“But as soon as credit is shaken [sc. in commercial crises]—and this phase always appears of necessity in the cycles of modern industry—all the real wealth is to be actually and suddenly transformed into money, into gold and silver, a crazy demand, which, however, necessarily grows out of the system itself. And all the gold and silver, which is supposed to satisfy these enormous demands, amounts to a few millions in the cellars of the Bank.These statements have the virtue of being clear: money, for Marx, can only ever ultimately be a commodity, and by implication paper money or credit money can only be a symbol for commodity money.
In the effects of the gold drains, then, the fact that production as a social process is not subject to social control is strikingly emphasized by the existence of the social form of wealth outside out of it as a separate thing. The capitalist system of production, it is true, shares this with former systems of production, so far as they rest on the trade with commodities and private exchange. But only in it does this become apparent in the most striking and grotesque form of the most absurd contradiction and nonsense, because, in the first place, production for the direct use of the producers is most completely abolished under the capitalist system, so that wealth exists only as a social process expressed by the interrelations of production and circulation; and in the second place, because capitalist production forever strives to overcome this metallic barrier the material and phantastic barrier of wealth and its movements, in proportion as the credit system develops, but forever breaks its head on this same barrier.
In the crisis the demand is made, that all bills of exchange, securities, and commodities shall be simultaneously convertible into bank money, and this whole bank money consists of gold.” (Marx 1909: 673–674).
“But it should never be forgotten, that money, in the first place, in the form of precious metals, remains the basis from which the credit system naturally can never detach itself.” (Marx 1909: 712).
“The banking system shows, furthermore, by putting different forms of circulating credit in the place of money, that money is in reality nothing but a special expression of the social character of labor and its products, so that this character, as distinguished from the basis of individual production, must present itself in the last analysis as a thing, as a peculiar commodity by the side of the other commodities.” (Marx 1909: 713).
Attempts to overcome the need for commodity money through credit money always fail (Marx 1909: 673–674). Marx says explicitly that “money …, in the form of precious metals, remains the basis from which the credit system naturally can never detach itself” (my emphasis; Marx 1909: 712). Money must be a produced commodity with a labour value alongside other commodities (Marx 1909: 713). This view is already expressed in the Grundrisse of 1857–1858:
“Money – the common form, into which all commodities as exchange values are transformed, i.e. the universal commodity – must itself exist as a particular commodity alongside the others, since what is required is not only that they can be measured against it in the head, but that they can be changed and exchanged for it in the actual exchange process. The contradiction which thereby enters, to be developed elsewhere. Money does not arise by convention, any more than the state does. It arises out of exchange, and arises naturally out of exchange; it is a product of the same.”Attempts to claim that fiat money can properly function as money within Marx’s economic system as Marx understood money are utterly wrong. If Marxists are going to do this, they must admit that they need to radically revise Marx’s economic system and that Marx was wrong about money in important respects.
Marx, The Grundrisse, Notebook 1, October 1857, The Chapter on Money (Part II)
Marx, Karl. 1909. Capital. A Critique of Political Economy. Volume III. The Process of Capitalist Production as a Whole (trans. Ernst Untermann from 1st German edn.). Charles H. Kerr & Co., Chicago.