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Capital And Its Reward: Could Our Society Exist Without It?
Finance, in the sense in which it is going to be applied in this article, means the machinery of money dealing. That is, the machinery by which money which you and I save is combined and given out to individuals who want to use it.
Money therefore saved and lent is capital. So finance is the machinery that handles capital, collects it from people who save it, lends it to those that wish to use it and consent to pay a price for the loan of it. This cost is called the rate of interest, or profit.
The borrower presents this cost simply because he hopes to be able, immediately after paying it, to benefit himself out of what he's going to make or grow or get with its help. If it's a Government, it wants to improve the country's wealth by its use.
From time to time applicants want money because they have been spending more than they've been getting, and attempt to tide over a difficulty by paying one set of creditors with the help of another, rather than of lowering their spending.
This path, if followed far enough, leads to bankruptcy for the borrower and loss to the lender.
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If no price were offered for capital, none of us save it, or if we saved it we didn't risk our funds by lending it, but hide it in a hole, or lock it up in a storage space, and so there could be no new industry.
When it's 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 employed, is far from becoming a sinister and suspicious weapon in the hands of those who have somehow managed to seize it.
It really is in fact so necessary to all kinds of industry, that people 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.
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