Means of Circulation

The function performed by money when it acts as a means of exchange in the circulation of commodities. The function of money as a measure of value is the precondition for its function as a means of circulation, while its function as a means of circulation is a development of its function as a measure of value. As a measure of value, money gives a uniform money expression to the value of a commodity. As a means of circulation, money allows the producer of commodities to first appear as a seller, realize the value of his commodities, and complete the first metamorphosis in the circulation of commodities, i.e., the commodity–money transformation (C–M). He then appears as a buyer, buys the commodities it needs with money, and accomplishes the second metamorphosis in the circulation of commodities, i.e., the money–commodity transformation (M–C). The entire change of form in the circulation of commodities, i.e., Commodity–Money–Commodity (C–M–C), is accomplished by relying on the mediating role of money, i.e., its function as a means of circulation.

The function of money to serve as a measure of value can be notional, but money that serves as a means of circulation must be actual money. In the case of barter, buying and selling of both sides are accomplished simultaneously. However, with money as a means of circulation, buying and selling are separated into two separate acts in time and space in the process of commodity circulation. A seller who sells his commodities in one place can buy commodities in another; the seller may not buy commodities immediately after he sells his commodities for money. Meanwhile, a seller cannot buy commodities if he cannot exchange his commodities for money. As developed from barter to commodity circulation, all kinds of commodity exchanges are entwined with each other, which has strengthened the connection and antagonism between commodity producers and also strengthened their interdependence. If some people only sell but do not buy, then, another commodity owner cannot sell his or her own commodity. “Circulation bursts through all restrictions as to time, place, and individuals, imposed by direct barter, and this it effects by splitting up, into the antithesis of a sale and a purchase, the direct identity that in barter does exist between the alienation of one’s own and the acquisition of some other man’s product.”

As a means of circulation, money continuously removes commodities from the sphere of circulation, while it itself always functions as a means of purchase in the sphere of circulation. In a given period of time, the quantity of money required in the process of commodity circulation is directly proportional to the sum of the prices of commodities to be realized, and inversely proportional to the average velocity of circulation of the same unit of money.

Money that serves a means of circulation was first made of bars and then developed into coins. Coins are coins minted by the State in a certain color, weight and form. With coinage as the standard of prices, money could better play its function as a means of circulation. In the circulation of commodities, money, as an independent expression of the exchange-value of commodities, is only something transient. The seller of commodities needs money, not in order to hoard it, but in order to use it as a means of purchase in exchange for other kinds of commodities he needs. Therefore, the function of money as a means of circulation can be performed entirely by the symbol of itself. It is from the function of money as a means of circulation that paper money has arose. Paper money relies on the State’s compulsion to perform the function of means of circulation on behalf of metallic money within the boundaries of a given country.