the capital he has invested at 5 per cent. In this way every connection with the real valorization process of capital is lost, right down to the last trace, and the notion of capital as an automaton that valorizes itself out of itself takes firm hold.

Auch da, wo der Schuldschein - das Wertpapier - nicht wie bei den Staatsschulden rein illusorisches Kapital vorstellt, ist der Kapitalwert dieses Papiers rein illusorisch. Man hat vorhin gesehn, wie das Kreditwesen assoziiertes Kapital erzeugt. Die Papiere gelten als Eigentumstitel, die dies Kapital vorstellen. Die Aktien von Eisenbahn-, Bergwerks-, Schiffahrts- etc. Gesellschaften stellen wirkliches Kapital vor, nämlich das in diesen Unternehmungen angelegte und fungierende Kapital oder die Geldsumme, welche von den Teilhabern vorgeschossen ist, um als Kapital in solchen Unternehmungen verausgabt zu werden. Wobei keineswegs ausgeschlossen ist, daß sie auch bloßen Schwindel vorstellen. Aber dies Kapital existiert nicht doppelt, einmal als Kapitalwert der Eigentumstitel, der Aktien, und das andre Mal als das in jenen Unternehmungen wirklich angelegte oder anzulegende Kapital. Es existiert nur in jener letztern Form, und die Aktie ist nichts als ein Eigentumstitel, pro rata, auf den durch jenes zu realisierenden Mehrwert. A mag diesen Titel an B, und B ihn an C verkaufen. Diese Transaktionen ändern nichts an der Natur der Sache. A oder B hat dann seinen Titel in Kapital, aber C sein Kapital in einen bloßen Eigentumstitel auf den von dem Aktienkapital zu erwartenden Mehrwert verwandelt.
shares: one capital, not two

Even where the promissory note — the security — does not represent purely illusory capital, as it does with the national debt, the capital value of this paper is purely illusory. We saw just now how the credit system produces joint-stock capital. The securities count as titles of ownership representing this capital. The shares of railway, mining, shipping and other companies represent real capital, namely the capital invested and functioning in these enterprises, or the sum of money advanced by the shareholders to be spent as capital in such enterprises. This in no way rules out their also representing nothing but swindle. But this capital does not exist twice: once as the capital value of the ownership titles, the shares, and once again as the capital really invested or still to be invested in those enterprises. It exists only in that latter form, and the share is nothing but a title of ownership, pro rata, to the surplus-value that this capital is to realize. A may sell this title to B, and B to C. These transactions change nothing in the nature of the matter. A or B has then turned his title into capital, while C has turned his capital into a mere title of ownership to the surplus-value to be expected from that share capital.

Kap. 29
Die selbständige Bewegung der Eigentumstitel; das Bankierkapital ist großenteils fiktiv; die doppelte Rolle der Depositen
Behind us stands the form that reads any steady revenue backwards into a capital behind it: the state debt whose capital was spent and never laid out, wages turned into the interest on labour-power, and the share, which stands for real capital existing once only. Here those titles are followed onto the market, where they become commodities with a price of their own, set by the yield capitalized at the going rate of interest and by revenue expected in advance. What gets settled is what that movement is worth, and how much of the banker's capital is claims rather than capital at all.
Die selbständige Bewegung des Werts dieser Eigentumstitel, nicht nur der Staatseffekten, sondern auch der Aktien, bestätigt den Schein, als bildeten sie wirkliches Kapital neben dem Kapital oder dem Anspruch, worauf sie möglicherweise Titel sind. Sie werden nämlich zu Waren, deren Preis eine eigentümliche Bewegung und Festsetzung hat. Ihr Marktwert erhält eine von ihrem Nominalwert verschiedne Bestimmung, ohne daß sich der Wert (wenn auch die Verwertung) des wirklichen Kapitals änderte. Einerseits schwankt ihr Marktwert mit der Höhe und Sicherheit der Erträge, worauf sie Rechtstitel geben. Ist der Nominalwert einer Aktie, d.h. die eingeschoßne Summe, die die Aktie ursprünglich repräsentiert, 100 Pfd.St. und wirft das Unternehmen statt 5% 10% ab, so steigt ihr Marktwert bei sonst gleichbleibenden Umständen und bei einem Zinsfuß von 5% auf 200 Pfd.St., denn zu 5% kapitalisiert, stellt sie jetzt ein fiktives Kapital von 200 Pfd.St. vor. Wer sie zu 200 Pfd.St. kauft, erhält 5% Revenue von dieser Kapitalanlage. Umgekehrt, wenn der Ertrag der Unternehmung abnimmt. Der Marktwert dieser Papiere ist zum Teil spekulativ, da er nicht nur durch die wirkliche Einnahme, sondern durch die erwartete, vorweg berechnete bestimmt ist. Aber die Verwertung des wirklichen Kapitals als konstant vorausgesetzt, oder wo kein Kapital existiert, wie bei den Staatsschulden, den jährlichen Ertrag als gesetzlich fixiert und auch sonst hinreichend sicher vorausgesetzt, steigt und fällt der Preis dieser Wertpapiere umgekehrt wie der Zinsfuß. Steigt der Zinsfuß von 5 auf 10%, so stellt ein Wertpapier, das einen Ertrag von 5 Pfd.St. sichert, nur noch ein Kapital von 50 Pfd.St. vor. Fällt der Zinsfuß auf 2 1/2 %, so stellt dasselbe Wertpapier ein Kapital von 200 Pfd.St. vor. Sein Wert ist stets nur der kapitalisierte Ertrag, d.h. der Ertrag, berechnet auf ein illusorisches Kapital nach dem bestehenden Zinsfuß. In Zeiten einer Klemme im Geldmarkt werden diese Wertpapiere also doppelt im Preise fallen; erstens, weil der Zinsfuß steigt, und zweitens, weil sie massenhaft auf den Markt geworfen werden, um sie in Geld zu realisieren. Dieser Preisfall findet statt unabhängig davon, ob der Ertrag, den diese Papiere ihrem Besitzer sichern, konstant ist, wie bei den Staatseffekten, oder ob die Verwertung des wirklichen Kapitals, das sie repräsentieren, wie bei industriellen Unternehmungen, möglicherweise durch die Störung des Reproduktionsprozesses mit betroffen wird. Im letztern Fall tritt nur zu der erwähnten Entwertung noch eine weitere hinzu. Sobald der Sturm vorüber ist, steigen diese Papiere wieder auf ihre frühere Höhe, soweit sie nicht verunglückte oder Schwindelunternehmungen vorstellen. Ihre Depreziation in der Krise wirkt als kräftiges Mittel zur Zentralisation des Geldvermögens.2
Title prices move on their own

The value of these ownership titles moves on its own — and not only the value of government bonds but of shares too. That confirms the illusion that they are real capital standing beside the capital, or the claim, that they may give title to. They turn into commodities, and the price of a commodity like this has a movement and a fixing of its own. Its market value is set by something other than its nominal value, and none of this requires any change in the value of the real capital — though how that capital is valorized may change.

For one thing, the market value swings with how high and how secure the receipts are that the title gives a legal claim to. Suppose a share's nominal value — the sum paid in, which the share originally stands for — is £100, and the undertaking yields 10 per cent instead of 5 per cent. Other things equal, and with the rate of interest at 5 per cent, its market value then rises to 200, since capitalized at 5 per cent it now stands for a fictitious capital of £200. Whoever buys it at £200 gets a revenue of 5 per cent on that investment. The opposite happens when the undertaking's revenue falls away. The market value of these papers is partly speculative, since it is fixed not only by the revenue actually coming in but by the revenue expected, reckoned up in advance.

Take the valorization of the real capital as constant, though — or, where no capital exists at all, as with state debts, take the yearly yield as fixed by law and otherwise secure enough — and then the price of these securities rises and falls in the opposite direction to the rate of interest. Let the rate rise from 5 to 10 per cent, and a security that guarantees a yield of £5 now stands for a capital of only £50. Let it fall to 2 1/2 per cent, and the same security stands for a capital of £200. Its value is always only the capitalized yield — the yield reckoned up on an illusory capital at the going rate of interest.

In times of squeeze in the money market, these securities therefore fall in price twice over: first, because the rate of interest rises, and second, because they are thrown on the market in masses to be turned into money. That fall comes about regardless of whether the yield the papers guarantee their owner is constant, as with government bonds, or whether the valorization of the real capital they represent may also be caught by a disturbance in the reproduction process, as with industrial undertakings. In the second case, a further devaluation is simply added on to the one just described. Once the storm is over, these papers climb back to their earlier level, so far as they do not represent undertakings that have failed or are swindles. Their depreciation in a crisis acts as a powerful means of centralizing money wealth.

Soweit die Entwertung oder Wertsteigerung dieser Papiere unabhängig ist von der Wertbewegung des wirklichen Kapitals, das sie repräsentieren, ist der Reichtum einer Nation gerade so groß vor wie nach der Entwertung oder Wertsteigerung.
The nation just as rich afterwards

So far as the fall or rise in the value of these papers goes on independently of how the value of the real capital they represent moves, a nation's wealth is just as great after the fall or rise as before it.

"Am 23. Oktober 1847 waren die öffentlichen Fonds und die Kanal- und Eisenbahnaktien bereits entwertet um 114.752.225 Pfd.St." (Morris, Gouverneur der Bank von England, Aussage im Bericht über Commercial Distress", 1847/48 [Nr. 3800].)
Morris's 1847 depreciation figure

Morris, the Governor of the Bank of England, told the committee on commercial distress in 1847-8 that by 23 October 1847 the public funds and the canal and railway shares had already been depreciated to the amount of £114,752,225.

Soweit ihre Entwertung nicht wirklichen Stillstand der Produktion und des Verkehrs auf Eisenbahnen und Kanälen oder Aufgeben von angefangnen Unternehmungen ausdrückte oder Wegwerfen von Kapital in positiv wertlosen Unternehmungen, wurde die Nation um keinen Heller ärmer durch das Zerplatzen dieser Seifenblasen von nominellem Geldkapital.
The no-poorer claim and its limit

So far as the depreciation of these papers did not express a real standstill of production and of traffic on the railways and canals, or the abandonment of undertakings already begun, or capital thrown away on enterprises positively worthless, the nation was not a penny the poorer for the bursting of these soap bubbles of nominal money capital.

Alle diese Papiere stellen in der Tat nichts vor als akkumulierte Ansprüche, Rechtstitel, auf künftige Produktion, deren Geld- oder Kapitalwert entweder gar kein Kapital repräsentiert, wie bei den Staatsschulden, oder von dem Wert des wirklichen Kapitals, das sie vorstellen, unabhängig reguliert wird.
Accumulated claims on future production

All these papers represent, in fact, nothing but accumulated claims — legal titles — to future production. Their money value or capital value either represents no capital at all, as with state debts, or is regulated independently of the value of the real capital they represent.

In allen Ländern kapitalistischer Produktion existiert eine ungeheure Masse des sog. zinstragenden Kapitals oder moneyed capital in dieser Form. Und unter Akkumulation des Geldkapitals ist zum großen Teil nichts zu verstehn als Akkumulation dieser Ansprüche auf die Produktion, Akkumulation des Marktpreises, des illusorischen Kapitalwerts dieser Ansprüche.
What accumulating money capital mostly is

In every country of capitalist production there exists a tremendous mass of so-called interest-bearing capital, or moneyed capital, in this form. And by the accumulation of money capital there is for the most part nothing to be understood but the accumulation of these claims on production, the accumulation of the market price, of the illusory capital value of these claims.

Ein Teil des Bankierkapitals ist nun angelegt in diesen sog. zinstragenden Papieren. Es ist dies selbst ein Teil des Reservekapitals, das nicht im wirklichen Bankgeschäft fungiert. Der bedeutendste Teil besteht aus Wechseln, d.h. Zahlungsversprechen von industriellen Kapitalisten oder Kaufleuten. Für den Geldverleiher sind diese Wechsel zinstragende Papiere; d.h. wenn er sie kauft, zieht er den Zins ab für die Zeit, die sie noch zu laufen haben. Dies ist, was man diskontieren nennt. Es hängt also vom jedesmaligen Zinsfuß ab, wie groß der Abzug ist von der Summe, die der Wechsel vorstellt. -
Bills, discount, and the banker's capital

One part of the banker's capital is now invested in these so-called interest-bearing securities. That part is itself a piece of the reserve capital, and it does not function in the banking business proper. The most important part consists of bills of exchange, that is, promises to pay issued by industrial capitalists or merchants. For the money-lender these bills are interest-bearing paper; that is, when he buys them he deducts the interest for the time they still have to run. This is what is called discounting. How large the deduction is from the sum the bill represents therefore depends on the rate of interest at the time.

Der letzte Teil des Kapitals des Bankiers endlich besteht aus seiner Geldreserve von Gold oder Noten. Die Depositen, wenn nicht für längre Zeit kontraktlich ausbedungen, stehn stets zur Verfügung der Depositoren. Sie befinden sich in beständiger Fluktuation. Aber, wenn von den einen entzogen, werden sie von den andern ersetzt, so daß der allgemeine Durchschnittsbetrag in Zeiten normalen Geschäftsverlaufs wenig schwankt.
Deposits in perpetual flux

The last part of the banker's capital, finally, consists of his money reserve in gold or notes. Deposits, unless they have been contractually tied up for a longer period, always stand at the depositors' disposal. They are in perpetual flux. But what one depositor withdraws another replaces, so that the general average amount fluctuates little in times of normal business.

Die Reservefonds der Banken, in Ländern entwickelter kapitalistischer Produktion, drücken immer im Durchschnitt die Größe des als Schatz vorhandnen Geldes aus, und ein Teil dieses Schatzes besteht selbst wieder aus Papier, bloßen Anweisungen auf Gold, die aber keine Selbstwerte sind. Der größte Teil des Bankierkapitals ist daher rein fiktiv und besteht aus Schuldforderungen (Wechseln), Staatspapieren (die vergangnes Kapital repräsentieren) und Aktien (Anweisungen auf künftigen Ertrag). Wobei nicht vergessen werden muß, daß der Geldwert des Kapitals, den diese Papiere in den Panzerschränken des Bankiers vorstellen, selbst soweit sie Anweisungen auf sichre Erträge (wie bei den Staatspapieren) oder soweit sie Eigentumstitel auf wirkliches Kapital (wie bei den Aktien), durchaus fiktiv ist und von dem Wert des wirklichen Kapitals, das sie wenigstens teilweise vorstellen, abweichend reguliert wird; oder wo sie bloße Forderung auf Erträge vorstellen und kein Kapital, die Forderung auf denselben Ertrag in beständig wechselndem fiktivem Geldkapital sich ausdrückt. Außerdem kommt noch hinzu, daß dies fiktive Bankierkapital großenteils nicht sein Kapital, sondern das des Publikums vorstellt, das bei ihm deponiert, sei es mit, sei es ohne Zinsen.
Mostly fictitious, and mostly the public's

The reserve funds of the banks, in countries of developed capitalist production, always express on average the size of the money that exists as a hoard; and part of this hoard in turn consists of paper — mere drafts on gold, which have no value of their own.

The greater part of banker's capital is therefore purely fictitious, and consists of claims (bills of exchange), state paper (which represents capital that is past) and shares (drafts on future revenue). It must not be forgotten that the money value of the capital which these papers stand for in the banker's strongbox is thoroughly fictitious even where they are drafts on secure revenues, as with government paper, or ownership titles to real capital, as with shares — that money value being regulated differently from the value of the real capital which they at least partly represent; or, where they represent a mere claim on revenues and no capital, the claim on that same revenue is expressed in a constantly changing fictitious money capital. On top of this, the fictitious banker's capital is for the greater part not his own capital but the public's, deposited with him, with or without interest.

Die Depositen werden immer in Geld gemacht, in Gold oder Noten, oder in Anweisungen darauf. Mit Ausnahme des Reservefonds, der je nach dem Bedürfnis der wirklichen Zirkulation sich zusammenzieht oder ausdehnt, befinden sich diese Depositen in Wirklichkeit stets in der Hand einerseits der industriellen Kapitalisten und Kaufleute, deren Wechsel damit diskontiert und denen Vorschüsse damit gemacht werden; andrerseits in der Hand der Händler in Wertpapieren (Börsenmakler) oder in der Hand von Privaten, die ihre Wertpapiere verkauft haben, oder in der Hand der Regierung (bei Schatzscheinen und neuen Anleihen). Die Depositen selbst spielen eine doppelte Rolle. Einerseits werden sie, wie eben erwähnt, als zinstragendes Kapital ausgeliehen und finden sich also nicht in den Kassen der Banken, sondern figurieren nur in ihren Büchern als Guthaben der Depositoren. Andrerseits fungieren sie als solche bloße Buchposten, soweit die wechselseitigen Guthaben der Depositoren durch Schecks auf ihre Depositen sich ausgleichen und gegeneinander abgeschrieben werden; wobei es ganz gleichgültig ist, ob die Depositen bei demselben Bankier liegen, so daß dieser die verschiednen Konti gegeneinander abschreibt, oder ob dies durch verschiedne Banken geschieht, die ihre Schecks gegeneinander austauschen und sich nur die Differenzen zahlen.
The double role of deposits

Deposits are always made in money — gold or notes — or in drafts on them. Apart from the reserve fund, which contracts or expands with the needs of actual circulation, these deposits are in fact always in the hands of industrial capitalists and merchants, whose bills are discounted with them and who are given advances out of them; or else in the hands of dealers in securities (stockbrokers), of private people who have sold their securities, or of the government, in the case of treasury bills and new loans.

The deposits themselves play a double role. On the one hand, as already said, they are lent out as interest-bearing capital, and so are not to be found in the banks' tills — they figure only in their books, as credits of the depositors. On the other hand they function as mere book entries, in so far as the depositors' mutual credits are settled by cheques on their deposits and written off against one another; and it makes no difference at all whether the deposits lie with the same banker, so that he writes the different accounts off against each other, or whether this is done by different banks, which exchange their cheques and pay each other only the differences.

Kap. 29
Alles verdoppelt und verdreifacht sich: Depositen als Buchposten, A. Smith, der Reservefonds der Bank von England
Behind us lie shares, state bonds and the titles whose prices move by their own rule, and the banker's capital found to be mostly claims rather than the capital it is counted as. That much is settled for securities. What gets settled here is the same ruling for the banker's book: deposits that exist only as credits, deposits said to multiply without limit, and a loan in which one sum is counted as several capitals. It ends where the last solid-looking thing stands, the reserve, and shows it double, and breakable.
Mit der Entwicklung des zinstragenden Kapitals und des Kreditsystems scheint sich alles Kapital zu verdoppeln und stellenweis zu verdreifachen durch die verschiedne Weise, worin dasselbe Kapital oder auch nur dieselbe Schuldforderung in verschiednen Händen unter verschiednen Formen erscheint.3 Der größte Teil dieses "Geldkapitals" ist rein fiktiv. Die sämtlichen Depositen, mit Ausnahme des Reservefonds, sind nichts als Guthaben an den Bankier, die aber nie im Depositum existieren. Soweit sie zum Girogeschäft dienen, fungieren sie als Kapital für die Bankiers, nachdem diese sie ausgeliehen haben. Sie zahlen sich untereinander die wechselseitigen Anweisungen auf die nichtexistierenden Depositen durch Abrechnung dieser Guthaben gegeneinander.
capital only seems to double

As interest-bearing capital and the credit system develop, all capital seems to double, and in places to treble. That is because the same capital, or even just the same claim on somebody, turns up in different hands under different forms. Most of this 'money capital' is purely fictitious.

Apart from the reserve fund, deposits are nothing but credits with the banker — and they never exist in the deposit itself. In so far as they serve clearing business, they function as capital for the bankers, once the bankers have lent them out. And the drafts the bankers hold on one another against these non-existent deposits are settled by writing the credits off against each other.

A. Smith sagt mit Bezug auf die Rolle, die das Kapital im Geldverleihen spielt:
the witness: Adam Smith

Adam Smith, on the part that capital plays when money is lent out:

"Selbst im Geldgeschäft ist jedoch das Geld gleichsam nur die Anweisung, die die Kapitale, für die ihre Eigentümer keine Verwendung haben, aus einer Hand in die andre überträgt. Diese Kapitale können fast beliebig größer sein als der Geldbetrag, der als Werkzeug ihrer Übertragung dient; dieselben Geldstücke dienen nacheinander bei vielen verschiednen Anleihen, ebensogut wie bei vielen verschiednen Einkäufen. Z.B. A leiht an W 1.000 Pfd.St., womit W sofort von B für 1.000 Pfd.St. Waren kauft. Da B selbst keine Verwendung für das Geld hat, leiht er die identischen Geldstücke an X, womit X sogleich von C wieder für 1.000 Pfd.St. Waren kauft. In derselben Weise und aus demselben Grund verleiht C das Geld an Y, der wieder Waren damit von D kauft. So können dieselben Stücke Gold oder Papier im Lauf weniger Tage zur Vermittlung von drei verschiednen Anleihen und von drei verschiednen Einkäufen dienen, deren jeder dem Wert nach gleich ist dem ganzen Betrag dieser Stücke. Was die drei Geldleute A, B und C den drei Borgern W, X und Y überwiesen haben, ist die Macht, diese Einkäufe zu machen. In dieser Macht besteht sowohl der Wert wie der Nutzen dieser Anleihen. Das von den drei Geldleuten geliehene Kapital ist gleich dem Wert der Waren, die damit gekauft werden können, und ist dreimal größer als der Wert des Geldes, womit die Kaufe gemacht werden. Trotzdem können alle diese Anleihen vollkommen sicher sein, da die damit von den verschiednen Schuldnern gekauften Waren so angewandt werden, daß sie ihrer Zeit einen gleichen Wert von Gold- oder Papiergeld, samt einem Profit, heimbringen. Und wie dieselben Geldstücke zur Vermittlung verschiedner Anleihen bis zu ihrem dreifachen oder selbst ihrem dreißigfachen Wert dienen können, ebensogut können sie nacheinander wieder als Mittel der Rückzahlung dienen." (Book II, chap. IV.)
Smith's exhibit: many loans, one sum

Even in the money trade, Smith says, the money is as it were only the assignment that carries from one hand to another the capitals whose owners have no use for them. Those capitals can be bigger than the sum of money that serves as the tool of their transfer, almost without limit, since the same pieces of money serve one loan after another, just as they serve one purchase after another. Say A lends a thousand pounds to W, and W immediately buys a thousand pounds' worth of goods from B. B has no use for the money himself, so he lends the identical pieces to X, and X immediately buys another thousand pounds' worth of goods from C. In the same way, and for the same reason, C lends the money to Y, who again buys goods with it from D. So the same pieces of coin or paper can, within a few days, carry three different loans and three different purchases, each of them equal in value to the whole amount of those pieces. What A, B and C hand over to W, X and Y is the power to make those purchases, and that power is both the value and the use of the loans. The capital lent by the three money men equals the value of the goods that can be bought with it, and is three times the value of the money with which the purchases are made. All the same, all three loans can be perfectly safe, since the goods the different borrowers bought with them are used in such a way as to bring back an equal value in coin or paper, plus a profit, in due time. And just as the same pieces of money can serve different loans up to three times, or even thirty times, their value, so they can serve one after another as the means of repayment. (Book II, Chapter IV.)

Da dasselbe Geldstück verschiedne Einkäufe, je nach der Geschwindigkeit seiner Zirkulation, verrichten kann, so kann es ebensogut verschiedne Anleihen vollziehn, denn die Einkäufe bringen es aus einer Hand in die andre, und die Anleihe ist nur eine Übertragung von einer Hand in die andre, die durch keinen Kauf vermittelt ist. Jedem der Verkäufer stellt das Geld die verwandelte Form seiner Ware vor; heutzutage, wo jeder Wert als Kapitalwert ausgedrückt wird, stellt es in den verschiednen Anleihen der Reihe nach verschiedne Kapitale vor, was nur andrer Ausdruck für den frühern Satz, daß es verschiedne Warenwerte der Reihe nach realisieren kann. Zugleich dient es als Zirkulationsmittel, um die sachlichen Kapitale aus einer Hand in die andre zu befördern. Im Anleihen geht es nicht als Zirkulationsmittel aus der einen Hand in die andre über. Solange es in der Hand des Verleihers bleibt, ist es in seiner Hand nicht Zirkulationsmittel, sondern Wertdasein seines Kapitals. Und in dieser Form überträgt er es im Anleihen an einen Dritten. Hätte A das Geld an B, und B es an C geliehen, ohne die Vermittlung der Einkäufe, so würde dasselbe Geld nicht drei Kapitale, sondern nur eins vorstellen, nur einen Kapitalwert. Wie viele Kapitale es wirklich vorstellt, hängt davon ab, wie oft es als die Wertform verschiedner Warenkapitale fungiert.
a loan is not a purchase

The same coin, depending on how fast it circulates, can make one purchase after another — so it can carry out one loan after another just as well. Purchases move it from hand to hand; a loan is nothing but a transfer from one hand to another, with no purchase in between. To each seller the money stands for the changed form of his commodity; nowadays, when every value is expressed as a capital value, the same money represents one capital after another in the various loans — which is only another way of putting the earlier statement that it can realize one commodity value after another. At the same time it serves as a means of circulation, moving the material capitals from hand to hand. In a loan it does not pass from one hand to another as a means of circulation. As long as it stays in the lender's hand, it is not a means of circulation there, but the value-existence of his capital. And it is in this form that he hands it over to a third party in the loan. If A had lent the money to B, and B to C, with no purchases in between, the same money would represent not three capitals but only one — a single capital value. How many capitals it really represents depends on how often it functions as the value form of different commodity capitals.

Dasselbe was A. Smith von den Anleihen überhaupt sagt, gilt von den Depositen, die ja nur ein besondrer Name für die Anleihen sind, die das Publikum den Bankiers macht. Dieselben Geldstücke können als Instrument für eine beliebige Anzahl von Depositen dienen.
deposits are the public's loans

What Adam Smith says about loans in general holds for deposits too, since a deposit is simply a particular name for the loans the public makes to the bankers. The same coins can serve as the instrument for any number of deposits.

"Es ist unstreitig wahr, daß die 1.000 Pfd.St., die jemand heute bei A deponiert, morgen wieder ausgegeben werden und ein Depositum bei B bilden. Den Tag nachher, weggezahlt durch B. können sie ein Depositum bei C bilden, und so fort ins Unendliche. Dieselben 1.000 Pfd.St. in Geld können daher, durch eine Reihe von Übertragungen, sich zu einer absolut unbestimmbaren Summe von Depositen vervielfältigen. Es ist daher möglich, daß 9/10 aller Depositen im Vereinigten Königreich keine Existenz haben außer den sie belegenden Buchposten in den Büchern der Bankiers, die ihrerseits darüber abzurechnen haben ... So z.B. in Schottland, wo der Geldumlauf nie über 3 Millionen Pfd.St. war, die Depositen aber 27 Millionen. Entstünde nun nicht ein allgemeiner Ansturm auf die Banken wegen der Depositen, so könnten dieselben 1.000 Pfd.St., ihren Weg rückwärts verfolgend, mit derselben Leichtigkeit eine ebenso unbestimmbare Summe wieder ausgleichen. Da dieselben 1.000 Pfd.St., womit jemand heute eine Schuld an einen Händler ausgleicht, morgen dessen Schuld an den Kaufmann ausgleichen können, den Tag darauf die Schuld des Kaufmanns an die Bank, und so fort ohne Ende; so können dieselben 1.000 Pfd.St. von Hand zu Hand und von Bank zu Bank wandern und jede nur erdenkliche Summe von Depositen ausgleichen." ("The Currency Theory Reviewed", p. 62, 63.)
the pamphlet's £1,000, travelling on

It is unquestionably true, the pamphlet says, that the £1,000 someone deposits with A today is paid out again tomorrow and forms a deposit at B. The day after, paid out by B, it can form a deposit at C, and so on without end. So the same £1,000 in money can, through a series of transfers, multiply into an absolutely indeterminate sum of deposits. It is therefore possible that nine-tenths of all deposits in the United Kingdom have no existence beyond the book entries recording them in the bankers' books, for which the bankers in turn have to settle accounts. In Scotland, for instance, where the currency never went above £3 million, deposits come to £27 million. Unless there were a general run on the banks for their deposits, the same £1,000, sent back the way it came, could cancel an equally indeterminate sum with the same ease. Since the same £1,000 with which someone today settles a debt to a tradesman can tomorrow settle that tradesman's debt to the merchant, the day after the merchant's debt to the bank, and so on without end, the same £1,000 can travel from hand to hand and from bank to bank and cancel any conceivable sum of deposits. (The Currency Theory Reviewed, pp. 62, 63.)

Wie alles in diesem Kreditsystem sich verdoppelt und verdreifacht und in bloßes Hirngespinst sich verwandelt, so gilt das auch vom "Reservefonds", wo man endlich glaubt, etwas Solides zu packen.
nothing solid in the reserve fund

Everything in this credit system doubles and trebles and turns into a mere phantom of the mind. The same holds for the 'reserve fund', where one thinks at last to lay hands on something solid.

Hören wir wieder Herrn Morris, den Gouverneur der Bank von England:
the witness: Morris, the Governor

Let us hear Mr Morris, the Governor of the Bank of England, once more:

"Die Reserven der Privatbanken sind in den Händen der Bank von England in Form von Depositen. Die erste Wirkung eines Goldabflusses scheint nur die Bank von England zu treffen; aber er würde ebensogut auf die Reserven der andern Banken einwirken, da es der Abfluß eines Teils der Reserve ist, die sie in unsrer Bank haben. Geradeso würde er wirken auf die Reserven aller Provinzialbanken." ("Commercial Distress", 1847/48 [Nr. 3639, 3642].)
a drain reaches every bank's reserve

The reserves of the private banks are in the hands of the Bank of England, in the form of deposits. The first effect of a gold drain seems to fall on the Bank of England alone; but it would act on the reserves of the other banks just as much, since what flows out is part of the reserve they hold with our Bank. In the same way it would act on the reserves of all the country banks. (Commercial Distress, 1847-8, nos. 3639, 3642.)

Schließlich lösen sich also die Reservefonds in Wirklichkeit auf in den Reservefonds der Bank von England.4 Aber auch dieser Reservefonds hat wieder Doppelexistenz. Der Reservefonds des banking department ist gleich dem Überschuß der Noten, die die Bank berechtigt ist auszugeben, über die in Zirkulation befindlichen Noten. Das gesetzliche Maximum der auszugebenden Noten ist = 14 Millionen (wofür keine Metallreserve erheischt; es ist der ungefähre Betrag der Schuld des Staats an die Bank) plus dem Betrag des Edelmetallvorrats der Bank. Wenn also dieser Vorrat = 14 Millionen Pfd.St., so kann die Bank 28 Millionen Pfd.St. in Noten ausgeben, und wenn davon 20 Millionen zirkulieren, so ist der Reservefonds des banking department = 8 Millionen. Diese 8 Millionen Noten sind dann gesetzlich das Bankierkapital, worüber die Bank zu verfügen hat, und zugleich der Reservefonds für ihre Depositen. Tritt nun ein Goldabfluß ein, der den Metallvorrat um 6 Millionen vermindert - wofür ebensoviel Noten vernichtet werden müssen -, so würde die Reserve des banking department von 8 auf 2 Millionen fallen. Einerseits würde die Bank ihren Zinsfuß sehr erhöhen; andrerseits würden die Banken, die bei ihr deponiert haben, und die andren Depositoren den Reservefonds für ihre eignen Guthaben bei der Bank sehr abnehmen sehn. 1857 drohten die vier größten Aktienbanken von London, wenn die Bank von England nicht einen "Regierungsbrief" zur Suspension des Bankakts von 1844 erwirke 5, ihre Depositen einzufordern, womit das banking department bankrott gewesen wäre. So kann das banking department fallieren, wie 1847, während beliebige Millionen (z.B. 1847 8 Millionen) in issue department liegen, als Garantie für die Konvertibilität der zirkulierenden Noten. Dies ist aber wieder illusorisch.
the Bank's reserve, doubled and failing

In the end, then, the reserve funds really do dissolve into the reserve fund of the Bank of England. But this reserve fund, too, has a double existence.

The reserve fund of the Banking Department equals the notes the Bank is entitled to issue minus the notes actually in circulation. The legal ceiling on the notes it may issue is £14 million (no metal reserve is required for that part; it is roughly the amount the state owes the Bank), plus the amount of the Bank's stock of precious metal. So if that stock is £14 million, the Bank may issue £28 million in notes; and if £20 million of them are circulating, the Banking Department's reserve fund comes to £8 million. These £8 million in notes are then, by law, the banking capital the Bank has at its disposal, and at the same time the reserve fund for its deposits.

Now let a gold drain come that cuts the metal stock by £6 million — for which an equal quantity of notes has to be destroyed — and the Banking Department's reserve would fall from £8 million to £2 million. On the one side the Bank would push its rate of interest up very sharply; on the other, the banks that have deposited with it, and its other depositors, would see the reserve fund behind their own credits at the Bank shrink very sharply. In 1857 the four biggest joint-stock banks in London threatened to call in their deposits unless the Bank of England obtained a 'government letter' suspending the Bank Act of 1844 — and without it the Banking Department would have gone bankrupt. So the Banking Department can fail, as it did in 1847, while any number of millions (in 1847, £8 million) lie in the Issue Department as a guarantee for the convertibility of the circulating notes. But that, in turn, is illusory.

"Der große Teil der Depositen, wofür die Bankiers selbst keine unmittelbare Nachfrage haben, geht in die Hände der bill-brokers" (buchstäblich Wechselmakler, der Sache nach halbe Bankiers), "die dem Bankier dagegen als Sicherheit für seinen Vorschuß Handelswechsel geben, die sie schon für Leute in London und der Provinz diskontiert haben. Der bill-broker ist dem Bankier verantwortlich für die Rückzahlung dieses money at call" {Geld, das auf Verlangen sofort rückzahlbar ist} "und diese Geschäfte sind von so gewaltigem Umfang, daß Herr Neave, der gegenwärtige Gouverneur der Bank" {von England,} "in seiner Zeugenaussage sagt: 'Wir wissen, daß ein broker 5 Millionen hatte, und wir haben Grund anzunehmen, daß ein andrer zwischen 8 und 10 Millionen hatte; einer hatte 4, ein andrer 3 1/2, ein dritter mehr als 8. Ich spreche von Depositen bei den brokers.'" ("Report of Committee on Bank Acts", 1857/58, p. V, Absatz Nr. 8.)
deposits passed to the bill-brokers

A large part of the deposits — the part the bankers themselves have no immediate call for — passes into the hands of the bill-brokers (literally bill-dealers, in effect half bankers). In return they give the banker commercial bills as security for his advance, bills they have already discounted for people in London and in the provinces. The bill-broker is answerable to the banker for the repayment of this money at call (money that must be repaid at once on demand). And these dealings are on such an enormous scale that Mr Neave, the present Governor of the Bank [of England], says in his evidence: we know that one broker had 5 million, and we have grounds for supposing that another had between 8 and 10 million; one had 4, another 3 1/2, a third more than 8. I am speaking of deposits with the brokers. (Report of Committee on Bank Acts, 1857-8, p. V, section no. 8.)

"Die Londoner bill-brokers ... führten ihr enormes Geschäft ohne irgendwelche Reserve in bar; sie verließen sich auf die Eingänge von ihren nach und nach verfallenden Wechseln oder im Notfall auf ihre Macht, Vorschüsse von der Bank von England gegen Depot der von ihnen diskontierten Wechsel zu erhalten." [ibidem. p. VIII, Absatz Nr. 17.] - "Zwei Firmen von bill-brokers in London stellten ihre Zahlungen 1847 ein; beide nahmen das Geschäft später wieder auf. 1857 suspendierten sie wieder. Die Passiva des einen Hauses waren 1847 in runder Zahl 2.683.000 Pfd.St. bei einem Kapital von 180.000 Pfd.St.; seine Passiva waren 1857 = 5.300.000 Pfd.St., während das Kapital wahrscheinlich nicht mehr als ein Viertel betrug von dem, was es 1847 gewesen. Die Passiva der andern Firma waren beidemal zwischen 3 und 4 Millionen, bei einem Kapital von nicht mehr als 45.000 Pfd.St." (ibidem, p. XXI. Absatz Nr. 52.)
bill-brokers with no cash reserve

The London bill-brokers ... carried on their enormous business without any cash reserve at all. They relied on the receipts from their bills as these fell due, or, if it came to it, on their power to get advances from the Bank of England against the deposit of the bills they had discounted. (ibid., p. VIII, section no. 17.) Two bill-broking firms in London stopped payment in 1847; both of them later took the business up again. In 1857 they suspended again. The liabilities of the one house were, in round numbers, £2,683,000 in 1847, against a capital of £180,000; its liabilities in 1857 were £5,300,000, while its capital was probably no more than a quarter of what it had been in 1847. The other firm's liabilities came to between £3 million and £4 million both times, on a capital of no more than £45,000. (ibid., p. XXI, section no. 52.)

Kap. 29
The Components of Banking Capital; Fictitious Capital: The National Debt, Capitalized Wages, the Share
Behind us stands a ruling on the bankers' 'currency' and 'capital': the money form of revenue against the money form of capital, the same coin circulating in both, and a squeeze met with means of payment rather than with additional real capital — though money capital in the banker's sense is genuinely scarce, and in a drain of gold the metal demanded is capital in its money form. What must now be settled is what the banking capital built out of such claims actually is: a list of ordinary assets, and then a form under which every steady income is read backwards into a capital behind it. By the end, state debt, wages and shares will have been tested against that form, and the difference between a real title and a real capital fixed.
We must now take a closer look at what banking capital consists of.
the question: what is banking capital

We now need to look more closely at what banking capital is actually made of.

We have just seen how Fullarton and others transform the distinction between money as means of circulation and money as means of payment (also as world money, in so far as a drain of gold is involved) into a distinction between circulation (‘currency’) and capital.
currency versus capital: the muddle

We have just seen how Fullarton and others take the difference between money as a means of circulation and money as a means of payment — and also as world money, where a drain of gold is at issue — and turn it into a difference between circulation ('currency') and capital.

The special role that capital plays here means that the amount of attention enlightened economics devoted to insisting that money was not capital is paralleled by this banker’s economics, which tries just as assiduously to insist that money is actually capital par excellence.
money as capital par excellence

Capital plays such a strange role here that the two sides mirror each other. Enlightened economics took great pains to drive it home that money is not capital. This banker's economics takes just as much pains to drive it home that money really is capital par excellence.

In the further course of our investigations we shall show how money capital is confused in this context with ‘moneyed capital’ in the sense of interest-bearing capital, although money capital in the former sense is never more than a transitional form of capital as distinct from its other forms, i.e. commodity capital and productive capital.
money capital versus moneyed capital

In the investigations that come later we show that what happens here is a confusion of money capital with moneyed capital, in the sense of interest-bearing capital. Money capital in that first sense is always no more than one transitional form of capital, different from capital's other forms, commodity capital and productive capital.

Banking capital consists of (1) cash, in the form of gold or notes; (2) securities. These latter may again be divided into two parts: commercial paper, current bills of exchange that fall due on specified dates, their discounting being the specific business of the banker; and public securities such as government bonds, treasury bills and stocks of all kinds, in short interest-bearing paper, which is essentially different from bills of exchange. Mortgages, too, can be included in this category. The capital which has these as its tangible component parts can also be broken down into the banker’s own invested capital, and the deposits that form his banking or borrowed capital. Notes must also be added here, in the case of banks which have the right to issue them. We shall leave these deposits and notes aside to start with. It is clear enough that the actual components of banker’s capital — money, bills of exchange and interest-bearing paper — are not affected by whether these various elements represent his own capital, or deposits, the capital of other people. The subdivisions remain the same whether he pursues his business simply with his own capital or whether he conducts it entirely with capital which has been deposited with him.
banking capital's tangible components

Banking capital consists of: (1) cash, gold or notes; (2) securities. The securities fall into two groups again. First, commercial paper — bills of exchange that are still outstanding, falling due from time to time, and whose discounting is the banker's real business. Second, public securities — government bonds, treasury bills, shares of every kind, in short interest-bearing paper, which is essentially different from bills of exchange. Mortgages can be counted in here too. The capital put together out of these tangible parts then divides again into the banker's own invested capital and the deposits that make up his banking capital, or borrowed capital. Banks that issue notes have notes on top of that. We leave deposits and notes aside for the moment.

One thing is clear: it makes no difference to what the banker's capital actually consists of — money, bills, interest-bearing paper — whether these various elements represent his own capital or deposits, the capital of other people. The same division would still hold if he ran his business with his own capital alone, or only with capital deposited with him.

The form of interest-bearing capital makes any definite and regular monetary revenue appear as the interest on a capital, whether it actually derives from a capital or not. The money income is first transformed into interest, and with the interest we then have the capital from which it derives. Likewise, with interest-bearing capital, any sum of value appears as capital as soon as it is not spent as revenue; i.e. as a ‘principal’ in contrast to the possible or actual interest it can bear.
every revenue read as interest

The form of interest-bearing capital brings it about that any definite and regular money revenue appears as the interest on a capital, whether it springs from a capital or not. First the money income is turned into interest, and once we have the interest, we also have the capital it springs from. In the same way, with interest-bearing capital, any sum of value appears as capital as soon as it is not spent as revenue; it appears as the principal, in contrast to the possible or actual interest it can bear.

The matter is simple. Say that the average rate of interest is 5 per cent per year. A sum of £500, then, if transformed into interest-bearing capital, would bring in a yearly £25. Hence every fixed annual income of £25 is seen as the interest on a capital of £500. Yet this is and remains a purely illusory notion, except in the case where the source of the £25, whether this is a mere title of ownership or claim, or whether it is an actual element of production, such as a piece of land for example, is directly transferable, or assumes a form in which it is transferable. Let us take the national debt and wages as examples.
the illusion, and its exception

The matter is simple. Suppose the average rate of interest is 5 per cent a year. A sum of £500, turned into interest-bearing capital, would then bring in £25 a year. So any fixed annual income of £25 is taken as the interest on a capital of £500. But this is and remains a purely illusory notion — except in one case: where the source of the £25 is directly transferable, or takes a form in which it becomes transferable, whether that source is a mere title of ownership or a claim, or an actual element of production such as a piece of land. Let us take the national debt and wages as our examples.

The state has to pay its creditors a certain sum of interest each year for the capital it borrows. In this case the creditor cannot recall his capital from the debtor but can only sell the claim, his title of ownership. The capital itself has been consumed, spent by the state. It no longer exists. What the state’s creditor possesses is (1) the state’s promissory note for, say, £100; while (2) this note gives him a claim on the state’s annual revenue, i.e. the proceeds of the year’s taxation, to a certain amount, say £5 or 5 per cent; (3) he is free to sell this promissory note to anyone he likes. If the rate of interest is 5 per cent, and assuming the state’s security is good, owner A can generally sell the note for £100 to B: since it is the same thing for B whether he lends out £100 at 5 per cent per year or assures himself of an annual tribute of £5 from the state by paying out £100. But in all these cases, the capital from which the state’s payment is taken as deriving, as interest, is illusory and fictitious. It is not only that the sum that was lent to the state no longer has any kind of existence. It was never designed to be spent as capital, to be invested, and yet only by being invested as capital could it have been made into a self-maintaining value. As far as the original creditor A is concerned, the share of the annual taxation he receives represents interest on his capital, just as does the share of the wealth of the spendthrift that accrues to the money-lender, but in neither case has the sum of money lent been laid out as capital. The possibility of selling the state’s promissory note represents for A the potential return of his principal. As far as B is concerned, from his own private standpoint his capital is then invested as interest-bearing capital. In actual fact, he has simply taken the place of A, and bought A’s claim on the state. No matter how these transactions are multiplied, the capital of the national debt remains purely fictitious, and the moment these promissory notes become unsaleable, the illusion of this capital disappears. Yet this fictitious capital has its characteristic movement for all that, as we shall see soon.
state debt: a capital that was eaten

The state has to pay its creditors a certain amount of interest every year for the capital it borrows. The creditor here cannot give notice to his debtor; he can only sell the claim, his title of ownership over it. The capital itself has been eaten up, spent by the state. It no longer exists. What the state's creditor holds is, first, a promissory note on the state, say for £100. Second, this note gives him a claim on the state's annual revenue, that is, on the year's product of the taxes, for a certain amount, say £5 or 5 per cent. Third, he can sell this note to anyone he likes. If the rate of interest is 5 per cent, and the state's security is assumed, then the holder A can as a rule sell the note to B for £100; for it comes to the same thing for B whether he lends out £100 at 5 per cent a year, or whether by paying out £100 he secures himself an annual tribute from the state of £5.

But in all these cases the capital whose offshoot — its interest — the state's payment is taken to be remains illusory, fictitious capital. It is not only that the sum lent to the state no longer exists at all. It was never intended at any point to be spent and invested as capital, and only by being invested as capital could it have been turned into a value that maintains itself. For the original creditor A, the share of the annual tax that falls to him represents interest on his capital, just as for the usurer the share of the spendthrift's wealth that falls to him does — although in neither case was the money sum lent spent as capital. For A, the possibility of selling the note on the state represents the possible return of his principal. As for B, from his own private standpoint his capital is invested as interest-bearing capital. In substance he has merely stepped into A's place and bought A's claim on the state.

However much these transactions multiply, the capital of the national debt remains a purely fictitious one, and from the moment the notes became unsaleable, the semblance of this capital would fall away. All the same, as we shall see shortly, this fictitious capital has a movement of its own.

Moving from the capital of the national debt, where a negative quantity appears as capital — interest-bearing capital always being the mother of every insane form, so that debts, for example, can appear as commodities in the mind of the banker — we shall now consider labour-power. Here wages are conceived as interest, and hence labour-power as capital that yields this interest. If the wage for a year comes to £50, say, and the rate of interest is 5 per cent, one annual labour-power is taken as equal to a capital of £1,000. Here the absurdity of the capitalist’s way of conceiving things reaches its climax, in so far as instead of deriving the valorization of capital from the exploitation of labour-power, they explain the productivity of labour-power by declaring that labour-power itself is this mystical thing, interest-bearing capital. In the second half of the seventeenth century (with Petty, for example) this was a favourite notion, but it is still used today, in all seriousness, by vulgar economists and especially by German statisticians. 1 Unfortunately, however, two inconvenient circumstances militate against this unthinking notion: first, the worker has to work in order to receive this interest, and second, he cannot turn the capital value of his labour-power into money by transferring it to someone else. Rather, the annual value of his labour-power is his average annual wage, and his labour has to replace its buyer with this value itself plus the surplus-value that is its valorization. Under the slave system the worker does have a capital value, namely his purchase price. And if he is hired out, the hirer must first pay the interest on this purchase price and on top of this replace the capital’s annual depreciation.
wages capitalized: the peak of absurdity

In contrast to the capital of the national debt, where a minus appears as capital — interest-bearing capital being the mother of every crazy form, so that debts, for instance, can appear in the banker's mind as commodities — let us now look at labour-power. Here the wage is conceived as interest, and so labour-power is conceived as the capital that throws off this interest. If, for example, a year's wage is £50, and the rate of interest stands at 5 per cent, then one year's labour-power counts as equal to a capital of £1,000. The madness of the capitalist way of conceiving things reaches its peak here: instead of explaining the valorization of capital out of the exploitation of labour-power, the productivity of labour-power is explained the other way round, by the fact that labour-power itself is this mystical thing, interest-bearing capital. In the second half of the seventeenth century (in one writer of the period, for example) this was a favourite notion, but it is used in all seriousness today as well, partly by vulgar economists and mainly by German statisticians.

Unfortunately two circumstances cut disagreeably across this thoughtless notion. First, the worker has to work in order to get this interest. Second, he cannot turn the capital value of his labour-power into money by transferring it. Rather, the annual value of his labour-power equals his average annual wage, and what he has to replace to its buyer through his labour is this value itself plus the surplus-value, the valorization of that value. Under the slave system the worker does have a capital value, namely his purchase price. And when he is hired out, the hirer has first to pay the interest on the purchase price and on top of that to replace the annual depreciation of the capital.

The formation of fictitious capital is known as capitalization. Any regular periodic income can be capitalized by reckoning it up, on the basis of the average rate of interest, as the sum that a capital lent out at this interest rate would yield. For example, if the annual income in question is £100 and the rate of interest 5 per cent, then £100 is the annual interest on £2,000, and this £2,000 is then taken as the capital value of the legal ownership title to this annual £100. For the person who buys this ownership title, the annual £100 does actually represent the conversion of the capital he has invested into interest. In this way, all connection with the actual process of capital’s valorization is lost, right down to the last trace, confirming the notion that capital is automatically valorized by its own powers.
capitalization, and the automaton

The formation of fictitious capital is called capitalizing. Any regularly repeating income is capitalized by reckoning it, at the average rate of interest, as the yield that a capital lent out at this rate would bring in. For example, if the annual income is £100 and the rate of interest 5 per cent, then the £100 would be the annual interest on £2,000, and this £2,000 now counts as the capital value of the legal title of ownership to that annual £100. For the person who buys this title of ownership, the annual £100 then does in fact represent the interest on the capital he has invested at 5 per cent. In this way every connection with the real valorization process of capital is lost, right down to the last trace, and the notion of capital as an automaton that valorizes itself out of itself takes firm hold.

Even when the promissory note — the security — does not represent a purely illusory capital, as it does in the case of national debts, the capital value of this security is still pure illusion. We have already seen how the credit system produces joint-stock capital. Securities purport to be ownership titles representing this capital. The shares in railway, mining, shipping companies, etc. represent real capital, i.e. capital invested and functioning in these enterprises, or the sum of money that was advanced by the shareholders to be spent in these enterprises as capital. It is in no way ruled out here that these shares may be simply a fraud. But the capital does not exist twice over, once as the capital value of the ownership titles, the shares, and then again as the capital actually invested or to be invested in the enterprises in question. It exists only in the latter form, and the share is nothing but an ownership title, pro rata, to the surplus-value which this capital is to realize. A may sell this title to B, and B to C. These transactions have no essential effect on the matter. A or B has then transformed his title into capital, but C has transformed his capital into a mere ownership title to the surplus-value expected from this share capital.
shares: one capital, not two

Even where the promissory note — the security — does not represent purely illusory capital, as it does with the national debt, the capital value of this paper is purely illusory. We saw just now how the credit system produces joint-stock capital. The securities count as titles of ownership representing this capital. The shares of railway, mining, shipping and other companies represent real capital, namely the capital invested and functioning in these enterprises, or the sum of money advanced by the shareholders to be spent as capital in such enterprises. This in no way rules out their also representing nothing but swindle. But this capital does not exist twice: once as the capital value of the ownership titles, the shares, and once again as the capital really invested or still to be invested in those enterprises. It exists only in that latter form, and the share is nothing but a title of ownership, pro rata, to the surplus-value that this capital is to realize. A may sell this title to B, and B to C. These transactions change nothing in the nature of the matter. A or B has then turned his title into capital, while C has turned his capital into a mere title of ownership to the surplus-value to be expected from that share capital.

Kap. 29
The Independent Movement of the Ownership Titles; The Banker's Capital Is Largely Fictitious; The Double Role of the Deposits
Behind us stands the form that reads any steady revenue backwards into a capital behind it: the state debt whose capital was spent and never laid out, wages turned into the interest on labour-power, and the share, which stands for real capital existing once only. Here those titles are followed onto the market, where they become commodities with a price of their own, set by the yield capitalized at the going rate of interest and by revenue expected in advance. What gets settled is what that movement is worth, and how much of the banker's capital is claims rather than capital at all.
The independent movement of these ownership titles’ values, not only those of government bonds, but also of shares, strengthens the illusion that they constitute real capital besides the capital or claim to which they may give title. They become commodities, their prices having a specific movement and being specifically set. Their market values receive a determination differing from their nominal values, without any change in the value of the actual capital (even if its valorization does change). On the one hand their market values fluctuate with the level and security of the receipts to which they give a legal title. If the nominal value of a share, i.e. the sum advanced which the share originally represents, is £100, and the enterprise yields 10 per cent instead of 5 per cent, its market value rises, other circumstances being equal, since, when capitalized at 5 per cent, it now represents a fictitious capital of £200. Someone who buys it for £200 gets a revenue of 5 per cent on his capital investment. The opposite is the case when the revenue from the enterprise declines. The market value of these securities is partly speculative, since it is determined not just by the actual revenue but rather by the anticipated revenue as reckoned in advance. But if we take the valorization of the actual capital to be constant, or, where no such capital exists, as in the case of national debts, if we take the annual yield to be fixed by law as well as sufficiently guaranteed, the prices of these securities rise and fall in inverse proportion to the rate of interest. If the interest rate rises from 5 per cent to 10 per cent, a security that ensures a yield of £5 now represents a capital of only £50. If the interest rate falls to 2 1/2 per cent, the same security represents a capital of £200. Its value is always simply the capitalized yield, i.e. the yield as reckoned on an illusory capital at the existing rate of interest. In times of pressure on the money market, therefore, these securities fall in price for two reasons: first, because the interest rate rises, and second, because they are put up for sale in massive quantities, to be converted into money. This fall in price occurs irrespective of whether the yield these securities ensure for their owner is constant, as in the case of government bonds, or whether the valorization of the real capital that they represent may be affected by the disturbance in the reproduction process, as in the case of industrial undertakings. In the latter case, we simply have a further devaluation besides that already mentioned. Once the storm is over, these securities rise again to their former level, in so far as the undertakings they represent have not come to grief and are not fraudulent. Their depreciation in a crisis is a powerful means of centralizing money wealth. 2
Title prices move on their own

The value of these ownership titles moves on its own — and not only the value of government bonds but of shares too. That confirms the illusion that they are real capital standing beside the capital, or the claim, that they may give title to. They turn into commodities, and the price of a commodity like this has a movement and a fixing of its own. Its market value is set by something other than its nominal value, and none of this requires any change in the value of the real capital — though how that capital is valorized may change.

For one thing, the market value swings with how high and how secure the receipts are that the title gives a legal claim to. Suppose a share's nominal value — the sum paid in, which the share originally stands for — is £100, and the undertaking yields 10 per cent instead of 5 per cent. Other things equal, and with the rate of interest at 5 per cent, its market value then rises to 200, since capitalized at 5 per cent it now stands for a fictitious capital of £200. Whoever buys it at £200 gets a revenue of 5 per cent on that investment. The opposite happens when the undertaking's revenue falls away. The market value of these papers is partly speculative, since it is fixed not only by the revenue actually coming in but by the revenue expected, reckoned up in advance.

Take the valorization of the real capital as constant, though — or, where no capital exists at all, as with state debts, take the yearly yield as fixed by law and otherwise secure enough — and then the price of these securities rises and falls in the opposite direction to the rate of interest. Let the rate rise from 5 to 10 per cent, and a security that guarantees a yield of £5 now stands for a capital of only £50. Let it fall to 2 1/2 per cent, and the same security stands for a capital of £200. Its value is always only the capitalized yield — the yield reckoned up on an illusory capital at the going rate of interest.

In times of squeeze in the money market, these securities therefore fall in price twice over: first, because the rate of interest rises, and second, because they are thrown on the market in masses to be turned into money. That fall comes about regardless of whether the yield the papers guarantee their owner is constant, as with government bonds, or whether the valorization of the real capital they represent may also be caught by a disturbance in the reproduction process, as with industrial undertakings. In the second case, a further devaluation is simply added on to the one just described. Once the storm is over, these papers climb back to their earlier level, so far as they do not represent undertakings that have failed or are swindles. Their depreciation in a crisis acts as a powerful means of centralizing money wealth.

In so far as the rise or fall in value of these securities is independent of the movement in the value of the real capital that they represent, the wealth of a nation is just as great afterwards as before.
The nation just as rich afterwards

So far as the fall or rise in the value of these papers goes on independently of how the value of the real capital they represent moves, a nation's wealth is just as great after the fall or rise as before it.

‘The public stocks and canal and railway shares had already by the 23rd of October, 1847, been depreciated in the aggregate to the amount of £114,752,225’ (Morris, Governor of the Bank of England, evidence in the Report on Commercial Distress, 1847-8).
Morris's 1847 depreciation figure

Morris, the Governor of the Bank of England, told the committee on commercial distress in 1847-8 that by 23 October 1847 the public funds and the canal and railway shares had already been depreciated to the amount of £114,752,225.

As long as their depreciation was not the expression of any standstill in production and in railway and canal traffic, or an abandonment of undertakings already begun, or a squandering of capital in positively worthless enterprises, the nation was not a penny poorer by the bursting of these soap bubbles of nominal money capital.
The no-poorer claim and its limit

So far as the depreciation of these papers did not express a real standstill of production and of traffic on the railways and canals, or the abandonment of undertakings already begun, or capital thrown away on enterprises positively worthless, the nation was not a penny the poorer for the bursting of these soap bubbles of nominal money capital.

All these securities actually represent nothing but accumulated claims, legal titles, to future production. Their money or capital value either does not represent capital at all, as in the case of national debts, or is determined independently of the real capital value they represent.
Accumulated claims on future production

All these papers represent, in fact, nothing but accumulated claims — legal titles — to future production. Their money value or capital value either represents no capital at all, as with state debts, or is regulated independently of the value of the real capital they represent.

In all countries of capitalist production, there is a tremendous amount of so-called interest-bearing capital or ‘moneyed capital’ in this form. And an accumulation of money capital means for the most part nothing more than an accumulation of these claims to production, and an accumulation of the market price of these claims, of their illusory capital value.
What accumulating money capital mostly is

In every country of capitalist production there exists a tremendous mass of so-called interest-bearing capital, or moneyed capital, in this form. And by the accumulation of money capital there is for the most part nothing to be understood but the accumulation of these claims on production, the accumulation of the market price, of the illusory capital value of these claims.

One portion of banker’s capital is invested in these so-called interest-bearing securities. This is actually part of the reserve capital and does not function in the banking business proper. The most important portion consists of bills of exchange, i.e. promises to pay issued by industrial capitalists or merchants. For the money-lender, these bills are interest-bearing paper, i.e. when he buys them, he deducts interest for the period that they still have to run. This is called discounting. The deduction from the face value of the bill thus depends on the rate of interest at the time.
Bills, discount, and the banker's capital

One part of the banker's capital is now invested in these so-called interest-bearing securities. That part is itself a piece of the reserve capital, and it does not function in the banking business proper. The most important part consists of bills of exchange, that is, promises to pay issued by industrial capitalists or merchants. For the money-lender these bills are interest-bearing paper; that is, when he buys them he deducts the interest for the time they still have to run. This is what is called discounting. How large the deduction is from the sum the bill represents therefore depends on the rate of interest at the time.

The final portion of the banker’s capital consists of his money reserve in gold or notes. Deposits, unless tied up for a longer period by contract, are always at the depositors’ disposal. They are in a state of perpetual flux. But if some depositors withdraw their deposits, others replace them, so that the overall average fluctuates only a little in times of normal business.
Deposits in perpetual flux

The last part of the banker's capital, finally, consists of his money reserve in gold or notes. Deposits, unless they have been contractually tied up for a longer period, always stand at the depositors' disposal. They are in perpetual flux. But what one depositor withdraws another replaces, so that the general average amount fluctuates little in times of normal business.

The banks’ reserve funds, in countries of developed capitalist production, always express the average amount of money existing as a hoard, and a part of this hoard itself consists of paper, mere drafts on gold, which have no value of their own. The greater part of banker’s capital is therefore purely fictitious and consists of claims (bills of exchange) and shares (drafts on future revenues). It should not be forgotten here that this capital’s money value, as represented by these papers in the banker’s safe, is completely fictitious even in so far as they are drafts on certain assured revenues (as with government securities) or ownership titles to real capital (as with shares), their money value being determined differently from the value of the actual capital that they at least partially represent; or, where they represent only a claim to revenue and not capital at all, the claim to the same revenue is expressed in a constantly changing fictitious money capital. Added to this is the fact that this fictitious capital of the banker represents to a large extent not his own capital but rather that of the public who deposit with him, whether with interest or without.
Mostly fictitious, and mostly the public's

The reserve funds of the banks, in countries of developed capitalist production, always express on average the size of the money that exists as a hoard; and part of this hoard in turn consists of paper — mere drafts on gold, which have no value of their own.

The greater part of banker's capital is therefore purely fictitious, and consists of claims (bills of exchange), state paper (which represents capital that is past) and shares (drafts on future revenue). It must not be forgotten that the money value of the capital which these papers stand for in the banker's strongbox is thoroughly fictitious even where they are drafts on secure revenues, as with government paper, or ownership titles to real capital, as with shares — that money value being regulated differently from the value of the real capital which they at least partly represent; or, where they represent a mere claim on revenues and no capital, the claim on that same revenue is expressed in a constantly changing fictitious money capital. On top of this, the fictitious banker's capital is for the greater part not his own capital but the public's, deposited with him, with or without interest.

Deposits are always made in money, gold or notes, or else in drafts on money. Except for the reserve fund, which contracts or expands according to the needs of actual circulation, these deposits are in fact always either in the hands of industrial capitalists and merchants, serving to discount their bills of exchange and make them advances; or else they are in the hands of dealers in securities (stockbrokers), private persons who have sold securities, or the government (in the case of treasury bills and new loans). The deposits themselves play a double role. On the one hand, as already mentioned, they are lent out as interest-bearing capital and are thus not to be found in the banks’ safes, figuring instead in their books as credits held by the depositors. On the other hand, they function as mere book entries of this kind in so far as the reciprocal credits of the depositors are settled by cheques on their deposits and mutually cancelled; and it is completely immaterial in this connection whether the deposits are with the same banker, so that they can cancel the various accounts against one another, or whether they are with different banks, which exchange their cheques on one another and simply pay the balances.
The double role of deposits

Deposits are always made in money — gold or notes — or in drafts on them. Apart from the reserve fund, which contracts or expands with the needs of actual circulation, these deposits are in fact always in the hands of industrial capitalists and merchants, whose bills are discounted with them and who are given advances out of them; or else in the hands of dealers in securities (stockbrokers), of private people who have sold their securities, or of the government, in the case of treasury bills and new loans.

The deposits themselves play a double role. On the one hand, as already said, they are lent out as interest-bearing capital, and so are not to be found in the banks' tills — they figure only in their books, as credits of the depositors. On the other hand they function as mere book entries, in so far as the depositors' mutual credits are settled by cheques on their deposits and written off against one another; and it makes no difference at all whether the deposits lie with the same banker, so that he writes the different accounts off against each other, or whether this is done by different banks, which exchange their cheques and pay each other only the differences.

Kap. 29
Everything Doubles and Trebles: Deposits as Book Entries, Adam Smith, the Bank of England's Reserve Fund
Behind us lie shares, state bonds and the titles whose prices move by their own rule, and the banker's capital found to be mostly claims rather than the capital it is counted as. That much is settled for securities. What gets settled here is the same ruling for the banker's book: deposits that exist only as credits, deposits said to multiply without limit, and a loan in which one sum is counted as several capitals. It ends where the last solid-looking thing stands, the reserve, and shows it double, and breakable.
With the development of interest-bearing capital and the credit system, all capital seems to be duplicated, and at some points triplicated, by the various ways in which the same capital, or even the same claim, appears in various hands in different guises. 3 The greater part of this ‘money capital’ is purely fictitious. With the exception of the reserve fund, deposits are never more than credits with the banker, and never exist as real deposits. In so far as they are used in clearing-house transactions, they function as capital for the bankers, after these latter have lent them out. The bankers pay one another reciprocal drafts on these non-existent deposits by balancing these credits against each other.
capital only seems to double

As interest-bearing capital and the credit system develop, all capital seems to double, and in places to treble. That is because the same capital, or even just the same claim on somebody, turns up in different hands under different forms. Most of this 'money capital' is purely fictitious.

Apart from the reserve fund, deposits are nothing but credits with the banker — and they never exist in the deposit itself. In so far as they serve clearing business, they function as capital for the bankers, once the bankers have lent them out. And the drafts the bankers hold on one another against these non-existent deposits are settled by writing the credits off against each other.

Adam Smith says of the role that capital plays in the lending of money: ‘Even in the monied interest, however, the money is, as it were, but the deed of assignment, which conveys from one hand to another those capitals which the owners do not care to employ themselves. Those capitals may be greater in almost any proportion than the amount of the money which serves as the instrument of their conveyance; the same pieces of money successively serving for many different loans, as well as for many different purchases. A, for example, lends to W a thousand pounds, with which W immediately purchases of B a thousand pounds’ worth of goods. B, having no occasion for the money himself, lends the identical pieces to X, with which X immediately purchases of C another thousand pounds’ worth of goods. C, in the same manner, and for the same reason, lends them to Y, who again purchases goods with them of D. In this manner the same pieces, either of coin or of paper, may, in the course of a few days, serve as the instrument of three different loans, and of three different purchases, each of which is, in value, equal to the whole amount of those pieces. What the three men, A, B and C, assign to the three borrowers, W, X and Y, is the power of making those purchases. In this power consist both the value and the use of the loans. The stock lent by the three monied men is equal to the value of the goods which can be purchased with it, and is three times greater than that of the money with which the purchases are made. Those loans, however, may be all perfectly well secured, the goods purchased by the different debtors being so employed, as, in due time, to bring back, with a profit, an equal value either of coin or of paper. And as the same pieces of money can thus serve as the instrument of different loans to three, or for the same reason, to thirty times their value, so they may likewise successively serve as the instrument of repayment’ (Book II, Chapter IV [Pelican edition, p. 452]).
the witness: Adam Smith

Adam Smith, on the part that capital plays when money is lent out:

English joined this paragraph
Smith's exhibit: many loans, one sum

Even in the money trade, Smith says, the money is as it were only the assignment that carries from one hand to another the capitals whose owners have no use for them. Those capitals can be bigger than the sum of money that serves as the tool of their transfer, almost without limit, since the same pieces of money serve one loan after another, just as they serve one purchase after another. Say A lends a thousand pounds to W, and W immediately buys a thousand pounds' worth of goods from B. B has no use for the money himself, so he lends the identical pieces to X, and X immediately buys another thousand pounds' worth of goods from C. In the same way, and for the same reason, C lends the money to Y, who again buys goods with it from D. So the same pieces of coin or paper can, within a few days, carry three different loans and three different purchases, each of them equal in value to the whole amount of those pieces. What A, B and C hand over to W, X and Y is the power to make those purchases, and that power is both the value and the use of the loans. The capital lent by the three money men equals the value of the goods that can be bought with it, and is three times the value of the money with which the purchases are made. All the same, all three loans can be perfectly safe, since the goods the different borrowers bought with them are used in such a way as to bring back an equal value in coin or paper, plus a profit, in due time. And just as the same pieces of money can serve different loans up to three times, or even thirty times, their value, so they can serve one after another as the means of repayment. (Book II, Chapter IV.)

Since the same piece of money can make several different purchases, depending on the velocity of its circulation, it can equally be used for various different loans, for purchases move it from one hand to another, and a loan is simply a transfer from one hand to another that is not mediated by any sale. For each seller, the money represents the transformed form of his commodity; nowadays, when every commodity is expressed as a capital value, the money in its various loans successively represents different capitals, which is simply a different way of putting the previous statement that it can successively realize different commodity values. Money also serves, as a means of circulation, to transfer material capitals from one hand to another. In a loan, it is not transferred from one hand to another as a means of circulation. As long as it remains in the lender’s possession, it is not a means of circulation in his hands but the value-existence of his capital. And it is in this form that he transfers it to someone else in a loan. If A had lent money to B, and B to C, without any purchases intervening, the same money would not represent three capitals but only one, just one capital value. How many capitals it actually does represent depends on how often it functions as the value form of various different commodity capitals.
a loan is not a purchase

The same coin, depending on how fast it circulates, can make one purchase after another — so it can carry out one loan after another just as well. Purchases move it from hand to hand; a loan is nothing but a transfer from one hand to another, with no purchase in between. To each seller the money stands for the changed form of his commodity; nowadays, when every value is expressed as a capital value, the same money represents one capital after another in the various loans — which is only another way of putting the earlier statement that it can realize one commodity value after another. At the same time it serves as a means of circulation, moving the material capitals from hand to hand. In a loan it does not pass from one hand to another as a means of circulation. As long as it stays in the lender's hand, it is not a means of circulation there, but the value-existence of his capital. And it is in this form that he hands it over to a third party in the loan. If A had lent the money to B, and B to C, with no purchases in between, the same money would represent not three capitals but only one — a single capital value. How many capitals it really represents depends on how often it functions as the value form of different commodity capitals.

What Adam Smith says about loans in general applies equally to deposits, this being simply a particular name for loans that the public make to the bankers. The same pieces of money can serve as instrument for any number of deposits.
deposits are the public's loans

What Adam Smith says about loans in general holds for deposits too, since a deposit is simply a particular name for the loans the public makes to the bankers. The same coins can serve as the instrument for any number of deposits.

‘It is unquestionably true that the £1,000 which you deposit at A today may be reissued tomorrow, and form a deposit at B. The day after that, reissued from B, it may form a deposit at C... and so on to infinitude; and that the same £1,000 in money may, thus, by a succession of transfers, multiply itself into a sum of deposits absolutely indefinite. It is possible, therefore, that nine-tenths of all the deposits in the United Kingdom may have no existence beyond their record in the books of the bankers who are respectively accountable for them ... Thus in Scotland, for instance, currency has never exceeded £3 million, the deposits in the banks are estimated at £27 million. Unless a run on the banks be made, the same £1,000 would, if sent back upon its travels, cancel with the same facility a sum equally indefinite. As the same £1,000, with which you cancel your debt to a tradesman today, may cancel his debt to the merchant tomorrow, the merchant’s debt to the bank the day following, and so on without end; so the same £1,000 may pass from hand to hand, and bank to bank, and cancel any conceivable sum of deposits’ (The Currency Theory Reviewed, pp. 62-3).
the pamphlet's £1,000, travelling on

It is unquestionably true, the pamphlet says, that the £1,000 someone deposits with A today is paid out again tomorrow and forms a deposit at B. The day after, paid out by B, it can form a deposit at C, and so on without end. So the same £1,000 in money can, through a series of transfers, multiply into an absolutely indeterminate sum of deposits. It is therefore possible that nine-tenths of all deposits in the United Kingdom have no existence beyond the book entries recording them in the bankers' books, for which the bankers in turn have to settle accounts. In Scotland, for instance, where the currency never went above £3 million, deposits come to £27 million. Unless there were a general run on the banks for their deposits, the same £1,000, sent back the way it came, could cancel an equally indeterminate sum with the same ease. Since the same £1,000 with which someone today settles a debt to a tradesman can tomorrow settle that tradesman's debt to the merchant, the day after the merchant's debt to the bank, and so on without end, the same £1,000 can travel from hand to hand and from bank to bank and cancel any conceivable sum of deposits. (The Currency Theory Reviewed, pp. 62, 63.)

Just as everything in this credit system appears in duplicate and triplicate, and is transformed into a mere phantom of the mind, so this also happens to the ‘reserve fund’, where one might finally expect to lay hold of something solid.
nothing solid in the reserve fund

Everything in this credit system doubles and trebles and turns into a mere phantom of the mind. The same holds for the 'reserve fund', where one thinks at last to lay hands on something solid.

Let us listen once more to Mr Morris, Governor of the Bank of England: ‘The reserves of the private bankers are in the hands of the Bank of England in the shape of deposits ... An export of gold acts exclusively, in the first instance, upon the reserve of the Bank of England; but it would also be acting upon the reserves of the bankers, in as much as it is a withdrawal of a portion of the reserves which they have in the Bank of England. It would be acting upon the reserves of all the bankers throughout the country’ (Commercial Distress, 1847-8 [Nos. 3639, 3642]).
the witness: Morris, the Governor

Let us hear Mr Morris, the Governor of the Bank of England, once more:

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a drain reaches every bank's reserve

The reserves of the private banks are in the hands of the Bank of England, in the form of deposits. The first effect of a gold drain seems to fall on the Bank of England alone; but it would act on the reserves of the other banks just as much, since what flows out is part of the reserve they hold with our Bank. In the same way it would act on the reserves of all the country banks. (Commercial Distress, 1847-8, nos. 3639, 3642.)

Ultimately, therefore, what these reserve funds actually boil down to is the reserve fund of the Bank of England. 4 But this reserve fund, too, has a double existence. The reserve fund of the Banking Department is equal to the excess of notes that the Bank is authorized to issue over the notes that are actually in circulation. The legal maximum note issue is £14 million (the amount for which no metal reserve is required, this being the approximate sum of the government’s debt to the Bank), plus the Bank’s total reserve of precious metal. So if this reserve is also £14 million, the Bank can issue £28 million in notes, and if £20 million of these are already in circulation, the reserve fund of the Banking Department 4s £8 million. This £8 million in notes is then the legal banking capital that the Bank has at its disposal and at the same time the ue reserve fund for its deposits. Should a drain of gold take place, reducing the metal reserve by £6 million — for which an equal sum in notes has to be destroyed — the Banking Department’s reserve falls from £8 million to £2 million. On the one hand, the Bank increases its interest rate very sharply; on the other hand, the banks which have deposited with it, as well as its other depositors, see the reserve fund for their own credits with the Bank take a sharp drop. In 1857, London’s four largest joint-stock banks threatened that if the Bank of England did not obtain a ‘government letter’ suspending the Bank Act of 1844, 5 they would call in their deposits and bankrupt the Banking Department. Thus the Banking Department can fail to meet obligations, as in 1847, while there are still several millions in the Issue Department (e.g. £8 million in 1847), as guarantee for the convertibility of notes in circulation. Though this is in turn an illusion.
the Bank's reserve, doubled and failing

In the end, then, the reserve funds really do dissolve into the reserve fund of the Bank of England. But this reserve fund, too, has a double existence.

The reserve fund of the Banking Department equals the notes the Bank is entitled to issue minus the notes actually in circulation. The legal ceiling on the notes it may issue is £14 million (no metal reserve is required for that part; it is roughly the amount the state owes the Bank), plus the amount of the Bank's stock of precious metal. So if that stock is £14 million, the Bank may issue £28 million in notes; and if £20 million of them are circulating, the Banking Department's reserve fund comes to £8 million. These £8 million in notes are then, by law, the banking capital the Bank has at its disposal, and at the same time the reserve fund for its deposits.

Now let a gold drain come that cuts the metal stock by £6 million — for which an equal quantity of notes has to be destroyed — and the Banking Department's reserve would fall from £8 million to £2 million. On the one side the Bank would push its rate of interest up very sharply; on the other, the banks that have deposited with it, and its other depositors, would see the reserve fund behind their own credits at the Bank shrink very sharply. In 1857 the four biggest joint-stock banks in London threatened to call in their deposits unless the Bank of England obtained a 'government letter' suspending the Bank Act of 1844 — and without it the Banking Department would have gone bankrupt. So the Banking Department can fail, as it did in 1847, while any number of millions (in 1847, £8 million) lie in the Issue Department as a guarantee for the convertibility of the circulating notes. But that, in turn, is illusory.

That large portion (of deposits) for which the bankers themselves have no immediate demand passes into the hands of the billbrokers, who give to the banker in return commercial bills already discounted by them for persons in London and in different parts of the country as a security for the sum advanced by the banker. The billbroker is responsible to the banker for payment of this money at call; and such is the magnitude of these transactions, that Mr Neave, the present Governor of the Bank [of England], stated in evidence, “We know that one broker had 5 million, and we were led to believe that another had between 8 and 10 million; there was one with 4, another with 3 1/2; and a third with above 8. I speak of deposits with the brokers”’ (Report of Committee on Bank Acts, 1857-8, p. 5, Section 8).
deposits passed to the bill-brokers

A large part of the deposits — the part the bankers themselves have no immediate call for — passes into the hands of the bill-brokers (literally bill-dealers, in effect half bankers). In return they give the banker commercial bills as security for his advance, bills they have already discounted for people in London and in the provinces. The bill-broker is answerable to the banker for the repayment of this money at call (money that must be repaid at once on demand). And these dealings are on such an enormous scale that Mr Neave, the present Governor of the Bank [of England], says in his evidence: we know that one broker had 5 million, and we have grounds for supposing that another had between 8 and 10 million; one had 4, another 3 1/2, a third more than 8. I am speaking of deposits with the brokers. (Report of Committee on Bank Acts, 1857-8, p. V, section no. 8.)

The London billbrokers carried on their enormous transactions without any cash reserve, relying on the run off of their bills falling due, or in extremity, on the power of obtaining advances from the Bank of England on the security of bills under discount. Two billbroking houses in London suspended payment in 1847; both afterwards resumed business. In 1857, both suspended again. The liabilities of one house in 1847 were, in round numbers, £2,683,000, with a capital of £180,000; the liabilities of the same house, in 1857, were £5,300,000, the capital probably not more than one-fourth of what it was in 1847. The liabilities of the other firm were between £3,000,000 and £4,000,000 at each period of stoppage, with a capital not exceeding £45,000’ (ibid., p. xxi, section 52).
bill-brokers with no cash reserve

The London bill-brokers ... carried on their enormous business without any cash reserve at all. They relied on the receipts from their bills as these fell due, or, if it came to it, on their power to get advances from the Bank of England against the deposit of the bills they had discounted. (ibid., p. VIII, section no. 17.) Two bill-broking firms in London stopped payment in 1847; both of them later took the business up again. In 1857 they suspended again. The liabilities of the one house were, in round numbers, £2,683,000 in 1847, against a capital of £180,000; its liabilities in 1857 were £5,300,000, while its capital was probably no more than a quarter of what it had been in 1847. The other firm's liabilities came to between £3 million and £4 million both times, on a capital of no more than £45,000. (ibid., p. XXI, section no. 52.)