financetank

As to naval expenditure, here again we have bad finance writ large over the proposal. It is not good business for countries to borrow in order to increase their armies and navies in time of peace, and the practice is especially objectionable when the loan is raised abroad. In time of war, when expenditure has to be so great and so rapid, that the taxpayers could not be expected to have it all taken out of their pockets by the tax-gatherer, there is some excuse for borrowing for naval and military needs; though even in time of war, if we could imagine an ideal State, with every citizen truly patriotic, and properly educated in economics and finance, and with wealth so fairly distributed and taxation so fairly imposed that there would be no possibility of any feeling of grievance and irritation among any class of taxpayers, it would probably decide that the simplest and most honest way of financing war is to do so wholly out of taxation. In time of peace, borrowing for expenditure on defence simply means that the cost of a need of to-day is met by someone who is hired to meet it, by a promise of interest and repayment, the provision of which is passed on to the citizens of to-morrow. It is always urged, of course, that the citizens of to-morrow are as deeply interested in the defence of the realm that they are to inherit as those of to-day, but that argument ignores the obvious fact that to-morrow will bring its own problems of defence with it, which seem likely to be at least as costly as those of the present day. Another objection to lending economically backward countries money to be invested in ships, is that we thereby encourage them to engage in shipbuilding rivalry, and to join in that race for aggressive power which has laid so sore a burden on the older peoples. The business is also complicated by the unpleasant activities of the armament firms of all countries, which are said to expend much ingenuity in inducing the Governments of the backward peoples to indulge in the luxury of battleships. Here, again, there is no need to paint too lurid a picture. The armament firms are manufacturers with an article to sell, which is important to the existence of any nation with a seaboard; and they are entirely justified in legitimate endeavours to push their wares. The fact that the armament firms of England, Germany, and France had certain interests in common, is often used as a text for sermons on the subject of the unpatriotic cynicism of international finance. It is easy to paint them as a ring of cold-blooded devils trying to stimulate bloodthirsty feeling between the nations so that there may be a good market for weapons of destruction. From their point of view, they are providers of engines of defence which they make, in the first place, for the use of their own country, and are ready to supply also, in time of peace, to other nations in order that their plant may be kept running, and the cost of production may be kept low. This is one of the matters on which public opinion may have something to say when the war is over. In the meantime it may be noted that unsavoury scandals have occasionally arisen in connection with the placing of battleship orders, and that this is another reason why a loan to finance them is likely to have an unpleasant flavour in the nostrils of the fastidious.

Other Securities 7,434,900
Gold Coin and Bullion 38,458,235
Silver Bullion —
———– ———–
?6,908,235 ?6,908,235
———– ———–

where they can best be made and grown remains just as true as ever it
was, but it has been complicated by a political objection that if one
happens to go to war with a nation that has supplied raw material, or
half-raw material, for industries that are essential to our commercial
if not to our actual existence, the good profits made in time of peace
are likely to be wiped out, or worse, by the extent of the inconvenience
and paralysis that this dependence brings with it in time of war
The economic argument, then, that it pays best to make and grow things
where they can best be made and grown remains just as true as ever it
was, but it has been complicated by a political objection that if one
happens to go to war with a nation that has supplied raw material, or
half-raw material, for industries that are essential to our commercial
if not to our actual existence, the good profits made in time of peace
are likely to be wiped out, or worse, by the extent of the inconvenience
and paralysis that this dependence brings with it in time of war. And
even if we are not at war with our providers, the greater danger and
cost of carriage by sea, when war is afoot, makes us question the
advantage of the process, for example, by which we have developed a
foreign dairying industry with our capital, and learnt to depend on it
for a large part of our supply of eggs and butter, while at home we have
seen a great magnate lay waste farms in order to make fruitful land into
a wilderness for himself and his deer. It may have paid us to let this
be done if we were sure of peace, but now that we have seen what modern
warfare means, when it breaks out on a big scale, we may surely begin to
think that people who make bracken grow in place of wheat, in order to
improve what auctioneers call the amenities of their rural residences,
are putting their personal gratification first in a question which is of
national importance.

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its reward, do so on the ground that capital is often acquired by
questionable means, they are barking up the wrong tree
Hence it is that when some of those who question the right of capital to
its reward, do so on the ground that capital is often acquired by
questionable means, they are barking up the wrong tree. Capital can only
be acquired by selling something to you and me. If you and I had more
sense in the matter of what we buy, capital could not be acquired by
questionable means. By our greed and wastefulness we give fortunes to
bookmakers, market-riggers and money-lenders. By our preference for
‘brilliant’ investments, with a high rate of interest and bad security,
we invite the floating of rotten companies and waterlogged loans. By our
readiness to be deafened by the clamour of the advertiser into buying
things that we do not want, we hand industry over to the hands of the
loudest shouter, and by our half-educated laziness in our selection of
what we read and of the entertainments that we frequent, we open the way
to opulence through the debauching of our taste and opinions. It is our
fault and ours only. As soon as we have learnt and resolved to buy and
enjoy only what is worth having, the sellers of rubbish may put up their
shutters and burn their wares.

property ownership, receives a property income
‘The individual who receives a return because of his
property ownership, receives a property income. This man has
a title deed to a piece of unimproved land lying in the
centre of a newly developing town. A storekeeper offers him
a thousand dollars a year for the privilege of placing a
store on the land. The owner of the land need make no
exertion. He simply holds his title. Here a man has labored
for twenty years and saved ten thousand dollars by denying
himself the necessaries of life. He invests the money in
railroad bonds, and someone insists he thereby serves
society. In one sense he does serve. In another, and a
larger sense, he expects the products of his past service
(the twenty years of labor), to yield him an income. From
the day when he makes his investment he need never lift a
finger to serve his fellows. Because he has the investment,
he has income. The same would hold true if the ten thousand
dollars had been left him by his father or given to him by
his uncle…. The fact of possession is sufficient to yield
him an income.’

save as long as it is left in the hands of their bankers, and we have
seen that it is only likely to be employed internationally, if invested
by bankers in bills of exchange which form a comparatively small part of
their assets
So far we have only considered what happens to the money of those who
save as long as it is left in the hands of their bankers, and we have
seen that it is only likely to be employed internationally, if invested
by bankers in bills of exchange which form a comparatively small part of
their assets. It is true that bankers also invest money in securities,
and that some of these are foreign, but here again the proportion
invested abroad is so small that we may be reasonably sure that any
money left by us in the hands of our bankers will be employed at home.

1.F.5. Some states do not allow disclaimers of certain implied
warranties or the exclusion or limitation of certain types of damages.
If any disclaimer or limitation set forth in this agreement violates the
law of the state applicable to this agreement, the agreement shall be
interpreted to make the maximum disclaimer or limitation permitted by
the applicable state law. The invalidity or unenforceability of any
provision of this agreement shall not void the remaining provisions.

To return to our Ruritanian loan, which we left being underwritten. The prospectus duly comes out and is advertised in the papers and sown broadcast over the country through the post. It offers 1,500,000 (part of 3,000,000 of which half is reserved for issue in Paris), 4-1/2 per cent. bonds of the Kingdom of Ruritania, with interest payable on April 1st and October 1st, redeemable by a cumulative Sinking Fund of 1 per cent., operating by annual drawings at par, the price of issue being 97, payable as to 5 per cent. on application, 15 per cent. on allotment and the balance in instalments extending over four months. Coupons and drawn bonds are payable in sterling at the countinghouse of the issuing firm. The extent of the other information given varies considerably. Some firms rely so far on their own prestige and the credit of those on whose account they offer loans, that they state little more than the bare terms of the issue as given above. Others deign to give details concerning the financial position of the borrowing Government, such as its revenue and expenditure for a term of years, the amount of its outstanding debt, and of its assets if any. If the credit of the Kingdom of Ruritania is good, such a loan as here described would be, or would have been before the war, an attractive issue, since the investor would get a good rate of interest for his money, and would be certain of getting par or 100, some day, for each bond for which he now pays 97. This is ensured by the action of the Sinking Fund of 1 per cent. cumulative, which works as follows. Each year, as long as the loan is outstanding the Kingdom of Ruritania will have to put 165,000 in the hands of the issuing houses, to be applied to interest and Sinking Fund. In the first year interest at 4-1/2 per cent. will take 135,000 and Sinking Fund (1 per cent. of 3,000,000) 30,000; this 30,000 will be applied to the redemption of bonds to that value, which are drawn by lot; so that next year the interest charge will be less and the amount available for Sinking Fund will be greater; and each year the comfortable effect of this process continues, until at last the whole loan is redeemed and every investor will have got his money back and something over. The effect of this obligation to redeem, of course, makes the market in the loan very steady, because the chance of being drawn at par in any year, and the certainty of being drawn if the investor holds it long enough, ensures that the market price will be strengthened by this consideration.

stocks–that is, if our Government or one of our municipalities issues a
loan, the subscribers have their names registered in a book by the
debtor, or its banker, and merely hold a certificate which is a receipt,
but the possession of which is not in itself evidence of ownership
In England we chiefly affect what are called registered and inscribed
stocks–that is, if our Government or one of our municipalities issues a
loan, the subscribers have their names registered in a book by the
debtor, or its banker, and merely hold a certificate which is a receipt,
but the possession of which is not in itself evidence of ownership.
There are no coupons, and the half-yearly interest is posted to
stockholders, or to their bankers or to any one else to whom they may
direct it to be sent. Consequently when the holder sells it is not
enough for him to hand over his certificate, as is the case with a
bearer security, but the stock has to be transferred into the name of
the buyer in the register kept by the debtor, or by the bank which
manages the business for it.