Pricewassimplydazzledbythegargantuandimensionsobtainedinageometricalprogression。Sincehetooknonoteoftheconditionsofreproductionandlabour，andregardedcapitalasaself-regulatingautomaton，asamerenumberthatincreasesitselfjustasMalthus[AnEssayonthePrincipleofPopulation，London，1798，pp。25-26——Ed]didwithrespecttopopulationinhisgeometricalprogression，hewasstruckbythethoughtthathehadfoundthelawofitsgrowthintheformulas=c1in，inwhichs=thesumofcapitalcompoundinterest，c=
　　advancedcapital，i=rateofinterestexpressedinaliquotpartsof100
　　andnstandsforthenumberofyearsinwhichthisprocesstakesplace。
　　PitttakesDr。Price’smystificationquiteseriously。In1786theHouseofCommonshadresolvedtoraise£；1millionforthepublicweal。
　　AccordingtoPrice，inwhomPittbelieved，therewas，ofcourse，nobetterwaythantotaxthepeople，soasto”accumulate”thissumafterraisingit，andthustospiritawaythenationaldebtthroughthemysteryofcompoundinterest。TheaboveresolutionoftheHouseofCommonswassoonfollowedupbyPittwithalawwhichorderedtheaccumulationof£；250，000，”until，withtheexpiredannuities，thefundshouldhavegrownto£；4，000，000
　　annually。”Act26，GeorgeIII，Chap。3l。[”AnActforvestingcertainsumsinCommissioners，attheEndofeveryQuarterofaYear，tobebythemappliedtotheReductionoftheNationalDebt”Anno26GeorgiiIII，Regis，cap。31——Ed。]Inhisspeechof4792，inwhichPittproposedthattheamountdevotedtothesinkingfundbeincreased，hementionedmachines，credit，etc。，amongthecausesofEngland’scommercialsupremacy，butas”themostwide-spreadandenduringcause，thatofaccumulation。”
　　Thisprinciple，hesaid，wascompletelydevelopedintheworkofSmith，thatgenius……andthisaccumulation，hecontinued，wasaccomplishedbylayingasideatleastaportionoftheannualprofitforthepurposeofincreasingtheprincipal，whichwas。tobeemployedinthesamemannerthefollowingyear，andwhichthusyieldedacontinualprofit。WithDr。
　　Price’saidPittthusconvertsSmith’stheoryofaccumulationintoenrichmentofanationbymeansofaccumulatingdebts，andthusarrivesatthepleasantprogressionofaninfinityofloans-loanstopayloans。
　　IthadalreadybeennotedbyJosiahChild，thefatherofmodernbanking，that£；100at10%wouldproducein70yearsbycompoundinterest£；102，400。
　　Traité；surlecommerce，etc。，parJ。Child，traduit，etc。，AmsterdametBerlin，1754，p。115。Writtenin1669。
　　HowthoughtlesslyDr。Price’sconceptionisappliedbymoderneconomists，isshowninthefollowingpassagefromtheEconomist:”Capital，withcompoundinterestoneveryportionofcapitalsaved，issoall-engrossingthatallthewealthintheworldfromwhichincomeisderived，haslongagobecometheinterestofcapital……Allrentisnowthepaymentofinterestoncapitalpreviouslyinvestedintheland。”Economist，July49，1851。Initscapacityofinterest-bearingcapital，capitalclaimstheownershipofallwealthwhichcaneverbeproduced，andeverythingithasreceivedsofarisbutaninstalmentforitsall-engrossingappetite。Byitsinnatelaws，allsurplus-labourwhichthehumanracecaneverperformbelongstoit。Moloch。
　　Inconclusion，thefollowinghodge-podgebytheromanticMü；ller:”Dr。Price’simmenseincreaseofcompoundinterest，oroftheself-acceleratingforcesofman，presupposesanundivided，oruninterrupted，uniformapplicationforseveralcenturies，iftheyaretoproducesuchenormouseffects。Assoonascapitalisdivided，cutupintoseveralindependentlygrowingshoots，thetotalprocessofaccumulatingforcesbeginsanew。Naturehasdistributedoveraspanofabout20to25yearstheprogressionofenergywhichfallsonanaveragetotheshareofeverylabourer！。Afterthelapseofthistimethelabourerleaveshiscareerandmusttransferthecapitalaccumulatedbythecompoundinterestoflabourtoanewlabourer，mostlydistributingitamongseverallabourersorchildren。Thesemustfirstlearntoactivateandapplytheirshareofcapital，beforetheycandrawanyactualcompoundinterestonit。Furthermore，anenormousquantityofcapitalgainedbycivilsocietyeveninthemostrestlesscommunities，isgraduallyaccumulatedovermanyyearsandnotemployedforanyimmediateexpansionoflabour。
　　Instead，assoonasanappreciablesumisgatheredtogether，itistransferredtoanotherindividual，alabourer，bankorstate，undertheheadofaloan。
　　Andthereceiverthensetsthecapitalintoactualmotionanddrawscompoundinterestonit，sothathecaneasilypledgetopaysimpleinteresttothelender。Finally，thelawofconsumption，greed，andwasteopposesthosehugeprogressions，inwhichman’spowersandtheirproductswouldmultiplyifthelawofproduction，orthrift，werealoneeffective。”A。Mü；ller，ElementederStaatskunst，III，pp。147-49。
　　Itisimpossibletoconcoctamorehair-raisingabsurdityinsofewlines。Leavingasidethedrollconfusionoflabourerandcapitalist，valueoflabour-powerandinterestoncapital，etc。，thechargingofcompoundinterestissupposedtobeexplainedbythefactthatcapitalisloanedouttobringincompoundinterest。ThemethodemployedbyourMü；Ileristhoroughlycharacteristicoftheromanticisminallwalksoflife。Itismadeupofcurrentprejudices，skimmedfromthemostsuperficialsemblanceofthings。Thisincorrectandtritecontentshouldthenbe”exalted”andrenderedsublimethroughamystifyingmodeofexpression。
　　Theprocessofaccumulationofcapitalmaybeconceivedasanaccumulationofcompoundinterestinthesensethattheportionofprofitsurplus-value
　　whichisreconvertedintocapital，i。e。，servestoabsorbmoresurplus-labour，maybecalledinterest。But:
　　1Asidefromallincidentalinterference，alargepartofavailablecapitalisconstantlymoreorlessdepreciatedinthecourseofthereproductionprocess，becausethevalueofcommoditiesisnotdeterminedbythelabour-timeoriginallyexpendedintheirproduction，butbythelabour-timeexpendedintheirreproduction，andthisdecreasescontinuallyowingtothedevelopmentofthesocialproductivityoflabour。Onahigherlevelofsocialproductivity，allavailablecapitalappears，forthisreason，tobetheresultofarelativelyshortperiodofreproduction，insteadofalongprocessofaccumulationofcapital。[2]
　　2AsdemonstratedinPartIIIofthisbook，therateofprofitdecreasesinproportiontothemountingaccumulationofcapitalandthecorrespondinglyincreasingproductivityofsociallabour，whichisexpressedpreciselyintherelativeandprogressivedecreaseofthevariableascomparedtotheconstantportionofcapital。Toproducethesamerateofprofitaftertheconstantcapitalsetinmotionbyonelabourerincreasesten-fold，thesurpluslabour-timewouldhavetoincreaseten-fold，andsoonthetotallabour-time，andfinallytheentire24hoursofaday，wouldnotsuffice，evenifwhollyappropriatedbycapital。Theideathattherateofprofitdoesnotshrinkis，however，thebasisofPrice’sprogressionandingeneralthebasisof”all-engrossingcapitalwithcompoundinterest。”[3]
　　Theidentityofsurplus-valueandsurplus-labourimposesaqualitativelimitupontheaccumulationofcapital。Thisconsistsofthetotalworking-day，andtheprevailingdevelopmentoftheproductiveforcesandofthepopulation，whichlimitsthenumberofsimultaneouslyexploitableworking-days。
　　Butifoneconceivesofsurplus-valueinthemeaninglessformofinterest，thelimitismerelyquantitativeanddefiesallfantasy。
　　Now，theconceptofcapitalasafetishreachesitsheightininterest-bearingcapital，beingaconceptionwhichattributestotheaccumulatedproductoflabour，andatthatinthefixedformofmoney，theinherentsecretpower，asanautomaton，ofcreatingsurplus-valueingeometricalprogression，sothattheaccumulatedproductoflabour，astheEconomistthinks，haslongdiscountedallthewealthoftheworldforalltimeasbelongingtoitandrightfullycomingtoit。Theproductofpastlabour，thepastlabouritself，isherepregnantinitselfwithaportionofpresentorfuturelivingsurplus-labour。Weknow，however，thatinrealitythepreservation，andtothatextentalsothereproductionofthevalueofproductsofpastlabourisonlytheresultoftheircontactwithlivinglabour；andsecondly，thatthedominationoftheproductsofpastlabouroverlivingsurplus-labourlastsonlyaslongastherelationsofcapital，whichrestonthoseparticularsocialrelationsinwhichpastlabourindependentlyandoverwhelminglydominatesoverlivinglabour。
　　FOOTNOTES[1]RichardPrice，AnAppealtothePublicontheSubjectoftheNationalDebt，2nded。，London，1774，p。19。Hecracksthenaivejoke:”Itisborrowingmoneyatsimpleinterest，inordertoimproveitatcompoundinterest。”R。Hamilton，AnInquiryintotheRiseandProgressoftheNationalDebtofGreatBritain，2nded。，Edinburgh，1814，p。133。
　　Accordingtothis，borrowingwouldbethesafestmeansalsoforprivatepeopletogatherwealth。ButifIborrow£；100at5%annualinterest，Ihavetopay£；5attheendoftheyear，andeveniftheloanlastsfor100millionyears，Ihavemeanwhileonly£；100toloaneveryyearand£；5topayeveryyear。Icannevermanagebythisprocesstoloan£；105whenborrowing£；100。AndhowamIgoingtopay5%？Bynewloans，or，ifitisthestate，bynewtaxes。Now，iftheindustrialcapitalistborrowsmoney，andhisprofitamountsto，say，15%，hemaypay5%interest，spend5%forhisprivateexpensesalthoughhisappetitegrowswithhisincome，andcapitalise5%。Inthiscase，15%isthepreconditionforpayingcontinually5%interest。Ifthisprocesscontinues，therateofprofit，forthereasonsindicatedinformerchapters，willfallfrom15%to，say，10%。ButPriceentirelyforgetsthattheinterestof5%presupposesarateofprofitof15%，andassumesittocontinuewiththeaccumulationofcapital。Hehasnothingwhatsoevertodowiththeactualprocessofaccumulation，butratheronlywithlendingmoneyandgettingitbackwithcompoundinterest。Howthatisaccomplishedisimmaterialtohim，sinceitistheinnatepropertyofinterest-bearingcapital。
　　[2]SeeMillandCarey，andRoscher’smistakencommentaryonthisscore。[Marxreferstothefollowingworks:J。St。Mill，PrinciplesofPoliticalEconomy，Secondedition，Vol。I，London，1849，pp。91-92；H。Ch。Carey，PrinciplesofSocialScience，Vol。111，Philadelphia，1859，pp。
　　71。73；W。Roscher，DieGrundlagenderNationalö；konomie，3Auflage，StuttgartundAugsburg，1858，§；45——Ed。]
　　[3]”Itisclear，thatnolabour，noproductivepower，noingenuity，andnoart，cananswertheoverwhelmingdemandofcompoundinterest。Butallsavingismadefromtherevenueofthecapitalist，sothatactuallythesedemandsareconstantlymadeandasconstantlytheproductivepoweroflabourrefusestosatisfythem。Asortofbalanceis，therefore，constantlystruck。”LabourDefendedAgainsttheClaimsofCapital，p。23。ByHodgskin。
　　Capital，Vol。3，Chapter25KarlMarxCAPITALVol。III
　　THEPROCESSOF
　　CAPITALISTPRODUCTIONASAWHOLEPartV
　　DIVISIONOFPROFITINTOINTERESTANDPROFIT
　　OFENTERPRISE。
　　INTEREST-BEARINGCAPITALCHAPTER25
　　CreditandFictitiousCapitalAnexhaustiveanalysisofthecreditsystemandoftheinstrumentswhichitcreatesforitsownusecredit-money，etc。liesbeyondourplan。Wemerelywishtodwellhereuponafewparticularpoints，whicharerequiredtocharacterisethecapitalistmodeofproductioningeneral。Weshalldealonlywithcommercialandbankcredit。Theconnectionbetweenthedevelopmentofthisformofcreditandthatofpubliccreditwillnotbeconsideredhere。
　　IhaveshownearlierBuchI，Kap。III，3，b[Englishedition:Ch。III，3，b——Ed。]howthefunctionofmoneyasameansofpayment，andtherewitharelationofcreditoranddebtorbetweentheproducerandtraderofcommodities，developfromthesimplecirculationofcommodities。
　　Withthedevelopmentofcommerceandofthecapitalistmodeofproduction，whichproducessolelywithaneyetocirculation，thisnaturalbasisofthecreditsystemisextended，generalised，andworkedout。Moneyserveshere，byandlarge，merelyasameansofpayment，i。e。，commoditiesarenotsoldformoney，butforawrittenpromisetopayforthematacertaindate。Forbrevity’ssake，wemayputallthesepromissorynotesunderthegeneralheadofbillsofexchange。Suchbillsofexchange，intheirturn，circulateasmeansofpaymentuntilthedayonwhichtheyfalldue；andtheyformtheactualcommercialmoney。Inasmuchastheyultimatelyneutraliseoneanotherthroughthebalancingofclaimsanddebts，theyactabsolutelyasmoney，althoughthereisnoeventualtransformationintoactualmoney。Justasthesemutualadvancesofproducersandmerchantsmakeuptherealfoundationofcredit，sodoestheinstrumentoftheircirculation，thebillofexchange，formthebasisofcredit-moneyproper，ofbank-notes，etc。Thesedonotrestuponthecirculationofmoney，beitmetallicorgovernment-issuedpapermoney，butratheruponthecirculationofbillsofexchange。
　　W。LeathambankerofYorkshirewritesinhisLettersontheCurrency，2nded。，London，1840:”Ifind，then，theamountforthewholeoftheyearof1839……tobe£；528，493，842”heassumedthattheforeignbillsofexchangemadeupaboutone-fifthofthetotal”andtheamountofbillsoutatonetimeintheaboveyear，tobe£；132，123，460”p。
　　56。Thebillsofexchangemakeup”onecomponentpartgreaterinamountthanalltherestputtogether”p。3。”Thisenormoussuperstructureofbillsofexchangerests！uponthebaseformedbytheamountofbank-notesandgold，andwhen，byevents，thisbasebecomestoomuchnarrowed，itssolidityandveryexistenceisendangered”p。8。”IfIestimatethewholecurrency”hemeansofthebank-notes”andtheamountoftheliabilitiesoftheBankandcountrybankers，payableondemand，Ifindasumof153
　　million，which，bylaw，canbeconvertedintogold……andtheamountofgoldtomeetthisdemand”only14millionp。11。”Thebillsofexchangearenot……placedunderanycontrol，exceptbypreventingtheabundanceofmoney，excessiveandlowratesofinterestordiscount，whichcreateapartofthem，andencouragetheirgreatanddangerousexpansion。Itisimpossibletodecidewhatpartarisesoutofrealbonâ；fidetransactions，suchasactualbargainandsale，orwhatpartisfictitiousandmereaccommodationpaper，thatis，whereonebillofexchangeisdrawntotakeupanotherrunning，inordertoraiseafictitiouscapital，bycreatingsomuchcurrency。
　　IntimesofabundanceandcheapmoneythisIknowreachesanenormousamount”
　　pp。43-44。J。W。Bosanquet，Metallic，PaperandCreditCurrency，London，1842:”Anaverageamountofpaymentstotheextentofupwardsof£；3，000，000issettledthroughtheClearingHousewheretheLondonbankersexchangeduebillsandfiledchequeseverydayofbusinessintheyear，andthedailyamountofmoneyrequiredforthepurposeislittlemorethan£；200，000”p。86。In1889，thetotalturnoveroftheClearingHouseamountedto£；7，618。75million，which，inroughly300
　　businessdays，averages£；251/2milliondaily——
　　F。E。]”Billsofexchangeactundoubtedlyascurrency，independentofmoney，”inasmuchastheytransferpropertyfromhandtohandbyendorsementp。92。Itmaybeassumedthat”uponanaveragetherearetwoendorsementsuponeverybillincirculation，and……eachbillperformstwopaymentsbeforeitbecomesdue。Uponthisassumptionitwouldappear，thatbyendorsementalonepropertychangedhands，bymeansofbillsofexchange，tothevalueoftwicefivehundredandtwenty-eightmillion，or£；1，056，000，000，beingattherateofmorethan£；3，000，000perday，inthecourseoftheyear1839。Wemaysafelythereforeconclude，thatdepositsandbillsofexchangetogether，performthefunctionsofmoney，bytransferringpropertyfromhandtohandwithouttheaidofmoney，toanextentdailyofnotlessthan£；18，000，000”p。93。
　　Tookesaysthefollowingaboutcreditingeneral:”Credit，initsmostsimpleexpression，istheconfidencewhich，well，orill-founded，leadsapersontoentrustanotherwithacertainamountofcapital，inmoney，oringoodscomputedatavalueinmoneyagreedupon，andineachcasepayableattheexpirationofafixedterm。Inthecasewherethecapitalislentinmoney，thatiswhetherinbank-notes，orinacashcredit，orinanorderuponacorrespondent，anadditionfortheuseofthecapitalofsomuchuponevery£；100ismadetotheamounttoberepaid。Inthecaseofgoodsthevalueofwhichisagreedintermsofmoney，constitutingasale，thesumstipulatedtoberepaidincludesaconsiderationfortheuseofthecapitalandfortherisk，tilltheexpirationoftheperiodfixedforpayment。Writtenobligationsofpaymentatfixeddatesmostlyaccompanythesecredits，andtheobligationsorpromissorynotesafterdatebeingtransferable，formthemeansbywhichthelenders，iftheyhaveoccasionfortheuseoftheircapital，intheshapewhetherofmoneyorgoods，beforetheexpirationofthetermofthebillstheyhold，aremostlyenabledtoborrowOrtobuyonlowerterms，byhavingtheirowncreditstrengthenedbythenamesonthebillsinadditiontotheirown。”InquiryintotheCurrencyPrinciple，p。87。
　　Ch。Coquelin，DuCré；ditetdesBanquesdansL’Industrie，RevuedesDeuxMondes，1842，Tome31:”Ineverycountrythemajorityofcredittransactionstakesplacewithinthecircleofindustrialrelations……Theproduceroftherawmaterialadvancesittotheprocessingmanufacturer，andreceivesfromthelatterapromisetopayonacertainday。Themanufacturer，havingcompletedhisshareofthework，inhisturnadvanceshisproductonsimilartermstoanothermanufacturer，whohastoprocessitfurther，andinthiswaycreditstretchesonandon，fromonetotheother，rightuptotheconsumer。Thewholesaledealergivestheretailercommoditiesoncredit，whilereceivingcreditfromamanufacturerorcommissionagent。
　　Allborrowwithonehandandlendwiththeother，sometimesmoney，butmorefrequentlyproducts。Inthismanneranincessantexchangeofadvances，whichcombineandintersectinalldirections，takesplaceinindustrialrelations。Thedevelopmentofcreditconsistspreciselyinthismultiplicationandgrowthofmutualadvances，andthereinistherealseatofitspower。”
　　Theothersideofthecreditsystemisconnectedwiththedevelopmentofmoney-dealing，which，ofcourse，keepsstepundercapitalistproductionwiththedevelopmentofdealingincommodity。WehaveseenintheprecedingpartChap。XIXhowthecareofthereservefundsofbusinessmen，thetechnicaloperationsofreceivinganddisbursingmoney，ofinternationalpayments，andthusofthebulliontrade，areconcentratedinthehandsofthemoney-dealers。Theothersideofthecreditsystem——themanagementofinterest-bearingcapital，ormoney-capital，developsalongsidethismoney-dealingasaspecialfunctionofthemoney-dealers。Borrowingandlendingmoneybecomestheirparticularbusiness。Theyactasmiddlemenbetweentheactuallenderandtheborrowerofmoney-capital。Generallyspeaking，thisaspectofthebankingbusinessconsistsofconcentratinglargeamountsoftheloanablemoney-capitalinthebankers’hands，sothat，inplaceoftheindividualmoney-lender，thebankersconfronttheindustrialcapitalistsandcommercialcapitalistsasrepresentativesofallmoneylenders。
　　Theybecomethegeneralmanagersofmoney-capital。Ontheotherhandbyborrowingfortheentireworldofcommerce，theyconcentratealltheborrowersvis-à；-visallthelenders。Abankrepresentsacentralisationofmoney-capital，ofthelenders，ontheonehand，andontheotheracentralisationoftheborrowers。Itsprofitisgenerallymadebyborrowingatalowerrateofinterestthanitreceivesinloaning。
　　Theloanablecapitalwhichthebankshaveattheirdisposalstreamstotheminvariousways。Inthefirstplace，beingthecashiersoftheindustrialcapitalists，allthemoney-capitalwhicheveryproducerandmerchantmusthaveasareservefund，orreceivesinpayment，isconcentratedintheirhands。Thesefundsarethusconvertedintoloanablemoney-capital。
　　Inthisway，thereservefundofthecommercialworld，becauseitisconcentratedinacommontreasury，isreducedtoitsnecessaryminimum，andaportionofthemoney-capitalwhichwouldotherwisehavetolieslumberingasareservefund，isloanedoutandservesasinterest-bearingcapital。Inthesecondplace，theloanablecapitalofthebanksisformedbythedepositsofmoney-capitalistswhoentrustthemwiththebusinessofloaningthemout。Furthermore，withthedevelopmentofthebankingsystem，andparticularlyassoonasbankscametopayinterestondeposits，moneysavingsandthetemporarilyidlemoneyofallclassesweredepositedwiththem。Smallamounts，eachinitselfincapableofactinginthecapacityofmoney-capital，mergetogetherintolargemassesandthusformamoneypower。Thisaggregationofsmallamountsmustbedistinguishedasaspecificfunctionofthebankingsystemfromitsgo-betweenactivitiesbetweenthemoney-capitalistsproperandtheborrowers。Inthefinalanalysis，therevenues，whichareusuallybutgraduallyconsumed，arealsodepositedwiththebanks。
　　Theloanismadewereferherestrictlytocommercialcreditbydiscountingbillsofexchange——byconvertingbillsofexchangeintomoneybeforetheycomedue——andbyadvancesofvariouskinds:directadvancesonpersonalcredit，loansagainstsecurities，suchasinterest-bearingpaper，governmentpaper，stocksofallsorts，and，notably，overdraftsagainstbillsoflading，dockwarrants，andothercertifiedtitlesofownershipofcommoditiesandoverdrawingdeposits，etc。
　　Thecreditgivenbyabankermayassumevariousforms，suchasbillsofexchangeonotherbanks，chequesonthem，creditaccountsofthesamekind，andfinally，ifthebankisentitledtoissuenotes——bank-notesofthebankitself。Abank-noteisnothingbutadraftuponabanker，payableatanytimetothebearer，andgivenbythebankerinplaceofprivatedrafts。Thislastformofcreditappearsparticularlyimportantandstrikingtothelayman，first，becausethisformofcredit-moneybreaksoutoftheconfinesofmerecommercialcirculationintogeneralcirculation，andservesthereasmoney；andbecauseinmostcountriestheprincipalbanksissuingnotes，beingapeculiarmixtureofnationalandprivatebanks，actuallyhavethenationalcredittobackthem，andtheirnotesaremoreorlesslegaltender；becauseitisapparentherethatthebankerdealsincredititself，abank-notebeingmerelyacirculatingtokenofcredit。Butthebankeralsohastodowithcreditinallitsotherforms，evenwhenheadvancesthecashmoneydepositedwithhim。Infact，abank-notesimplyrepresentsthecoinofwholesaletrade，anditisalwaysthedepositwhichcarriesthemostweightwithbanks。ThebestproofofthisisfurnishedbytheScottishbanks。
　　Specialcreditinstitutions，likespecialformsofbanks，neednofurtherconsiderationforourpurpose。”Thebusinessofbankers……maybedividedintotwobranches……Onebranchofthebanker’sbusinessistocollectcapitalfromthosewhohavenotimmediateemploymentforit，andtodistributeortransferittothosewhohave。Theotherbranchistoreceivedepositsoftheincomesoftheircustomers，andtopayouttheamount，asitiswantedforexpenditurebythelatterintheobjectsoftheirconsumption……Theformerbeingacirculationofcapital，thelatterofcurrency……”One”relatestotheconcentrationofcapitalontheonehandandthedistributionofitontheother，”theother”isemployedinadministeringthecirculationforlocalpurposesofthedistrict。”Tooke，InquiryintotheCurrencyPrinciple，pp。36，37。Weshallreverttothispassagelater，inChapterXXVIII。
　　ReportsofCommittees，Vol。VIII。CommercialDistress，Vol。11，PartI，1847-48，MinutesofEvidence。FurtherquotedasCommercialDistress，1847-48。Intheforties，whendiscountingbillsofexchangeinLondon，21-daydraftsofonebankonanotherwereoftenacceptedinlieuofbanknotes。
　　TestimonyofJ。Pease，countrybanker，Nos。4638and4645。Accordingtothesamereport，bankerswereinthehabitofgivingsuchbillsofexchangeregularlyinpaymenttotheircustomerswhenevermoneywastight。Ifthereceiverwantedbank-notes，hehadtorediscountthisbill。Forthebanksthisamountedtoaprivilegeofcoiningmoney。Messrs。Jones，LloydandCo。madepaymentsinthisway”fromtimeimmemorial，”assoonasmoneywasscarceandtherateofinterestroseabove5%。Thecustomerwasgladtogetsuchbanker’sbillsbecausebillsfromJones，LoydandCo。wereeasierdiscountedthanhisown；besides，theyoftenpassedthroughtwentytothirtyhands。Ibid。，Nos。901to904，905，992。
　　Alltheseformsservetomakethepaymentsclaimtransferable——”Thereisscarcelyanyshapeintowhichcreditcanbecast，inwhichitwillnotattimesbecalledtoperformthefunctionsofmoney；andwhetherthatshapebeabank-note，orabillofexchange，orabanker’scheque，theprocessisineveryessentialparticularthesame，andtheresultisthesame。”Fullarton，OntheRegulationofCurrencies，2nded。，London，1845，p。38——”Bank-notesarethesmallchangeofcredit”p。51。
　　ThefollowingfromJ。W。Gilbart’sTheHistoryandPrincipleofBanking，London，1834:”Thetradingcapitalofabankmaybedividedintotwoparts:theinvestedcapital，andtheborrowedbankingcapitalp。117。”Therearethreewaysofraisingabankingorborrowedcapital。First，byreceiving；secondly，bytheissuingofnotes；thirdly，bythedrawingofbills。Ifapersonwilllendme£；100fornothing，andIlendthat£；100toanotherpersonatfourpercentinterest，then，inthecourseofayear，Ishallgain£；4bythetransaction。Again，ifapersonwilltakemy憄romisetopay？”Ipromisetopay”istheusualformulaforEnglishbank-notes”andbringitbacktomeattheendoftheyear，andpaymefourpercentforit，justthesameasthoughIhadlenthim100sovereigns，thenIshallgain£；4bythattransaction；andagain，ifapersoninacountrytownbringsme£；100onconditionthat，twenty-onedaysafterwards，IshallpaythesameamounttoapersoninLondon，thenwhateverinterestIcanmakeofthemoneyduringthetwenty-onedays，willbemyprofit。Thisisafairrepresentationoftheoperationsofbanking，andofthewayinwhichabankingcapitaliscreatedbymeansofdeposits，notes，andbills”p。117。”Theprofitsofabankeraregenerallyinproportiontotheamountofhisbankingorborrowedcapital……Toascertaintherealprofitofabank，theinterestupontheinvestedcapitalshouldbedeductedfromthegrossprofit，andwhatremainsisthebankingprofit”p。118。”Theadvancesofbankerstotheircustomersaremadewithotherpeople’smoney”p。146。”Preciselythosebankerswhodonotissuenotes，createabankingcapitalbythediscountingofbills。Theyrendertheirdiscountssubservienttotheincreaseoftheirdeposits。TheLondonbankerswillnotdiscountexceptforthosehouseswhohavedepositaccountswiththem”
　　p。119。”Apartywhohashadbillsdiscounted，andhaspaidinterestonthewholeamount，mustleavesomeportionofthatamountinthehandsofthebankerwithoutinterest。Bythismeansthebankerobtainsmorethanthecurrentrateofinterestonthemoneyactuallyadvanced，andraisesabankingcapitaltotheamountofthebalanceleftinhishands”pp。
　　119-20。Economisingonreservefunds，deposits，cheques:”Banksofdepositservetoeconomisetheuseofthecirculatingmedium。Thisisdoneupontheprincipleoftransferoftitles……Thusitisthatbanksofdeposit……
　　areenabledtosettlealargeamountoftransactionswithasmallamountofmoney。Themoneythusliberated，isemployedbythebankerinmakingadvances，bydiscountorotherwise，tohiscustomers。Hencetheprincipleoftransfergivesadditionalefficiencytothedepositsystem……”p。
　　123。”Itmattersnotwhetherthetwoparties，whohavedealingswitheachother，keeptheiraccountswiththesamebankerorwithdifferentbankers；
　　for，asthebankersexchangetheirchequeswitheachotherattheclearinghouse……Thedepositsystemmightthus，bymeansoftransfers，becarriedtosuchanextentaswhollytosupersedetheuseofametalliccurrency。
　　Wereeverymantokeepadepositaccountatabank，andmakeallhispaymentsbycheques，moneymightbesuperseded，andchequesbecomethesolecirculatingmedium。Inthiscase，however，itmustbesupposedthatthebankerhasthemoneyinhishands，orthechequeswouldhavenovalue”p。124。Centralisationoflocaltransactionsinthehandsofthebanksiseffected1throughbranchbanks。Countrybankshavebranchestablishmentsinthesmallertownsoftheirdistrict，andLondonbanksindifferentdistrictsofthecity。
　　2Throughagencies。”EachcountrybankeremploysaLondonagenttopayhisnotesorbills……andtoreceivesumsthatmaybelodgedbypartiesresidinginLondonfortheuseofpartiesresidinginthecountry”p。127。
　　Eachbankeracceptsthenotesofothers，butdoesnotreissuethem。Inalllargercitiestheycometogetheronceortwiceaweekandexchangetheirnotes。ThebalanceispaidbyadraftonLondonp。134。”Itistheobjectofbankingtogivefacilitiestotrade，andwhatevergivesfacilitiestotradegivesfacilitiestospeculation。Tradeandspeculationareinsomecasessonearlyallied，thatitisimpossibletosayatwhatprecisepointtradeendsandspeculationbegins……Wherevertherearebanks，capitalismorereadilyobtained，andatacheaperrate。Thecheapnessofcapitalgivesfacilitiestospeculation，justinthesamewayasthecheapnessofbeefandofbeergivesfacilitiestogluttonyanddrunkenness”pp。
　　137，438。”Asbanksofcirculationalwaysissuetheirownnotes，itwouldseemthattheirdiscountingbusinesswascarriedonexclusivelywiththislastdescriptionofcapital，butitisnotso。Itisverypossibleforabankertoissuehisownnotesforallthebillshediscounts，andyetnine-tenthsofthebillsinhispossessionshallrepresentrealcapital。
　　For，althoughinthefirstinstance，thebanker’snotesaregivenforthebill，yetthesenotesmaynotstayincirculationuntilthebillbecomesdue——thebillmayhavethreemonthstorun，thenotesmayreturninthreedays”p。172。”Theoverdrawingofacashcreditaccountisaregularmatterofbusiness；itis，infact，thepurposeforwhichthecashcredithasbeengranted……Cashcreditsaregrantednotonlyuponpersonalsecurity，butalsouponthesecurityofthePublicFunds”pp。174，175。”Capitaladvanced，bywayofloan，onthesecuritiesofmerchandise，wouldproducethesameeffectsasifadvancedinthediscountingofbills。Ifapartyborrows1400onthesecurityofhismerchandise，itisthesameasthoughhehadsoldhismerchandisefora8100bill，andgotitdiscountedwiththebanker。Byobtainingthisadvanceheisenabledtoholdoverthismerchandiseforabettermarket，andavoidsasacrificewhich，otherwise，bemightbeinducedtomake，inordertoraisethemoneyforurgentpurposes”pp。
　　180-81。
　　TheCurrencyTheoryReviewed，etc。，pp。62-63:”Itisunquestionablytruethatthe£；1，000whichyoudepositatAtodaymaybereissuedtomorrow，andformadepositatB。Thedayafterthat，reissuedfromB，itmayformadepositatC……andsoontoinfinitude；andthatthesame£；1，000inmoneymaythus，byasuccessionoftransfers，multiplyitselfintoasumofdepositsabsolutelyindefinite。Itispossible，therefore，thatnine-tenthsofallthedepositsintheUnitedKingdommayhavenoexistencebeyondtheirrecordinthebooksofthebankerswhoarerespectivelyaccountableforthem……ThusinScotland，forinstance，currencymostlypapermoneyatthathasneverexceeded13million，thedepositsinthebanksareestimatedat£；27million……Unlessarunonthebanksbemade，thesame£；1，000would，ifsentbackuponitstravels，cancelwiththesamefacilityasumequallyindefinite。Asthesame£；1，000
　　withwhichyoucancelyourdebttoatradesmantoday，maycancelhisdebttothemerchanttomorrow，themerchant’sdebttothebankthedayfollowing，andsoonwithoutend；sothesame£；1，000maypassfromhandtohand，andbanktobank，andcancelanyconceivablesumofdeposits。”
　　[WehaveseenthatGilbartknewevenin1834that”whatevergivesfacilitiestotradegivesfacilitiestospeculation。Tradeandspeculationareinsomecasessonearlyallied，thatitisimpossibletosayatwhatprecisepointtradeendsandspeculationbegins。”Theeasieritistoobtainadvancesonunsoldcommodities，themoresuchadvancesaretaken，andthegreaterthetemptationtomanufacturecommodities，ordumpalreadymanufacturedcommoditiesindistantmarkets，justtoobtainadvancesofmoneyonthem。
　　Towhatextenttheentirebusinessworldofacountrymaybeseizedbysuchswindling，andwhatitfinallycomesto，isamplyillustratedbythehistoryofEnglishbusinessduring1845-47。Itshowsuswhatcreditcanaccomplish。Beforepassingontothefollowingexamples，afewpreliminaryremarks。
　　Atthecloseof1842thepressurewhichEnglishindustrysufferedalmostuninterruptedlysince1837，begantolift。DuringthefollowingtwoyearsforeigndemandforEnglishmanufacturedgoodsincreasedstillmore；1845
　　and1846markedaperiodofgreatestprosperity。In1843theOpiumWarhadopenedChinatoEnglishcommerce。Thenewmarketgaveanewimpetustothefurtherexpansionofanexpandingindustry，particularlythecottonindustry。”Howcanweeverproducetoomuch？Wehavetoclothe300millionpeople，”aManchestermanufacturersaidtothiswriteratthetime。Butallthenewlyerectedfactorybuildings，steam-engines，andspinningandweavingmachinesdidnotsufficetoabsorbthesurplus-valuepouringinfromLancashire。Withthesamezealaswasshowninexpandingproduction，peopleengagedinbuildingrailways。Thethirstforspeculationofmanufacturersandmerchantsatfirstfoundgratificationinthisfield，andasearlyasinthesummerof1844。Stockwasfullyunderwritten，i。e。，sofarastherewasmoneytocovertheinitialpayments。Asfortherest，timewouldshow！Butwhenfurtherpaymentsweredue——Question1059，C。
　　D。1848/57，indicatesthatthecapitalinvestedinrailwaysin1846-47
　　amountedto£；75million——recoursehadtobetakentocredit，andinmostcasesthebasicenterprisesofthefirmhadalsotobleed。
　　Andinmostcasesthesebasicenterpriseswerealreadyover-burdened。
　　Theenticinglyhighprofitshadledtofarmoreextensiveoperationsthanjustifiedbytheavailableliquidresources。Yettherewascredit-easytoobtainandcheap。Thebankdiscountratestoodlow:13/4to23/4%in1844，lessthan3%untilOctober1845，risingto5%forawhileFebruary1846，thendroppingagainto31/4%
　　inDecember1846。TheBankofEnglandhadanunheard-ofsupplyofgoldinitsvaults。Allinlandquotationswerehigherthaneverbefore。Whythenallowthissplendidopportunitytoescape？Whynotgoinforallonewasworth？WhynotsendallonecouldmanufacturetoforeignmarketswhichpinedforEnglishgoods？AndwhyshouldnotthemanufacturerhimselfpocketthedoublegainarisingfromsellingyarnandfabricsintheFarEast，andthereturncargoinEngland？
　　ThusarosethesystemofmassconsignmentstoIndiaandChinaagainstadvancepayments，andthissoondevelopedintoasystemofconsignmentspurelyforthesakeofgettingadvances，asdescribedingreaterdetailinthefollowingnotes，whichledinevitablytoover-floodingthemarketsandacrash。
　　Thecrashwasprecipitatedbythecropfailureof1846。England，andparticularlyIreland，requiredenormousimportsoffoodstuffs，notablycornandpotatoes。ButthecountrieswhichsuppliedthemcouldbepaidwiththeproductsofEnglishindustryonlytoaverylimitedextent。Preciousmetalshadtobegivenout。Goldworthatleastninemillionwassentabroad。
　　OfthisamountnolessthansevenandahalfmillioncamefromthetreasuryoftheBankofEngland，whosefreedomofactiononthemoney-marketwastherebyconsiderablyimpaired。Otherbanks，whosereservesweredepositedwiththeBankofEnglandandwerepracticallyidenticalwiththoseofthatBank，werethusalsocompelledtocurtailaccommodationofmoney。Therapidandeasyflowofpaymentswasobstructed，firsthereandthere，thengenerally。
　　Thebankingdiscountrate，still3to31/2%inJanuary1847，roseto7%inApril，whenthefirstpanicbrokeout。Thesituationeasedsomewhatinthesummer6’1/2%，6%，butwhenthenewcropfailedaswellpanicbrokeoutafreshandevenmoreviolently。
　　TheofficialminimumbankdiscountroseinOctoberto7andinNovemberto10%；i。e。，theoverwhelmingmassofbillsofexchangewasdiscountableonlyatoutrageousratesofinterest，ornolongerdiscountableatall。
　　Thegeneralcessationofpaymentscausedthefailureofseveralleadingandverymanymedium-sizedandsmallfirms。TheBankitselfwasindangerduetothelimitationsimposedbytheartfulBankActof4844。ThegovernmentyieldedtothegeneralclamourandsuspendedtheBankActonOctober25，therebyeliminatingtheabsurdlegalfettersimposedontheBank。Nowitcouldthrowitssupplyofbank-notesintocirculationwithouthindrance。
　　Thecreditofthesebank-notesbeinginpracticeguaranteedbythecreditofthenation，andthusunimpaired，themoneystringencywasthusinstantlyanddecisivelyrelieved。Naturally，quiteanumberofhopelesslyenmeshedlargeandsmallfirmsfailednevertheless，butthepeakofthecrisiswasovercome，thebankingdiscountdroppedto5%inDecember，andinthecourseof1848anewwaveofbusinessactivitybeganwhichtooktheedgeofftherevolutionarymovementsonthecontinentin1849，andwhichinauguratedinthefiftiesanunprecedentedindustrialprosperity，butthenendedagain-inthecrashof1857——F。E。]
　　I。AdocumentissuedbytheHouseofLordsin1848dealswiththecolossaldepreciationofgovernmentpaperandbondsduringthe1847crisis。AccordingtoitthedepreciationofOctober23，1847，comparedwiththelevelinFebruaryofthesameyear，amountedto:
　　OnEnglishgovernmentbonds£；93，824，217
　　Ondockandcanalstock£；1，358，288
　　Onrailwaystock£；19，570，820
　　Total£；114，762，325II。WithreferencetotheswindleinEastIndiantrade，inwhichdraftswerenolongerdrawnbecausecommoditieswerebeingbought，butrathercommoditieswereboughttobeabletomakeoutdiscountabledraftsconvertibleintomoney，theManchesterGuardianofNovember24，1847，remarks:
　　Mr。AinLondoninstructsaMr。BtobuyfromthemanufacturerCinManchestercommoditiesforshipmenttoaMr。DinEastIndia。BpaysC
　　insixmonths’draftstobemadeoutbyConB。Bsecureshimselfbysixmonths’draftsonA。AssoonasthegoodsareshippedAmakesoutsixmonths’
　　draftsonDagainstthemailedbilloflading。慣heshipperandtheco-signeewerethusbothputinpossessionoffunds——monthsbeforetheyactuallypaidforthegoods；and，verycommonly，thesebillswererenewedatmaturity，onpretenceofaffordingtimeforthereturnsinalongtrade。？Unfortunately，lossesbysuchatrade，insteadofleadingtoitscontraction，leddirectlytoitsincrease。Thepoorermenbecame，thegreaterneedtheyhadtopurchase，inordertomakeup，bynewadvances，thecapitaltheyhadlostonthepastadventures。Purchasesthusbecame，notaquestionofsupplyanddemand，butthemostimportantpartofthefinanceoperationsofafirmlabouringunderdifficulties。Butthisisonlyonesideofthepicture。Whattookplaceinreferencetotheexportofgoodsathome，wastakingplaceinthepurchaseandshipmentofproduceabroad。HousesinIndia，whohadcredittopasstheirbills，werepurchasersofsugar，indigo，silk，orcotton-notbecausethepricesadvisedfromLondonbythelastoverlandmailpromisedaprofitonthepricescurrentinIndia，butbecauseformerdraftsupontheLondonhousewouldsoonfalldue，andmustbeprovidedfor。Whatwaysosimpleastopurchaseacargoofsugar，payforitinbillsupontheLondonhouseattenmonths’date，transmittheshippingdocumentsbytheoverlandmail；and，inlessthantwomonths，thegoodsonthehighseas，orperhapsnotyetpassedthemouthoftheHoogly，werepawnedinLombardStreet——puttingtheLondonhouseinfundseightmonthsbeforethedraftsagainstthosegoodsfelldue。Andallthiswentonwithoutinterruptionordifficulty，aslongasbill-brokershadabundanceofmoney慳tcall，？toadvanceonbillsofladinganddockwarrants，andtodiscount，withoutlimit，thebillsofIndiahousesdrawnupontheeminentfirmsinMincingLane。”
　　[ThisfraudulentprocedureremainedinvoguesolongasgoodstoandfromIndiahadtoroundtheCapeinsailingvessels。ButeversincetheyarebeingshippedinsteamboatsviatheSuezCanalthismethodoffabricatingfictitiouscapitalhasbeendeprivedofitsbasis——thelongfreightvoyage。
　　AndeversincethetelegraphinformstheEnglishbusinessmanabouttheIndianmarketandtheIndianmerchantabouttheEnglishmarket，onthesamedaythismethodhasbecometotallyimpracticable——F。E。]
　　III。ThefollowingistakenfromthequotedReportonCommercialDistress，1847-48:”InthelastweekofApril1847，theBankofEnglandadvisedtheRoyalBankofLiverpoolthatitwouldthereafterreduceitsdiscountbusinesswiththelatterbankbyone-half。Theannouncementoperatedwithpeculiarhardshiponthisaccount，thatthepaymentsintoLiverpoolhadlatterlybeenmuchmoreinbillsthanincash；andthemerchantswhogenerallybroughttotheBankalargeproportionofcashwithwhichtopaytheiracceptances，hadlatterlybeenabletobringonlybillswhichtheyhadreceivedfortheircottonandotherproduce，andthatIncreasedveryrapidlyasthedifficultiesincreased……Theacceptances……whichtheBankhadtopayforthemerchants，wereacceptancesdrawnchieflyuponthemfromabroad，andtheyhavebeenaccustomedtomeetthoseacceptancesbywhateverpaymenttheyreceivedfortheirproduce……Thebillsthatthemerchantsbrought……
　　inlieuofcash，whichtheyusuallybrought……wereofvariousdates，andofvariousdescriptions；aconsiderablenumberofthemwerebankers’bills，ofthreemonths’date，thelargebulkbeingcottonbills。Thesebillsofexchange，whenbankers’bills，wereacceptedbyLondonbankers，andbymerchantsineverytradethatwecouldmention——theBrazilian，theAmerican，theCanadian，theWestIndian……Themerchantsdidnotdrawuponeachother；
　　butthepartiesintheinterior，whohadpurchasedproducefromthemerchants，remittedtothemerchantsbillsonLondonbankers，orbillsonvariouspartiesinLondon，orbillsuponanybody。TheannouncementoftheBankofEnglandcausedareductionofthematuritytermsofbillsdrawnagainstsalesofforeignproducts，frequentlyextendingtooverthreemonths”pp。
　　26，27。
　　TheperiodofprosperityinEnglandfrom1844to1847，was，asdescribedabove，connectedwiththefirstgreatrailwayswindle。Theabove-namedreportmakesthefollowingreferencetotheeffectofthisswindleonbusinessingeneral:InApril1847”almostallmercantilehouseshadbeguntostarvetheirbusinessmoreorless……bytakingpartoftheircommercialcapitalforrailways”p。42。”Loansweremadeonrailwaysharesatahighrateofinterest，say，8%，byprivateindividuals，bybankersandbyfire-offices”
　　p。66。”Loanstosogreatanextentbycommercialhousestorailwaysinducedthemtoleantoomuchuponbanksbythediscountofpaper，wherebytocarryontheircommercialoperations”p。67。Question:”Shouldyousaythattherailwaycallshadhadagreateffectinproducingthepressurewhichtherewas”onthemoney-market”inAprilandOctober”1847？——
　　Answer:”IshouldsaythattheyhadhadhardlyanyeffectatallinproducingthepressureinApril；IshouldimaginethatuptoApril，andup，perhaps，tothesummer，theyhadincreasedthepowerofbankersinsomerespectsratherthandiminishedit；fortheexpenditurehadnotbeennearlysorapidasthecalls；theconsequencewas，thatmostofthebankshadratheralargeamountofrailwaymoneyintheirhandsinthebeginningoftheyear。”
　　ThisiscorroboratedinnumerousstatementsmadebybankersinC。D。1848-57。”Inthesummerthatmeltedgraduallyaway，andonthe31stofDecemberitwasmateriallyless。Onecause……ofthepressureinOctoberwasthegradualdiminutionoftherailwaymoneyinthebankers’hands；betweenthe22ndofAprilandthe31stofDecembertherailwaybalancesinourhandswerereducedone-third；andtherailwaycallshavealsohadthiseffectthroughouttheKingdom；theyhavebeengraduallydrainingthedepositsofbankers”pp。43，44——SamuelGurneyheadoftheill-famedfirmofOverend，GurneyandCo。similarlysays:”Duringtheyear1846……therehadbeenaconsiderabledemandforcapital，fortheestablishmentofrail-ways……
　　butitdidnotincreasethevalueofmoney……Therewasacondensationofsmallsumsintolargemasses，andthoselargemasseswereusedinourmarket；sothat，uponthewhole，theeffectwastothrowmoremoneyintothemoney-marketoftheCitythantotakeitout”[p。159]。
　　A。Hodgson，DirectoroftheLiverpoolJoint-StockBank，showshowmuchbillsofexchangemayconstituteareserveforbankers:”Ithasbeenourhabittokeepatleastnine-tenthsofallourdeposits，andallmoneywehaveofotherpersons，inourbillcase，inbillsthatarefallingduefromdaytoday……somuchso，thatduringthetimeoftherun，thebillsfallingduewerealmostequaltotheamountoftheranuponusdaybyday”
　　p。53。
　　Speculativebills——”5092。Whowerethosebillsagainstsoldcottongenerallyacceptedby？”——R。Gardner，thecottonmanufacturerrepeatedlymentionedinthiswork:”Producebrokers:apersonbuyscotton，andplacesitinthehandsofabroker，anddrawsuponthatbroker，andgetsthebillsdiscounted。”——”5094。AndtheyaretakentothebanksatLiverpool，anddiscounted？——Yes，andinotherpartsbesides……Ibelieveifithadnotbeenfortheaccommodationthusgranted，andprincipallybytheLiverpoolbanks，cottonwouldneverhavebeensohighlastyearasitwasby11/1d。or2d。apound。”——”600。Youhavestatedthatavastamountofbillswereputincirculation，drawnbyspeculatorsuponcottonbrokersinLiverpool；doesthatsystemextendtoyouradvanceonacceptancesuponcolonialandforeignproduceaswellasoncotton？”A。Hodgson，aLiverpoolbanker:”Itreferstoallkindsofcolonialproduce，buttocottonmostespecially。”——”601。Doyou，asabanker，disencourageasfarasyoucanthatdescriptionofpaper？——Wedonot；weconsideritaverylegitimatedescriptionofpaper，whenkeptinmoderation。Thisdescriptionofpaperisfrequentlyrenewed。”
　　SwindlingintheEastIndianandChineseMarket，1847——CharlesTurnerheadofoneoftheleadingEastIndianhousesinLiverpool:”WeareallawareoftheeventswhichhavetakenplaceasregardstheMauritiustrade，andothertradesofthatkind。Thebrokershavebeeninthehabit……
　　notonlyofadvancingupongoodsaftertheirarrivaltomeetthebillsdrawnagainstthosegoods，whichisperfectlylegitimate，anduponthebillsoflading……but……theyhaveadvanceduponproducebeforeitwasshipped，andinsomecasesbeforeitwasmanufactured。Now，tospeakofmyownindividualinstance:IhaveboughtbillsinCalcuttatotheextentofsixorseventhousandpoundsinoneparticularinstance；theproceedsofthebillswentdowntotheMauritius，tohelpinthegrowthofsugar；
　　thosebillscametoEngland，andabovehalfofthemwereprotested；forwhentheshipmentsofsugarcameforward，insteadofbeingheldtopaythosebills，ithadbeenmortgagedtothirdparties……beforeitwasshipped，infactalmostbeforeitwasboiled”p。78。”Nowmanufacturersareinsistinguponcashbutitdoesnotamounttomuch，becauseifabuyerhasanycreditinLondon，hecandrawuponthehouse，andgetthebilldiscounted；hegoestoLondon，wherediscountsnowarecheap；hegetsthebilldiscounted，andpayscashtothemanufacturer……Ittakestwelvemonths，atleast，fortheshipperofgoodstogethisreturnfromIndia……amanwithtenorfifteenthousandpoundswouldgointotheIndiantrade；hewouldopenacreditwithahouseinLondon，toaconsiderableextent，givingthathouseonepercent；he，drawinguponthehouseinLondon，ontheunderstandingthattheproceedsofthegoodsthatgooutaretobereturnedtothehouseinLondon，butitbeingperfectlyunderstoodbybothpartiesthatthemaninLondonistobekeptoutofacashadvance；thatistosay，inotherwords，thebillsaretoberenewedtilltheproceedscomehome。ThebillswerediscountedatLiverpool，Manchester……orinLondon……manyofthemlieintheScotchbanks”p。79——”786。ThereisonehousewhichfailedinLondontheotherday，andinexaminingtheiraffairs，atransactionofthissortwasprovedtohavetakenplace；thereisahouseofbusinessatManchester，andanotheratCalcutta；theyopenedacreditaccountwithahouseinLondontotheextentof£；200，000；thatistosay，thefriendsofthishouseinManchester，whoconsignedgoodstotheEastIndiaHousefromGlasgowandfromManchester，hadthepowerofdrawinguponthehouseinLondontotheextentof£；200，000；atthesametime，therewasanunderstandingthatthecorrespondinghouseinCalcuttaweretodrawupontheLondonhousetotheextentof£；200，000；withtheproceedsofthosebillssoldinCalcutta，theyweretobuyotherbills，andremitthemtothehouseinLondon，totakeupthefirstbillsdrawnfromGlasgow……
　　Therewouldhavebeen£；600，000ofbillscreateduponthattransaction。”——”971。Atpresent，ifahouseinCalcuttapurchaseacargo”forEngland，”andgivetheirownbillsupontheircorrespondentinLondoninpayment，andtheysendthebillsofladinghometothiscountry，thosebillsoflading……immediatelybecomeavailabletotheminLombardStreetforadvances，andtheyhaveeightmonths’useofthemoneybeforetheircorrespondentsarecalledupontopay。”
　　IV。In1848asecretcommitteeoftheHouseofLordsinvestigatedthecausesofthe1847crisis。Theevidencegiventothecommitteewasnotpublished，however，until1857MinutesofEvidence，takenbeforetheSecretCommitteeoftheH。ofL。appointedtoinquireintotheCausesofDistress，etc。，1857；quotedasC。D。1848/57。HereMr。Lister，DirectoroftheUnionBankofLiverpool，testified，amongotherthings，tothefollowing:”2444。Inthespringof1844therewasanundueextensionofcredit……
　　becauseamantransferredpropertyfrombusinessintorailwaysandwasstillanxioustocarryonthesameextentofbusiness。Heprobablyfirstthoughtthathecouldselltherailwaysharesataprofitandreplacethemoneyinhisbusiness。Perhapshefoundthatcouldnotbedone，andhethengotcreditinhisbusinesswhereformerlyhepaidincash。Therewasanextensionofcreditfromthatcircumstance。””2500。Werethosebills……uponwhichthebankshadsustainedalossbyholdingthem，principallybillsuponcornorbillsuponcotton？-Theywerebillsuponallkindsofproduce，cornandcottonandsugar，allforeignproduceofalldescriptions。Therewasscarcelyanythingperhapswiththeexceptionofoil，thatdidnotgodown。”——”2506。Abrokerwhoacceptsabillwillnotacceptitwithoutagoodmarginastothevalue。””2512。Therearetwokindsofbillsdrawnagainstproduce；thefirstistheoriginalbilldrawnabroaduponthemerchant，whoimportsit……
　　Thebillswhicharedrawnagainstproducefrequentlyfallduebeforetheproducearrives。Themerchant，therefore，whenitarrives，ifhehasnotsufficientcapital，hastopledgethatproducewiththebrokertillhehastimetosellthatproduce。ThenanewspeciesofbillisimmediatelydrawnbythemerchantinLiverpooluponthebroker，onthesecurityofthatproduce……Thenitisthebusinessofthebankertoascertainfromthebrokerwhetherhehastheproduce，andtowhatextenthehasadvanceduponit。Itishisbusinesstoseethatthebrokerhaspropertytoprotecthimselfifhemakesaloss。””2516。Wealsoreceivebillsfromabroad……AmanbuysabillabroadonEngland，andsendsittoahouseinEngland；wecannottellwhetherthatbillisdrawnprudentlyorimprudently，whetheritisdrawnforproduceorforwind。””2533。Yousaidthatalmosteverykindofforeignproducewassoldatagreatloss。Doyouthinkthatthatwasinconsequenceofunduespeculationinthatproduce？——Itarosefromaverylargeimport，endtherenotbeinganequalconsumptiontotakeitoff。Itappearsthatconsumptionfelloffagreatdeal。”——”2534。InOctoberproducewasalmostunsaleable。”
　　Howageneralsauvequipeutdevelopsattheheightofacrisisisrevealedinthesamereportbyafirst-rateexpert，theesteemedcraftyQuaker，SamuelGurney，ofOverend，GurneyandCo。:”1262……Whenapanicexistsamandoesnotaskhimselfwhathecangetforhisbank-notes，orwhetherheshallloseoneortwopercentbysellinghisexchequerbills，orthreepercent。Ifheisundertheinfluenceofalarmhedoesnotcarefortheprofitorloss，butmakeshimselfsafeandallowstherestoftheworldtodoastheyplease。”
　　V。ConcerningthemutualsatiationofthetwomarketsMr。Alexander，amerchantintheEastIndiatrade，testifiesbeforetheCommitteeofthe，LowerHouseontheBankActof1857quotedasB。C。1857:”4330。Atthepresentmoment，ifIlayout6s。inManchester，Iget5s。backinIndia；
　　ifIlayout6s。inIndia，Iget5s。backinLondon。”SothattheIndianmarketis，therefore，druggedbyEngland，andtheEnglishbyIndia。Thiswas，indeed，thecaseinthesummerof1857，barelytenyearsafterthebitterexperienceof1847！
　　Capital，Vol。3，Chapter26KarlMarxCAPITALVol。III
　　THEPROCESSOF
　　CAPITALISTPRODUCTIONASAWHOLEPartV
　　DIVISIONOFPROFITINTOINTERESTANDPROFIT
　　OFENTERPRISE。
　　INTEREST-BEARINGCAPITALCHAPTER26
　　AccumulationofMoney-Capital。
　　ItsInfluenceontheInterestRate”InEnglandtheretakesplaceasteadyaccumulationofadditionalwealth，whichhasatendencyultimatelytoassumetheformofmoney。Nownextinurgency，perhaps，tothedesiretoacquiremoney，isthewishtopartwithitagainforsomespeciesofinvestmentthatshallyieldeitherinterestorprofit；formoneyitself，asmoney，yieldsneither。Unless，therefore，concurrentlywiththisceaselessinfluxofsurplus-capital，thereisagradualandsufficientextensionofthefieldforitsemployment，wemustbesubjecttoperiodicalaccumulationsofmoneyseekinginvestment，ofmoreorlessvolume，accordingtothemovementofevents。Foralongseriesofyears，thegrandabsorbentofthesurpluswealthofEnglandwasourpublicdebt……Assoonasin1816thedebtreacheditsmaximum，andoperatednolongerasanabsorbent，asumofatleastseven-and-twentymillionperannumwasnecessarilydriventoseekotherchannelsofinvestment。Whatwasmore，variousreturnpaymentsofcapitalweremade……Enterpriseswhichentailalargecapitalandcreateanopeningfromtimetotimefortheexcessofunemployedcapital……areabsolutelynecessary，atleastinourcountry，soastotakecareoftheperiodicalaccumulationsofthesuperfluouswealthofsociety，whichisunabletofindroomintheusualfieldsofapplication。”TheCurrencyTheoryReviewed，London，1845，pp。32-34。
　　Of1845thesameworksays:”Withinaveryrecentperiodpriceshavesprungupwardsfromthelowestpointofdepression……Consolstouchpar……ThebullioninthevaultsoftheBankofEnglandhas……exceededinamountthetreasureheldbythatestablishmentsinceitsinstitution。Sharesofeverydescriptionrangeatpricesontheaveragewhollyunprecedented，andinteresthasdeclinedtorateswhichareallbutnominal。IfthesebenotevidencesthatanotherheavyaccumulationofunemployedwealthexistsatthishourinEngland，thatanotherperiodofspeculativeexcitementisathand。”Ibid。，p。36。”Although……theimportofbullionisnosuresignofgainupontheforeigntrade，yet，intheabsenceofanyexplanatorycause，itdoesprimafacierepresentaportionofit。”J。G。Hubbard，TheCurrencyandtheCountry，London，1843，pp。40-411。”Suppose……thatataperiodofsteadytrade，fairprices……andfull，butnotredundantcirculation，adeficientharvestshouldgiveoccasionforanimportofcorn，andanexportofgoldtothevalueoffivemillion。Thecirculation[meaning，asweshallpresentlysee，idlemoney-capitalratherthanmeansofcirculation——F。E。]wouldofcoursebereducedbythesameamount。Anequalquantityofthecirculationmightstillbeheldbyindividuals，butthedepositsofmerchantsattheirbankers，thebalancesofbankerswiththeirmoney-broker，andthereserveintheirtill，willallbediminished，andtheimmediateresultofthisreductionintheamountofunemployedcapitalwillbeariseintherateofinterest。Iwillassumefrom4percentto6。Tradebeinginasoundstate，confidencewillnotbeshaken，butcreditwillbemorehighlyvalued。”Ibid。，p。42。”Butimagine……thatallpricesfall……Thesuperfluouscurrencyreturnstothebankersinincreaseddeposits-theabundanceofunemployedcapitallowerstherateofinteresttoaminimum，andthisstateofthingslastsuntileitherareturnofhigherpricesoramoreactivetradecallthedormantcurrencyintoservice，oruntilitisabsorbedbyinvestmentsinforeignstocksorforeigngoods”
　　p。68。