Marxian theories of money, credit and crisis.

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Marxian theories of money, credit and crisis.

Introduction

It is possible to contend that Marx's theory of money is imbued with a very modern vision and that it, in many ways, prefigures the theories of Keynes (Sardoni, 1987). This is most evident in Marx's treatment of credit and financial crises. Marx's theory of money, however, can only be fully understood within the general context of value theory. In other words, it is essential to establish an intimate connection between the forms and functions of money expressed as the universal equivalent of exchange value. The derivation of money therefore assumes an independent form of value, and expresses the means by which market prices are denominated. Money itself precedes capitalism, and evolves historically to perform the various functions assigned to the sphere of exchange and general circulation. These various forms of money are inextricably bound up in the functions performed by the universal monetary equivalent. It will be argued here that specific capitalist forms of money correspond with the evolution of modern banking and the complex instruments of credit creation, and that the theory of a monetary circuit provides a more coherent analytical framework, which augments Marx's original treatment of credit money.

The forms and functions of money

Under capitalist conditions, the derivation of money presupposes that value assumes its autonomous form. Since commodities express values in their substance, the monetary expression of exchange value constitutes the commensurable 'universal equivalent'. It follows that the prices of commodities, which represent the exchange ratios between commodities and money (i.e. the expanded form of value), are determined by the relative quantities embodied in socially necessary labour time measured in the equivalent monetary unit. The value form, in this sense, represents the social form of the commodity in its intrinsic capacity to enter into the process of exchange and express monetary prices. Labour time embodied in use values can only be validated socially in the form of money, and thus as exchange values mediated by the market (Trigg, 2006:31). The general equivalent form, according to Marx, embodies the monetary expression of exchange value. Indeed, the monetary system itself can also be a means of deferred payment or the modern expression of circuits of credit. But money itself precedes capitalism in the form of commercial or mercantile capital. Marx argues that social custom and norms will determine which form of commodity money is selected through the process of excluding all other commodities other than one particular commodity, which then acts as the universal equivalent. Money therefore enjoys a monopoly over the purchasing power of commodities. To quote Lapavistas (2005: 97), 'The universal equivalent as monopolist of th...

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