 Gold functioning as a medium of circulation assumes a specific shape, it becomes a coin. In order to prevent its circulation from being hampered by technical difficulties, gold is minted according to the standard of the money of account. Coins are pieces of gold whose shape and imprint signify that they contain weights of gold as indicated by the names of the money of account, such as pound sterling, shilling, etc. Both the establishing of the mint-price and the technical work of minting devolve upon the State. Coined money assumes a local and political character, it uses different national languages and wears different national uniforms, just as does money of account. Coined money circulates therefore in the internal sphere of circulation of commodities, which is circumscribed by the boundaries of a given community and separated from the universal circulation of the world of commodities. But the only difference between gold in the form of bullion and gold in the form of coin is that between the denomination of the coin and denomination of its metal weight. What appears as a difference of denomination in the latter case, appears as a difference of shape in the former. Gold coins can be thrown into the crucible and thus turned again into gold sans phrase, just as conversely gold bars have only to be sent to the mint to be transformed into coin. The conversion and reconversion of one form into the other appears as a purely technical operation. In exchange for 100 pounds or 1,200 ounces troy of 22-carat gold one receives 4,672 or 4,672 gold sovereigns from the English mint, and if one puts these sovereigns on one side of a pair of scales and 100 pounds of gold bars on the other, the two will balance. This proves that the sovereign is simply a quantity of gold with a specific shape and a specific imprint the weight of which is denoted by this name in the English monetary scale. The 4,672 gold sovereigns are thrown into circulation at different points and, once in the current, they make a certain number of moves each day, some sovereigns more and others less. If the average number of moves made by one ounce of gold during a day were ten, then the 1,200 ounces of gold would realise a total of commodity-prices amounting to 12,000 ounces or 46,725 sovereigns. An ounce of gold, no matter how one may twist and turn it, will never weigh ten ounces. But here in the process of circulation, one ounce does indeed amount to ten ounces. In the process of circulation a coin is equal to the quantity of gold contained in it multiplied by the number of moves it makes. In addition to its actual existence as an individual piece of gold of a certain weight, the coin thus acquires a nominal existence which arises from the function it performs. But whether the sovereign makes one or ten moves, in each particular purchase or sale it nevertheless acts merely as a single sovereign. The effect is the same as in the case of a general who on the day of battle replaces ten generals by appearing at ten different places at the crucial time, but remains the same general at each point. The nominalisation of the medium of circulation, which arises as a result of the replacement of quantity by velocity, concerns only the functioning of coins within the process of circulation but does not affect the status of the individual coins. But the circulation of money is an external movement and the sovereign, although non olet, [It does not smell. Ed.] keeps mixed company. The coin, which comes into contact with all sorts of hands, bags, purses, pouches, tills, chests and boxes, wears away, leaves a particle of gold here and another there, thus losing increasingly more of its intrinsic content as a result of abrasion sustained in the course of its worldly career. While in use it is getting used up. Let us consider a sovereign at a moment when its original solid features are as yet hardly impaired. Jacob estimates that of the 380 million which existed in Europe in 1809, 19 million had completely disappeared as a result of abrasion by 1829, that is in the course of 20 years. Whereas the commodity having taken its first step, bringing it into the sphere of circulation, drops out of it again, the coin, after making a few steps in the sphere of circulation, represents a greater metal content than it actually possesses. The longer a coin circulates at a given velocity, or the more rapidly it circulates in a given period of time, the greater becomes the divergence between its existence as a coin and its existence as a piece of gold or silver. What remains is magni nominis umbra, the body of the coin is now merely a shadow. Whereas originally circulation made the coin heavier, it now makes it lighter, but in each individual purchase or sale it still passes for the original quantity of gold. As a pseudo-sovereign, or pseudo-gold, the sovereign continues to perform the function of a legal gold coin. Although friction with the external world causes other entities to lose their idealism, the coin becomes increasingly ideal as a result of practice, its golden or silver substance being reduced to a mere pseudo-existence. This second idealisation of metal currency, that is, the disparity between its nominal content and its real content, brought about by the process of circulation itself, has been taken advantage of both by governments and individual adventurers who debased the coinage in a variety of ways. The entire history of the Monetary System from the early Middle Ages until well into the eighteenth century-is a history of such bilateral and antagonistic counterfeiting, and Custodi s voluminous collection of works of Italian economists is largely concerned with this subject. But the ideal existence of gold within the confines of its function comes into conflict with its real existence. In the course of circulation some gold coins have lost more of their metal content, others less, and one sovereign is now indeed worth more than another. Since they are however equally valid while they function as coin the sovereign that weighs a quarter of an ounce is valued no more highly than the sovereign which only represents a quarter of an ounce some unscrupulous owners perform surgical operations on sovereigns of standard weight to achieve the same result artificially which circulation has brought about spontaneously in the case of lighter coins. Sovereigns are clipped and debased and the surplus gold goes into the melting pot. When 4,672 gold sovereigns placed on the scales weigh on the average only 800 ounces instead of 1,200, they will buy only 800 ounces of gold on the gold market: in other words, the market-price of gold has risen above the mint-price. All sovereigns, even those retaining the standard weight, would be worth less as coin than in the shape of bars. Sovereigns of standard weight would be reconverted into bars, a form in which a greater quantity of gold has a greater value than a smaller quantity of gold. When the decline of the metal content has affected a sufficient number of sovereigns to cause a permanent rise of the market-price of gold over its mint-price, the coins will retain the same names of account but these will henceforth stand for a smaller quantity of gold. In other words, the standard of money will be changed, and henceforth gold will be minted in accordance with this new standard. Thus, in consequence of its idealisation as a medium of circulation, gold in its turn will have changed the legally established relation in which it functioned as the standard of price. A similar revolution would be repeated after a certain period of time; gold both as the standard of price and the medium of circulation in this way being subject to continuous changes, so that a change in the one aspect would cause a change in the other and vice versa. This accounts for the phenomenon mentioned earlier, namely that, as the history of all modern nations shows, the same monetary titles continued to stand for a steadily diminishing metal content. The contradiction between gold as coin and gold as the standard of price becomes also the contradiction between gold as coin and gold as the universal equivalent, which circulates not only within the boundaries of a given territory but also on the world market. As a measure of value gold has always retained its full weight, because it has served only nominally as gold. When serving as an equivalent in the separate transaction C M, gold reverts from movement immediately to a state of rest; but when it serves as a coin its natural substance comes into constant conflict with its function. The transformation of gold sovereigns into nominal gold cannot be entirely prevented, but legislation attempts to preclude the establishment of nominal gold as coin by withdrawing it from circulation when the coins in question have lost a certain percentage of their substance. According to English law, for instance, a sovereign which has lost more than 0.747 grain of weight is no longer legal tender. Between 1844 and 1848, 48 million gold sovereigns were weighed by the Bank of England, which possesses scales for weighing gold invented by Mr. Cotton. This machine is not only able to detect a difference between the weights of two sovereigns amounting to one-hundredth of a grain, but like a rational being it flings the light-weight coin onto a board from which it drops into another machine that cuts it into pieces with oriental cruelty. Under these conditions, however, gold coins would not be able to circulate at all unless they were confined to a definite sphere of circulation where they wear out less quickly. In so far as a gold coin in circulation is worth a quarter of an ounce, whereas it weighs only a fifth of an ounce, it has indeed become a mere token or symbol for one-twentieth of an ounce of gold, and in this way the process of circulation converts all gold coins to some extent into mere tokens or symbols representing their substance. But a thing cannot be its own symbol. Painted grapes are no symbol of real grapes, but are imaginary grapes. Even less is it possible for a light-weight sovereign to be the symbol of a standard-weight sovereign, just as an emaciated horse cannot be the symbol of a fat horse. Since gold thus becomes a symbol of itself but cannot serve as such a symbol it assumes a symbolic existence quite separate from its own existence in the shape of silver or copper counters in those spheres of circulation where it wears out most rapidly, namely where purchases and sales of minute amounts go on continuously. A certain proportion of the total number of gold coins, although not always the same coins, perpetually circulate in these spheres. This proportion of gold coins is replaced by silver or copper tokens. Various commodities can thus serve as coin alongside gold, although only one specific commodity can function as the measure of value and therefore also as money within a particular country. These subsidiary means of circulation, for instance silver or copper tokens, represent definite fractions of gold coins within the circulation. The amount of silver or copper these tokens themselves contain is, therefore, not determined by the value of silver or copper in relation to that of gold, but is arbitrarily established by law. They may be issued only in amounts not exceeding those in which the small fractions of gold coin they represent would constantly circulate, either as small change for gold coin of higher denominations or to realise correspondingly low prices of commodities. The silver tokens and copper tokens will belong to distinct spheres of retail trade. It is self-evident that their velocity of circulation stands in inverse ratio to the price they realise in each individual purchase and sale, or to the value of the fraction of the gold coin they represent. The relatively insignificant total amount of subsidiary coins in circulation indicates the velocity with which they perpetually circulate, if one bears in mind the huge volume of retail trade daily transacted in a country like England. A recently published parliamentary report shows, for instance, that in 1857 the English Mint coined gold to the amount of 4,859,000 and silver having a nominal value of 733,000 and a metal value of 363,000. In the ten-year period ending December 31, 1867, the total amount of gold coined came to 5S,239,000 and that of silver to only 2,434,000. The nominal value of copper coins issued in 1857 was only 6,720, while the value of the copper contained in them was 3,492; of this total 3,136 was issued as pennies, 2,464 as halfpennies and 1,120 as farthings. The total nominal value of the copper coin struck during the last ten years came to 141,477, and their metal value to 73,503. Just as gold coin is prevented from perpetually functioning as coin by the statutory provision that on losing a certain quantity of metal it is demonetised, so conversely by laying down the price level which they can legally realize silver and copper counters are prevented from moving into the sphere of gold coin and from establishing themselves as money. Thus for example in England, copper is legal tender for sums up to 6d. and silver for sums up to 40s. The issue of silver and copper tokens in quantities exceeding the requirements of their spheres of circulation would not lead to a rise in commodity-prices but to the accumulation of these tokens in the hands of retail traders, who would in the end be forced to sell them as metal. In 1798, for instance, English copper coins to the amounts of 20, 30 and 50, spent by private people, had accumulated in the tills of shopkeepers and, since their attempts to put the coins again into circulation failed, they finally had to sell them as metal on the copper market.  The metal content of the silver and copper tokens, which represent gold coin in distinct spheres of home circulation, is determined by law; but when in circulation they wear away, just as gold coins do, and, because of the velocity and constancy of their circulation, they are reduced even faster to a merely imaginary, or shadow existence. If one were to establish that silver and copper tokens also, on losing a certain amount of metal, should cease to function as coin, it would be necessary to replace them in turn in certain sections of their own sphere of circulation by some other symbolic money, such as iron or lead; and in this way the representation of one type of symbolic money by other types of symbolic money would go on for ever. The needs of currency circulation itself accordingly compel all countries with a developed circulation to ensure that silver and copper tokens function as coin independently of the percentage of metal they lose. It thus becomes evident that they are, by their very nature, symbols of gold coin not because they are made of silver or copper, not because they have value, but they are symbols in so far as they have no value. Relatively worthless things, such as paper, can function as symbols of gold coins. Subsidiary coins consist of metal, silver, copper, etc., tokens principally because in most countries the less valuable metals circulated as money e.g., silver in England, copper in the ancient Roman Republic, Sweden, Scotland, etc. before the process of circulation reduced them to the status of small coin and put a more valuable metal in their place. It is in the nature of things moreover that the monetary symbol which directly arises from metallic currency should be, in the first place, once again a metal. Just as the portion of gold which would constantly have to circulate as small change is replaced by metal tokens, so the portion of gold which as coin remains always in the sphere of home circulation, and must therefore circulate perpetually, can be replaced by tokens without intrinsic value. The level below which the volume of currency never falls is established in each country by experience. What was originally an insignificant divergence of the nominal content from the actual metal content of metallic currency can therefore reach a stage where the two things are completely divorced. The names of coins become thus detached from the substance of money and exist apart from it in the shape of worthless scraps of paper. In the same way as the exchange-value of commodities is crystallised into gold money as a result of exchange, so gold money in circulation is sublimated into its own symbol, first in the shape of worn gold coin, then in the shape of subsidiary metal coin, and finally in the shape of worthless counters, scraps of paper, mere tokens of value. But the gold coin gave rise first to metallic and then to paper substitutes only because it continued to function as a coin despite the loss of metal it incurred. It circulated not because it was worn, but it was worn to a symbol because it continued to circulate. Only in so far as in the process of circulation gold currency becomes a mere token of its own value can mere tokens of value be substituted for it. In so far as the circuit C M C is the dynamic unity of the two aspects C M and M C, which directly change into each other, or in so far as the commodity undergoes the entire metamorphosis, it evolves its exchange-value into price and into money, but immediately abandons these forms again to become once more a commodity, or rather a use-value. The exchange-value of the commodity thus acquires only a seemingly independent existence. We have seen, on the other hand, that gold, when it functions only as specie, that is when it is perpetually in circulation, does indeed represent merely the interlinking of the metamorphoses of commodities and their ephemeral existence as money. Gold realises the price of one commodity only in order to realise that of another, but it never appears as exchange-value in a state of rest or even a commodity in a state of rest. The reality which in this process the exchange-value of commodities assumes, and which is expressed by gold in circulation, is merely the reality of an electric spark. Although it is real gold, it functions merely as apparent gold, and in this function therefore a token of itself can be substituted for it. The token of value, say a piece of paper, which functions as a coin, represents the quantity of gold indicated by the name of the coin, and is thus a token of gold. A definite quantity of gold as such does not express a value relation, nor does the token which takes its place. The gold token represents value in so far as a definite quantity of gold, because it is materialised labour-time, possesses a definite value. But the amount of value which the token represents depends in each case upon the value of the quantity of gold represented by it. As far as commodities are concerned, the token of value represents the reality of their price and constitutes a token of their price and a token of their value only because their value is expressed in their price. In the circuit C M C, in so far as it expresses merely the dynamic unity of the two metamorphoses or the direct transformation of one metamorphosis into the other and this is how it appears in the sphere of circulation, within which the token of value operates the exchange-value of commodities assumes in the price merely a nominal existence and in money merely an imaginary or symbolic existence. Exchange-value thus appears to be something purely conceptual or an imagined entity but possessing no reality except in the commodities, in so far as a definite amount of labour-time is materialised in them. The token of value therefore seems to represent the value of commodities directly, since it appears to be not a token of gold but a token of the exchange-value which exists solely in the commodity and is merely expressed in the price. But the appearance is deceptive. The token of value is directly only a token of price, that is a token of gold, and only indirectly a token of the value of the commodity. Gold, unlike Peter Schlemihl, has not sold its shadow, but uses its shadow as a means of purchase. Thus the token of value is effective only when in the process of exchange it signifies the price of one commodity compared with that of another or when it represents gold with regard to every commodity-owner. First of all custom turns a certain, relatively worthless object, a piece of leather, a scrap of paper, etc., into a token of the material of which money consists, but it can maintain this position only if its function as a symbol is guaranteed by the general intention of commodity-owners, in other words if it acquires a legal conventional existence and hence a legal rate of exchange. Paper money issued by the state and given a legal rate is an advanced form of the token of value, and the only kind of paper money which directly arises from metallic currency or from simple commodity circulation itself. Credit money belongs to a more advanced stage of the social process of production and conforms to very different laws. Symbolic paper money indeed does not differ at all from subsidiary metal coin except in having a wider sphere of circulation. Even the merely technical development of the standard of price, or of the mint-price, and later the external transformation of gold bars into gold coin led to state intervention and consequently to a visible separation of internal circulation from the general circulation of commodities, this division being completed by the transformation of coin into a token of value. Money as a simple medium of circulation can after all acquire an independent existence only within the sphere of internal circulation. Our exposition has shown that gold in the shape of coin, that is tokens of value divorced from gold substance itself, originates in the process of circulation itself and does not come about by arrangement or state intervention. Russia affords a striking example of a spontaneously evolved token of value. At a time when hides and furs served as money in that country, the contradiction between the perishable and unwieldy material and its function as a medium of circulation led to the custom of substituting small pieces of stamped leather for it; these pieces thus became money orders payable in hides and furs. Later they were called kopeks and became mere tokens representing fractions of the silver ruble and as such were used here and there until 1700, when Peter the Great ordered their replacement by small copper coins issued by the State.  In antiquity writers, who were able to observe only the phenomena of metallic currency, among them Plato and Aristotle  already understood that gold coin is a symbol or token of value. Paper money with a legal rate of exchange arises early in countries such as China, which have not evolved a credit system.  Later advocates of paper money also refer expressly to the transformation of the metal coin into a token of value which is brought about by the circulation process itself. Such references occur in the works of Benjamin Franklin  and Bishop Berkeley.  How many reams of paper cut into fragments can circulate as money? In this form the question is absurd. Worthless tokens become tokens of value only when they represent gold within the process of circulation, and they can represent it only to the amount of gold which would circulate as coin, an amount which depends on the value of gold if the exchange-value of the commodities and the velocity of their metamorphoses are given. The number of pieces of paper with a denomination of 5 which could be used in circulation would be one-fifth of the number of pieces of paper with a denomination of 1, and if all payments were to be transacted in shilling notes, then twenty times more shilling notes than pound notes would have to circulate. If gold coin were represented by notes of different denomination, e.g., 5 notes, 1 notes and 10s. notes, the number of the different types of tokens of value needed would not just be determined by the quantity of gold required in the sphere of circulation as a whole, but by the quantity needed in the sphere of circulation of each particular type of note. If 14 million were the level below which the circulation of a country never fell (this is the presupposition of English Banking legislation, not however with regard to coin but to credit money), then 14 million pieces of paper, each a token of value representing 1, could circulate. If the value of gold decreased or increased because the labour-time required for its production had fallen or risen then the number of pound notes in circulation would increase or decrease in inverse ratio to the change in the value of gold, provided the exchange-value of the same mass of commodities remained unchanged. Supposing gold were superseded by silver as the standard of value and the relative value of silver to gold were 1:15, then 210 million pound notes would have to circulate henceforth instead of 14 million, if from now on each piece of paper was to represent the same amount of silver as it had previously represented of gold. The number of pieces of paper is thus determined by the quantity of gold currency which they represent in circulation, and as they are tokens of value only in so far as they take the place of gold currency, their value is simply determined by their quantity. Whereas, therefore, the quantity of gold in circulation depends on the prices of commodities, the value of the paper in circulation, on the other hand, depends solely on its own quantity. The intervention of the State which issues paper money with a legal rate of exchange and we speak only of this type of paper money seems to invalidate the economic law. The State, whose mint price merely provided a definite weight of gold with a name and whose mint merely imprinted its stamp on gold, seems now to transform paper into gold by the magic of its imprint. Because the pieces of paper have a legal rate of exchange, it is impossible to prevent the State from thrusting any arbitrarily chosen number of them into circulation and to imprint them at will with any monetary denomination such as 1, 5, or 20. Once the notes are in circulation it is impossible to drive them out, for the frontiers of the country limit their movement, on the one hand, and on the other hand they lose all value, both use-value and exchange-value, outside the sphere of circulation. Apart from their function they are useless scraps of paper. But this power of the State is mere illusion. It may throw any number of paper notes of any denomination into circulation but its control ceases with this mechanical act. As soon as the token of value or paper money enters the sphere of circulation it is subject to the inherent laws of this sphere. Let us assume that 14 million is the amount of gold required for the circulation of commodities and that the State throws 210 million notes each called 1 into circulation: these 210 million would then stand for a total of gold worth 14 million. The effect would be the same as if the notes issued by the State were to represent a metal whose value was one-fifteenth that of gold or that each note was intended to represent one-fifteenth of the previous weight of gold. This would have changed nothing but the nomenclature of the standard of prices, which is of course purely conventional, quite irrespective of whether it was brought about directly by a change in the monetary standard or indirectly by an increase in the number of paper notes issued in accordance with a new lower standard. As the name pound sterling would now indicate one-fifteenth of the previous quantity of gold, all commodity-prices would be fifteen times higher and 210 million pound notes would now be indeed just as necessary as 14 million had previously been. The decrease in the quantity of gold which each individual token of value represented would be proportional to the increased aggregate value of these tokens. The rise of prices would be merely a reaction of the process of circulation, which forcibly placed the tokens of value on a par with the quantity of gold which they are supposed to replace in the sphere of circulation. One finds a number of occasions in the history of the debasement of currency by English and French governments when the rise in prices was not proportionate to the debasement of the silver coins. The reason was simply that the increase in the volume of currency was not proportional to its debasement; in other words, if the exchange-value of commodities was in future to be evaluated in terms of the lower standard of value and to be realised in coins corresponding to this lower standard, then an inadequate number of coins with lower metal content had been issued. This is the solution of the difficulty which was not resolved by the controversy between Locke and Lowndes. The rate at which a token of value whether it consists of paper or bogus gold and silver is quite irrelevant can take the place of definite quantities of gold and silver calculated according to the mint-price depends on the number of tokens in circulation and by no means on the material of which they are made. The difficulty in grasping this relation is due to the fact that the two functions of money as a standard of value and a medium of circulation are governed not only by conflicting laws, but by laws which appear to be at variance with the antithetical features of the two functions. As regards its function as a standard of value, when money serves solely as money of account and gold merely as nominal gold, it is the physical material used which is the crucial factor. Exchange-values expressed in terms of silver, or as silver prices, look of course quite different from exchange-values expressed in terms of gold, or as gold prices. On the other hand, when it functions as a medium of circulation, when money is not just imaginary but must be present as a real thing side by side with other commodities, its material is irrelevant and its quantity becomes the crucial factor. Although whether it is a pound of gold, of silver or of copper is decisive for the standard measure, mere number makes the coin an adequate embodiment of any of these standard measures, quite irrespective of its own material. But it is at variance with common sense that in the case of purely imaginary money everything should depend on the physical substance, whereas in the case of the corporeal coin everything should depend on a numerical relation that is nominal. The rise or fall of commodity-prices corresponding to an increase or decrease in the volume of paper notes the latter where paper notes are the sole medium of circulation is accordingly merely a forcible assertion by the process of circulation of a law which was mechanically infringed by extraneous action; i.e., the law that the quantity of gold in circulation is determined by the prices of commodities and the volume of tokens of value in circulation is determined by the amount of gold currency which they replace in circulation. The circulation process will, on the other hand, absorb or as it were digest any number of paper notes, since, irrespective of the gold title borne by the token of value when entering circulation, it is compressed to a token of the quantity of gold which could circulate instead. In the circulation of tokens of value all the laws governing the circulation of real money seem to be reversed and turned upside down. Gold circulates because it has value, whereas paper has value because it circulates. If the exchange-value of commodities is given, the quantity of gold in circulation depends on its value, whereas the value of paper tokens depends on the number of tokens in circulation. The amount of gold in circulation increases or decreases with the rise or fall of commodity-prices, whereas commodity-prices seem to rise or fall with the changing amount of paper in circulation. The circulation of commodities can absorb only a certain quantity of gold currency, the alternating contraction and expansion of the volume of money in circulation manifesting itself accordingly as an inevitable law, whereas any amount of paper money seems to be absorbed by circulation. The State which issues coins even 1/100 of a grain below standard weight debases gold and silver currency and therefore upsets its function as a medium of circulation, whereas the issue of worthless pieces of paper which have nothing in common with metal except the denomination of the coinage is a perfectly correct operation. The gold coin obviously represents the value of commodities only after the value has been assessed in terms of gold or expressed as a price, whereas the token of value seems to represent the value of commodities directly. It is thus evident that a person who restricts his studies of monetary circulation to an analysis of the circulation of paper money with a legal rate of exchange must misunderstand the inherent laws of monetary circulation. These laws indeed appear not only to be turned upside down in the circulation of tokens of value but even annulled; for the movements of paper money, when it is issued in the appropriate amount, are not characteristic of it as token of value, whereas its specific movements are due to infringements of its correct proportion to gold, and do not directly arise from the metamorphosis of commodities.
Economic Manuscripts: Coins and Tokens of Value