|
Section I
CAPITAL AND ITS REWARD
Finance, in the sense in which it will be used here, means the
machinery of money dealing. That is, the machinery by which money which
you and I save is put together and lent out to people who want to borrow
it. Finance becomes international when our money is lent to borrowers in
other countries, or when people in England, who want to start an
enterprise, get some or all of the money that they need, in order to do
so, from lenders oversea. The biggest borrowers of money, in most
countries, are the Governments, and so international finance is largely
concerned with lending by the citizens of one country to the Governments
of others, for the purpose of developing their wealth, building
railways and harbours or otherwise increasing their power to produce.
Money thus saved and lent is capital. So finance is the machinery that
handles capital, collects it from those who save it and lends it to
those who want to use it and will pay a price for the loan of it. This
price is called the rate of interest, or profit. The borrower offers
this price because he hopes to be able, after paying it, to benefit
himself out of what he is going to make or grow or get with its help, or
if it is a Government because it hopes to improve the country's wealth
by its use. Sometimes borrowers want money because they have been
spending more than they have been getting, and try to tide over a
difficulty by paying one set of creditors with the help of another,
instead of cutting down their spending. This path, if followed far
enough, leads to bankruptcy for the borrower and loss to the lender.
If no price were offered for capital, we should none of us save, or if
we saved we should not risk our money by lending it, but hide it in a
hole, or lock it up in a strong room, and so there could be no new
industry.
Since capital thus seems to be the subject-matter of finance and it is
the object of this book to make plain what finance does, and how, it
will be better to begin with clear understanding of the function of
capital. All the more because capital is nowadays the object of a good
deal of abuse, which it only deserves when it is misused. When it is
misused, let us abuse it as heartily as we like, and take any possible
measures to punish it. But let us recognize that capital, when well and
fairly used, is far from being a sinister and suspicious weapon in the
hands of those who have somehow managed to seize it; but is in fact so
necessary to all kinds of industry, that those who have amassed it, and
placed it at the disposal of industry render a service to society
without which society could not be kept alive.
NEXT
* Disclaimer: this historical guide is for
research only - if you need advice, always consult the latest resources and seek
professional help.
Compare
USA Loans and Mortgages - Free Quotes
Compare
UK Loans and Mortgages - Free Quotes
Compare
Insurance - Free Quotes
Get the Free Mortgage Quotes - do
not bid for the free information service - some individuals and some companies are charging money for mortgage information that is freely available. |