1.

Change in role of money -- With the development of commerce and of the capitalist
mode of production, which produces solely with an eye to circulation, the natural basis of
the credit system is extended, generalised, and worked out. Money serves here, by and
large, merely as a means of payment, i.e., commodities are not sold for money, but for a
written promise to pay for them at a certain date.

2. Bills of exchange evolved The written promise to pay for the commodities at a
certain date i.e promissory notes came under the general head of bills of exchange.
3. The bills of exchange circulate as means of payment until the day on which they fall
due.They form the actual commercial money.They act as actual money as they neutralize
one another through the balancing of claims and debts.
4. What is credit -- Credit, in its most simple expression, is the confidence which, well, or
ill-founded, leads a person to entrust another with a certain amount of capital, in money,
or in goods computed at a value in money agreed upon, and in each case payable at the
expiration of a fixed term. In every country the majority of credit transactions takes place
within the circle of industrial relations... The producer of the raw material advances it to
the processing manufacturer, and receives from the latter a promise to pay on a certain
day. The manufacturer, having completed his share of the work, in his turn advances his
product on similar terms to another manufacturer, who has to process it further, and in
this way credit stretches on and on, from one to the other, right up to the consumer.
Just as these mutual advances of producers and merchants make up the real foundation
of credit, so does the instrument of their circulation, the bill of exchange, form the basis
of credit-money proper, of bank-notes, etc. These do not rest upon the circulation of
money, be it metallic or government-issued paper money, but rather upon the circulation
of bills of exchange.
5. How fictitious capital develops from bills of exchanges --- It is impossible to
decide what part arises out of real bona fide transactions, such as actual bargain and
sale, or what part is fictitious and mere accommodation paper, that is , where one bill of
exchange is drawn to take up another running, in order to raise a fictitious capital by
creating so much currency.
6. Role of bank The banks act as middlemen between the actual lender and the
borrower of money-capital. Generally speaking, this aspect of the banking business
consists of concentrating large amounts of the loanable money-capital in the bankers'
hands, so that, in place of the individual money-lender, the bankers confront the
industrial capitalists and commercial capitalists as representatives of all moneylenders.
They become the general managers of money-capital. On the other hand by borrowing
for the entire world of commerce, they concentrate all the borrowers vis--vis all the
lenders. A bank represents a centralisation of money-capital, of the lenders, on the one
hand, and on the other a centralisation of the borrowers. Its profit is generally made by
borrowing at a lower rate of interest than it receives in loaning.
7. The relation between trade , speculation and crisis -- "whatever gives facilities to
trade gives facilities to speculation. Trade and speculation are in some cases so nearly
allied, that it is impossible to say at what precise point trade ends and speculation
begins. Gilbaert. The easier it is to obtain advances on unsold commodities, the more
such advances are taken, and the greater the temptation to manufacture commodities, or
dump already manufactured commodities in distant markets, just to obtain advances of
money on them.In 1842 English industry developed a system of mass consignments to
India and China against advance payments, and this soon developed into a system of
consignments purely for the sake of getting advances, which led inevitably to over-
flooding the markets and a crash.