For We Must Always Remember That Finance Is Only The Handmaid Of Industry

Category: Finance, Financial Planning.

Capital, is wealth invested, then in industry, finance is the machinery by which this process of investment is carried out, and international finance is the machinery by which the wealth of one country is invested in another.

So here we have this quiet country doctor spreading all over the world the money that he gets for dosing and poulticing and dieting his patients, stimulating industry in many climates and bringing some part of its proceeds to be added to his store. Let us consider the case of a doctor in a provincial town who is making an annual income of about L800 a year, living on L600 of it and saving L20Instead of spending this quarter of his income on immediate enjoyments, such as wine and cigars, and journeys to London, he invests it in different parts of the world through the mechanism of international finance, because he has been attracted by the advantages of a system of investment which was fashionable some years ago, which worked by what was called Geographical Distribution. [2] This meant to say that the investors who practised it put their money into as many different countries as possible, so that the risk of loss owing to climatic or other disturbances might be spread as widely as possible. Let us see how the process works. As long as his money is in the bank, the bank has the use of it, and not much of it is likely to go abroad. First of all he has a bank, into which he pays day by day the fees that he receives in coin or notes and the cheques that he gets, from those of, each half year his patients who have an account with him. For the banks use most of the funds entrusted to them in investments in home securities, or in loans and advances to home customers. A bill of exchange is an order to pay.

Part of them they use in buying bills of exchange drawn on London houses by merchants and financiers all over the world, so that even when he pays money into his bank it is possible that our doctor is already forming part of the machinery of international finance and involving us in the need for an explanation of one of its mysteries. When a merchant in Argentina sells wheat to an English buyer, he draws a bill on the buyer( or some bank or firm in England whom the buyer instructs him to draw on) , saying, "Pay to me" (or anybody else whom he may name) "the sum of so many pounds. " This bill, if it is drawn on a firm or company of well known standing, the seller of the wheat can immediately dispose of, and so has got payment for his goods. These bills of exchange, are promises to, when thus accepted pay entered into by firms of first- rate standing, and are held as investments by English banks. Usually the bill is made payable two or three, or sometimes six months after sight, that is after it has been received by the firm on which it is drawn, and" accepted" by it, that is signed across the front to show that the firm drawn on will pay the bill when it falls due. Bills of exchange are also drawn on English houses to finance trade transactions between foreign countries, and also as a means of borrowing money from England. When they are drawn on behalf of foreign countries, trading with other foreigners, or using the credit to lend to other foreigners, the connection with international finance is obvious. When they are drawn on behalf of English customers, the credit given is given at home, but as it is( almost always) given in connection with international trade, the transaction may be considered as part of international finance.

They are readily taken all over the world, because all over the world there are people who have payments to make to England owing to the wide distribution of our trade, and it has long been England s boast that bills of exchange drawn on London firms are the currency of international commerce and finance. Certainly this danger is a real one, but it does not follow that we shall not be able to meet it and defeat it. Some people tell us that this commanding position of the English bill in the world s markets is in danger of being lost owing to the present war: in the first place because America is gaining wealth rapidly, while we are shooting away our savings, and also because the Germans will make every endeavour to free themselves from dependence on English credit for the conduct of their trade. If the war teaches us to work hard and consume little, so that when peace comes we shall have a great volume of goods to export, there is no reason why the bill on London should not retain much if not all of its old prestige and supremacy in the marts of the world. She is often a pert handmaid who steals her mistress s clothes and tries to flaunt before the world as the mistress, and so she sometimes imposes on many people who ought to know better, who think that finance is an all- powerful influence. For we must always remember that finance is only the handmaid of industry. Finance is a mighty influence, but it is a mere piece of machinery which assists, and lives on, quickens production.

The men who make and grow things, and carry them from the place where they are made and grown to the place where they are wanted, these are the men who furnish the raw material of finance, without which it would have to shut up its shop.

Read more...

What Is A 457 Plan - Finance and Financial Planning Articles:

What is a 457 plan? Contributions made to the plan with pre- tax money, and contributions are, earnings tax deferred while under the plan, and contributions are generally made by the employee, although some plans do have contributions by employees as well.

If You See Something You Think You Really Need, Give Yourself Two Weeks To Decide If It Is Really Something You Need Or Something You Can Easily Do Without - Ingrid Grimley's Finance and Financial Planning blog:

This is just a small example of impulse spending. Answer these questions truthfully: ) Does your spouse or partner complain that you spend too much money? ) Are you surprised each month when your credit card bill arrives at how much more you charged than you thought you had? ) Do you have more shoes and clothes in your closet than you could ever possibly wear? ) Do you own every new gadget before it has time to collect dust on a retailer s shelf? ) Do you buy things you didn t know you wanted until you saw them on display in a store?