Part V, Chapter XXXII
MONEY-CAPITAL AND ACTUAL CAPITAL. III.
THE mass of the money thus reconverted into capital is a result of the voluminous process of reproduction, but considered by itself, as loanable money-capital, it is not itself a mass of reproductive capital.
The most important point of our presentation so far is, that the expansion of that part of the revenue which is intended for consumption (leaving out of consideration the laborer, because his revenue is equal to the variable capital) represents itself in the first instance as an accumulation of money-capital. The accumulation of money-capital, therefore, presents a factor, which is essentially different from the actual accumulation of industrial capital; for that portion of the annual product, which is intended for consumption, does not become capital in any way. One portion of it replaces capital, namely the constant capital of the producers of means of consumption, but to the extent that it is actually converted into capital, it exists in the natural form of the revenue of the producers of this constant capital. The same money, which represents the revenue and serves merely for the promotion of consumption, is regularly transformed into loanable money-capital, for a certain time. So far as this money represents wages, it is at the same time the money-form of the variable capital; and so far as it replaces the constant capital of the producers of means of consumption, it is the money-form temporarily assumed by their constant capital and serves for the purchase of the natural elements of the constant capital to be replaced by them. Neither in the one nor in the other form does it express in itself any accumulation, although its mass increases with the volume of the process of reproduction. But it performs temporarily the function of loanable money, of money-capital. In this respect the accumulation of money-capital must reflect a greater accumulation of capital than is actually existing, owing to the fact that the extension of individual consumption, being promoted by money, appears as an accumulation of money-capital, whereby it furnishes the money-form for the actual accumulation of money opening new investments of capital.
The accumulation of money, then, expresses in part nothing else but the fact that all money, into which the industrial capital is transformed in the course of its cycle, assumes the form, not of money advanced by the reproductive capitalists, but of money borrowed by them; so that indeed the advance of money necessary in the process of reproduction appears as an advance of borrowed money. On the basis of commercial credit one capitalist loans indeed to another the money required for the process of reproduction. But this assumes now the form of a transaction, in which the banker, who receives the money as a loan from one portion of the reproductive capitalists, lends it to another portion of these reproductive capitalists, so that the banker appears in the role of a dispenser of blessings; at the same time the disposition of this capital drifts wholly into the hands of the banker in his capacity as a middleman.
A few special forms of accumulation of money-capital still remain to be mentioned. Capital is releases, for instance, by a fall in the price of the elements of production, raw materials, etc. If the industrial capitalist cannot expand his process of reproduction immediately, then a portion of his money-capital is expelled from the cycle as superfluous and converted into loanable money-capital. In the second place, capital in the form of money is released especially by the merchant, whenever any interruption of his business takes place. If the merchant has disposed of a series of transactions and cannot begin a new series on account of such interruptions until later, then his realised money represents for him but a hoard, superfluous capital. But at the same time it represents directly an accumulation of loanable money-capital. In the first case, the accumulation of money-capital expresses a repetition of the process of reproduction under more favorable conditions, an actual release of a portion of formerly tied up capital, in other words, an opportunity for expanding the process of reproduction with the same amount of money. But in the other case it expresses merely an interruption in the flow of transactions. However, in both cases it is converted into loanable money-capital, represents its accumulation, influences equally the money-market and the rate of interest, although it expresses a promotion of the accumulation in the actual process in one case and its obstruction in the other. Finally an accumulation of money-capital is brought about by that section of people, who have made their little pile and have withdrawn from reproduction. In proportion as more profits are made in the course of the industrial cycle, their number increases. In their case the accumulation of loanable money-capital expresses on the one hand an actual accumulation (considering its relative volume), and on the other hand the extent of the transformation of industrial capitalists into mere money-capitalists.
As for the other portion of profit, which is not intended to be consumed as revenue, it is converted into money-capital only when it is not immediately able to find a place for investment in the expansion of the productive sphere in which it has been made. This may be due to two causes. Either the sphere of production may be saturated with capital. Or it may be because accumulation must first have reached a certain volume, before it can serve as capital, according to the proportions of the investment of new capital required in this particular sphere. Hence it is converted for a while into loanable money-capital and serves in the expansion of production in other spheres. Assuming all other circumstances to remain unaltered, the mass of profits required for reconversion into capital will depend on the mass of profits made and thus on the extension of the process of reproduction itself. But if this new accumulation meets with difficulties in its employment, through a lack of spheres for investment, due to the overcrowding of the lines of production and an oversupply of loan capital, then such a plethora of loanable money-capital proves merely that capitalist production has its limits. The subsequent swindle with credit proves, that no positive obstacle stands in the way of the employment of this superfluous capital. The obstacle is merely one immanent in its laws of self-expansion, namely the limits in which capital can expand itself as such. A plethora of money-capital does not necessarily indicate an overproduction, nor even a lack of spheres of investment for capital.
The accumulation of loan-capital consists simply in the fact that money is precipitated as loanable money. This process is very different from an actual transformation into capital; it is merely the accumulation of money in a form, in which it may be invested as capital. But this accumulation may, as we have shown, indicate facts, which are greatly different from actual accumulation. So long as actual accumulation is continually expanding, this extended accumulation of money-capital may be partly its result, partly the result of circumstances, which accompany it but are quite different from it, partly also the result of impediments to actual accumulation. Since accumulation of loan-capital is swelled by such circumstances, which are independent of actual accumulation but nevertheless accompany it, there must be a plethora of money-capital in definite phases of the cycle for this reason alone, if for no other, and this plethora must develop with the organisation of credit. And simultaneously with it must also develop the necessity of driving the process of production beyond its capitalistic limits, by overproduction, excessive commerce, extreme credit. And this must take place in forms that call forth a reaction.
So far as accumulation of money-capital from ground rent, wages, etc., is concerned, it is superfluous to discuss that here. Only one thing must be mentioned, namely that the business of actual saving and abstinence (by people forming hoards), to the extent that it furnishes elements of accumulation, is left in the division of labor, which comes with the progress of capitalist production, to those who receive the smallest share of such elements, and who frequently enough lose even their savings, as do the laborers when banks fail. On the one hand the capital of the industrial capitalist is not "saved" by himself, but he has command of the savings of others in proportion to the magnitude of his capital; on the other hand the money-capitalist makes of the savings of others his own capital, and of the credit, which the reproductive capitalists give to one another, and which the public gives to them, a source for enriching himself. The last illusion of the capitalist system, to the effect that capital is the fruit of ones own labor and saving, is thereby destroyed. Not only does profit consist of the appropriation of other people's labor, but the capital, with which this labor of others is set in motion and exploited, consists of other people's property, which the money-capitalist places at the disposal of the industrial capitalist, at the same time exploiting the latter in his turn.
A few remarks remain to be made about credit-capital.
How often the same piece of money may figure as a loan capital, depends, as we have previously indicated.
1) On the question, how often it realises the value of commodities by sale or purchase, thereby transferring capital, and furthermore on the question, how often it realises revenue. How often it gets into other hands as a realised value, either of capital or of revenue, depends, therefore, obviously, upon the volume and mass of the actual transactions;
2) On the economy of payments and on the development and organisation of credit-system;
3) On the concatenation and velocity of action of the credits, so that a deposit set down at one point starts off immediately as a loan at another.
Even assuming that the form, in which loan capital exists, is merely that of actual money, of gold or silver, of that commodity whose substance serves as a measure of value, a large portion of this money-capital is necessarily purely fictitious, that is a title to some value just as the tokens of value. So far as money functions in the cycle of capital, it forms indeed for the moment a money-capital; it is rather exchanged for the elements of productive capital, or paid out as a medium of circulation in the realisation of revenue, and cannot, therefore, convert itself into loan capital for its owner. But so far as it is converted into loan capital, and the same money repeatedly represents loan capital, it is evident that it exists only at one point in the form of metallic money; at all other points it exists only in the form of title on capital. The accumulation of these titles, according to our analysis, arises from the actual accumulation, that is, from the transformation of the values of commodity-capital, etc., into money; but nevertheless the accumulation of these titles as such differs from the actual accumulation, from which it arises, and from the future accumulation, from which it arises, and from the future accumulation (the new process of production), which is promoted by the loaning of this money.
In the first instance loan capital exists always in the form of money, later as a title on money, since the money, in which it originally existed, is now held in the hand of the borrower as actual money. For the lender it has been transformed into title on money, a title of ownership. The same mass of actual money may, therefore, represent very different masses of money-capital. Mere money, whether it represent realised capital or realised revenue, becomes a loan capital through the simple act of loaning, by its conversion into a deposit, if we look upon the general form under a developed credit system. The deposit is a money-capital for the depositor. But in the hands of the banker it may be only a potential money-capital, which lies fallow in his strongbox instead of that of its owner.
With the growth of material wealth grows the class of money-capitalists; on one side the number and the wealth of retiring capitalists living on their incomes increases; on the other hand the development of the credit system is promoted, and with it the number of bankers, money lenders, financiers, etc.
With the development of the available money-capital grows also the mass of interest-bearing papers, government bonds, stocks, etc., as we have shown previously. At the same time grows also the demand for available money-capital, since the jobbers, who speculate in these securities, play a prominent role on the money-market. If all the purchases and sales of these papers were only an expression of actual investments of capital, it would be correct to say, that they can have no influence on the demand for loan capital, since, when A sells his paper, he draws exactly as much money as B puts into the paper. But even if the paper itself exists, though not the capital (at least not as money-capital) originally represented by it, it always creates to that extent a demand for such money-capital. But at any rate it is then money-capital, which was previously at the disposal of B and is not at the command of A.
B.A. 1857. No. 4886. "Is it in your opinion a correct statement of the causes determining the rate of discount, when I say that it is regulated by the quantity of capital existing on the market, which is available for the discounting of commercial bills, as distinguished from other kinds of securities?" [Chapman]: "No, I hold that the rate of interest is affected by all convertible securities of current character; it would be wrong to limit the question simply to the discounting of bills; for when there is a strong demand for money on consols [deposited] or even treasury notes, as was strongly the case of late, and at a much higher than the commercial rate of interest, it would be absurd to say that our commercial world is not influenced by it; it is very essentially touched by it."—4890. "When good and current securities, such as bankers accept, are on the market, and the owners take up money on them, it has surely an effect on the commercial world; for instance, I cannot expect that a man should give me his money at 5% on a commercial bill, when he can lend this money out at the same time at 6% on consols, etc.; it affects us in the same way; nobody can expect of me that I should discount his bills at 5½%, when I can lend my money out at 6%."—4892. "Of people, who buy securities as fixed investments of capital for 2,000, or 5,000, or 10,000 pounds sterling, we do not speak as though they had any essential influence upon the money-market. When you ask me for the rate of interest on [a deposit of] consols, I speak of people, who transact business to the amount of hundreds of thousands, of so-called jobbers, who underwrite large amounts of public loans, or buy them on the market, and who must hold these papers until they can get rid of them at a profit; these people must take up money for this purpose."
With the development of the credit system great concentrated money-markets are created, such as London, which are at the same time the main seats of trade in such securities. The bankers place the money-capital of the public in masses at the disposal of this unsavory crowd of dealers, and thus this breed of gamblers multiplies. "Money is generally cheaper at the stock exchange than anywhere else," says the incumbent of the Governor's chair of the Bank of England in 1848 before the secret Committee of Lords, C. D. 1848, printed, 1857, No. 219.)
In the discussion of the interest-bearing capital we have already shown, that the average interest for a long period of years, other circumstances remaining the same, is determined by the average rate of profit; this does not mean profits of enterprise, which are themselves nothing but profit minus interest.
It has also been mentioned, and will be further analysed in another place, that the variations of commercial interest, that is, of interest calculated by the money lenders for discounts and loans within the commercial world, meet in the course of the industrial cycle a phase, in which the rate of interest exceeds its minimum and reaches its average level, which it exceeds later, and that this movement is a result of a rise in profits.
However, two things must be noted here.
First: When the rate of interest stays up for a long time (we are speaking here of the rate of interest of a certain country, for instance England, where the average rate of interest is a fact for a certain long time, and presents itself also in the interest paid on loans for a long period, called private interest), it is an evident proof of the fact, that the rate of profit is high during this period, but it does not prove necessarily, that the rate of profits of enterprise is high. This last distinction is more or less removed for capitalists, who operate mainly with their own capital; they realise the high rate of profit, since they pay their own interest. The possibility of a high rate of interest of long duration is present when the rate of profit is high; this does not refer, however, to the phase of the actual stringency. But it is possible, that this high rate of profit may leave but a low rate of profit of enterprise, after the high rate of interest has been deducted. The rate of profit of enterprise may shrink, while the high rate of profit continues. This is possible, because the enterprises must be continued after they have once been started. During this phase operations are carried on to a large extent with a pure credit capital (capital of other people); and the high rate of profit may be speculative, prospective, in some places. A high rate of interest may be paid with a high rate of profit, while profit of enterprise is declining. It may be paid (and this is done in part during times of speculation), not out of the profit, but out of the borrowed capital of another, and this may continue for a long time.
Secondly: The expression, that the demand for money-capital, and with it the rate of interest, grows, while the rate of profit is high, is not the same as that which is to the effect that the demand for industrial capital grows and with it the rate of interest is high.
In times of crisis the demand for loan capital, and with it the rate of interest, reach their maximum; the rate of profit, and with it the demand for industrial capital, are almost gone. In such times every one borrows only for the purpose of paying, in order to settle previously contracted obligations. On the other hand, in times of renewed activity after a crisis, loan capital is demanded for the purpose of buying, and for the purpose of transforming money-capital into productive and commodity-capital. And then it is in demand either by the industrial capitalist or the merchant. The industrial capitalist invests it in means of production and in labor-power.
The rising demand for labor-power can never be by itself a cause for a rising rate of interest, so far as this is determined by the rate of profit. A higher wage is never a cause of higher profits, although it may be one of the consequences of higher profits, in some particular phases of the industrial cycle.
The demand for labor-power may increase, because the exploitation of labor takes place under especially favorable circumstances, but the rising demand for labor-power, and thus for variable capital, does not in itself increase the profit; it rather lowers it to that extent. But the demand for variable capital may nevertheless increase with the demand for labor-power, and to that extent the demand for money-capital, and this may raise the rate of interest. The market price of labor-power then rises above its average, more than the average number of laborers are employed, and the rate of interest rises at the same time, because the demand for money-capital rises under such circumstances. The rising demand for labor-power makes this commodity dearer like any other, increases its price, but not the profit, which rests mainly upon the relative cheapness of just this commodity. But it raises under the given assumptions also the rate of interest, because it increases the demand for money-capital. If the money-capitalist, instead of loaning the money, should transform himself into an industrial capitalist, then the fact that he has to pay more for labor-power would not increase his profit, but would rather decrease it in proportion. The constellation of conditions may be such, that his profit may rise nevertheless, but it will be in spite of the fact that he pays more for labor-power, and not because of it. This last circumstance, so far as it increases the demand for money-capital, is on the other hand sufficient to raise the rate of interest. If wages should rise for some reasons while the constellation is unfavorable, then the rise in wages would lower the rate of profit, but raise the rate of interest in proportion as it would increase the demand for money-capital.
Leaving the question of labor aside, the thing called "demand for capital" by Overstone consists only in a demand for commodities. The demand for commodities raises their price, either because it may rise above the average, or because the supply of commodities may fall below the average. If the industrial capitalist or the merchant must now pay 150 pounds sterling for the same mass of commodities for which he used to pay 100 pounds sterling, he would have to borrow 150 pounds sterling whereas he had to borrow but 100 pounds sterling formerly, and if the rate of interest were 5%, he would now have to pay 7½ pounds sterling of interest as against 5 pounds sterling of former times. The mass of the interest to be paid by him would rise because he now has to borrow more capital.
The whole attempt of Mr. Overstone consists in pretending that the interests of loan capital and of industrial capital are identical whereas his Bank Acts are precisely calculated to exploit the difference of these interests for the benefit of money-capital.
It is possible, that the demand for commodities, in case their supply has fallen below average, does not absorb any more money-capital than formerly. The same sum, or perhaps a smaller one, has to be paid for their total value, but a smaller quantity of use-values is received for the same sum. In this case the demand for loanable money-capital will remain the same, and the rate of interest will not rise, although the demand for commodities would have risen as compared to their supply, and consequently the price of commodities would have become higher. The rate of interest cannot be touched, unless the total demand for loan capital increases, and this is not the case under the above assumption.
The supply of an article may also fall below average, as it does in case of crop failures of corn, cotton, etc., and the demand for loan capital may increase, because the speculation in these commodities calculates on a rise in their prices and the first means of making them rise is to curtail for a while a portion of their supply on the market. But in order to pay for the bought commodities without selling them, money is secured by means of the commercial bill system. In this case the demand for loan capital increases, and the rate of interest may rise in consequence of this attempt to prevent by artificial means the supply of this commodity to the market. The higher rate of interest expresses in that case an artificial reduction of the supply of commodity-capital.
On the other hand the demand for an article may rise, because its supply has increased and the article stands below its average price.
In this case the demand for loan-capital may remain the same or may even fall, because more commodities can be had for the same sum of money. A speculative formation of a supply might also occur, either for the purpose of taking advantage of a favorable moment for the ends of production, or in expectation of a future rise in prices. In this case the demand for loan capital might grow, and the rise in the rate of interest would then be an expression of an investment of capital in the formation of an extra supply of elements of productive capital. We consider here merely that demand for loan capital, which is influenced by the demand and supply of commodity-capital. We have explained on a previous occasion, that the changing condition of the process of reproduction in the phases of the industrial cycle has its effect upon the supply of loan capital. The trivial statement to the effect that the market rate of interest is determined by the supply and demand of (loan) capital, is shrewdly mixed up by Overstone with his own assumption, according to which loan capital is identical with capital in general, and in this way he tries to transform the usurer into the only capitalist and his capital into the only capital.
In times of stringency the demand after loan capital is a demand for means of payment and nothing else; it is by no means a demand for money as a means of payment. The rate of interest may rise very high at the same time, regardless of whether real capital, that is, productive and commodity-capital, exists in abundance or is scarce. The demand for means of payment is a mere demand for convertibility into money, to the extent that the merchants and producers can offer good security; it is a demand for money-capital in so far as it is not this other, in other words, so far as an advance of means of payment gives them not merely the form of money, but also the equivalent which they lack for making payment in whatever form. This is the point, where both sides of the current theory are right and wrong in their opinion about crisis. Those who say that there is merely a lack of means of payment, have either the owners of bona fide securities alone in view, or they are fools who believe that it is the duty and power of banks to transform all bankrupt swindlers into solvent and solid capitalists by means of pieces of paper. Those who say that there is merely a lack of capital, are either harping on words, since in such times there is a mass of inconvertible capital in consequence of over-imports and overproduction, or they are referring only to such knights of credit as are now placed in conditions, where they cannot any longer get other people's capital for their operations, and who now demand that the bank should not only help them to pay for the lost capital, but also enable them to continue their swindling.
It is a basic principle of capitalist production, that the money, as an independent form of value, must stand opposed to commodities, or that exchange-value must assume an independent form in money, and this is possible only by making of one definite commodity the material, whose value measures all other commodities, so that it thus becomes the general commodity, the commodity par excellence as distinguished from all other commodities. This must become evident in two respects, particularly among capitalistically developed nations, who substitute other things for large masses of money, partly through credit operations, partly through credit money. In times of stringency, when credit shrinks or ceases entirely, money suddenly becomes the only means of payment and the only true existence of absolute value as opposed to all other commodities. Hence a universal depreciation of commodities, difficulty or even impossibility of transforming them into money, that is, into their own purely phantastic form. In the second place, credit money itself is but money in so far as it absolutely takes the place of actual money to the amount of its nominal value. With the export of gold its own convertibility becomes problematical, that is, its identity with actual money. Hence forcible measures, raising of the rate of interest, etc., for the purpose of safeguarding the conditions of this convertibility. This may be carried more or less to excess by mistaken legislation, resting upon false theories of money and enforced upon the nation by the interests of the money dealers, of Overstone and his like. The basis, however, is given with the basis of the mode of production itself. A depreciation of credit money (not to mention its imaginary depreciation) would unsettle all existing relations. The value of commodities is therefore sacrificed, for the purpose of safeguarding the phantastic and independent existence of this value in money. As money-value it is secured only so long as money itself is secure. For the sake of a few millions of money many millions of commodities must therefore be sacrificed. This is inevitable under capitalist production and constitutes one of its beauties. In former modes of production this does not occur, because on the narrow basis, upon which they move, neither credit nor credit money can develop to any extent. So long as the social character of labor appears as the money-existence of commodities, and thus as a thing outside of actual production, money crises are inevitable, either independently of crises or intensifying them. On the other hand it is obvious that, so long as the credit of a bank is not shaken, it will alleviate the panic in such cases by increasing the credit money, and intensify it by contracting this money. All history of modern industry shows that metal would indeed be required only for the balancing of international commerce, whenever its equilibrium is disturbed momentarily, if only national production were properly organised. That the inland market does not need any metal even now is shown by the suspension of cash payments of the so-called national banks, that resort to this expedient whenever extreme cases require it as the sole relief.
In the case of two individuals it would be ridiculous to say that both of them have a balance of payment against one another in their mutual transactions. If they are mutually creditors and debtors of one another, it is evident that to the extent that their claims do not balance, one must be the creditor and the other the debtor for the remainder. But in the case of nations this is by no means so. And that it is not so is acknowledged by all economists through the statement, that the balance of payment may be for or against a nation, even if its balance of trade must ultimately be settled. The balance of payment differs from the balance of trade in so far as payment is a balance of trade which must be settled at a definite period. What crises accomplish is the crowding of the difference between the balance of payment and the balance of trade into a short time; and the definite conditions, which develop in the nation suffering from a crisis and facing the term when payment becomes due, carry with them such a contraction of the time of settlement. These conditions are, first the shipping away of precious metals; then the throwing away of consigned commodities; the exportation of commodities for the purpose of getting rid of them or of securing loans on them in the home market; the rising of the rate of interest, the calling in of credits, the falling of securities, the selling out of foreign securities, the attraction of foreign capital for investment in these depreciated securities, and finally bankruptcy, which settles a mass of obligations. While this is going on, metal is often sent for some time into the country, where a crisis has broken out, because bills of exchange on it are unsafe and payment is best made in metal. This is further explained by the fact that in the case of a country like Asia all capitalist nations are generally direct or indirect debtors of it at the same time. As soon as these different circumstances exert their full effect upon the other involved nation, it likewise begins its export of gold and silver on account of the expiration of the date of payment, and the same phenomena are repeated.
In commercial credit the interest, being the credit price as distinguished from the cash price, enters only in so far into the price of commodities as the bills of exchange have a longer running time than the ordinary. Otherwise it does not. And this is explained by the fact that every one takes credit with one hand and gives it with the other. [This does not agree with my experience. F. E.] But so far as discount in this form enters into consideration here, it is not regulated by this commercial credit, but by the money-market.
If the demand and supply of money-capital, which determine the rate of interest, were identical with the demand and supply of actual capital, as Overstone maintains, then the interest would be simultaneously high or low according to different commodities, or different phases of the same commodity (raw material, partly finished product, finished product). In 1844 the rate of interest of the Bank of England fluctuated between 4% from January to September to 2½ and 3% from November to the end of the year. In 1845 it was 2½, 2¾, 3% from January to October, and between 3 and 5% during the remaining months. The average price of fair Orleans cotton was 6¼ d. in 1844 and 4 7/8 d. in 1845. On March 3, 1844, the cotton supply in Liverpool was 627,042 bales, and on March 3, 1845, it was 773,800 bales. To judge by the low price of cotton, the rate of interest should have been low in 1845, and it was indeed for the greater part of this time. But to judge by the yarn the rate of interest should have been high, for the prices were relatively and the profit absolutely high. From cotton at 4 d. per pound a yarn could be spun in 1845 with a spinning cost of 4 d. (No. 40 good second mule twist), or a total cost of 8 d. to the spinner, which he could sell in September and October 1845 at 10½ or 11½ d. per pound. (See the testimony of Wylie farther on.)
This whole question may be decided by the following considerations:
A supply and demand of loan capital would be identical with a demand and supply of capital in general (although this last phrase is absurd; for the industrial or commercial capitalist a commodity is a form of his capital, yet he never asks for capital as such, but only for this particular commodity as such, buys and sells it as a commodity, corn or cotton, regardless of the role which it has to play in the rotation of his capital), if there were no money lenders, and if in their stead the lending capitalists were in possession of machinery, raw materials, etc., which they would rent or loan just as houses are now, to the industrial capitalists, who are themselves part owners of these things. Under such circumstances the supply of loan capital would be identical with the supply of elements of production for the industrial capitalist, and of commodities for the merchant. But it is evident, that then the division of profit between the lender and borrower would depend primarily upon the proportion, in which this capital is loaned and in which it is the property of the one who employs it.
According to Mr. Weguelin (B. A. 1857) the rate of interest is determined by "the mass of unemployed capital" (252); it is "but an index of the mass of unemployed capital seeking investment" (271); later this unemployed capital becomes a "floating capital" (485) and by this he means " notes of the Bank of England and other means of circulation in the country, for instance the notes of provincial banks and the coins existing in the country....I include in the floating capital also the reserves of the banks" (502,503), and later he includes also gold bullion (503). Thus the same Mr. Weguelin says that the Bank of England has a great influence upon the rate of interest in times, when "we" (the Bank of England) actually have the greater portion of the unemployed capital in our hands (1198), while according to the above testimony of Mr. Overstone the Bank of England "is no place for capital." Mr. Weguelin further says: "In my opinion the rate of discount is regulated by the quantity of the unemployed capital in the country. The quantity of unemployed capital is represented by the reserve. of the Bank of England, which is in fact a metal reserve. Hence when the metal hoard is reduced, it reduces the quantity of unemployed capital in the country and consequently raises the value of the remaining quantity." (1258.) J. Stuart Mill says, 1102: "The Bank is compelled, in order to keep its banking department solvent, to do its utmost to fill the reserve of this department, hence as soon as it finds that a drain begins, it must secure its reserve and either reduce its discounts or sell securities."—The reserve, so far as only the banking department is concerned, is a reserve for the deposits only. According to the Overstones the banking department is supposed to act only as a banker, without regard to any "automatic" issue of notes. But in times of actual stringency this institution, independently of the reserve of the banking department, which consists only of notes, keeps a sharp eye on the metal reserve, and must do so, if it would not fail. For in proportion as the metal reserve dwindles, disappears also the reserve of bank notes, and no one should know this better than Mr. Overstone, who has so wisely arranged this by his Bank Acts of 1844.