Banking Machinary
Below is a MRR and PLR article in category Finance -> subcategory Other.
Banking Machinery
Summary
Capital refers to wealth invested in industry. Finance is the mechanism facilitating this investment, while international finance enables one country's wealth to be invested in another.
Keywords
Capital, money, finance, lending, borrowers, wealth, international finance, bills of exchange, banking, trade
Article
Capital is the wealth invested in industry, while finance serves as the machinery facilitating this investment. International finance expands this concept, allowing a country's wealth to be invested abroad.
Consider a doctor in a provincial town earning L800 annually. He lives on L600 and saves L200. Rather than spending on immediate pleasures like wine and cigars or trips to London, he opts for international investment. This approach, known as Geographical Distribution, was once fashionable because it spread the risk of loss across various countries.
Thus, this country doctor effectively stimulates industries worldwide by investing the earnings from his medical practice. Let’s explore how this process unfolds.
The doctor deposits his earnings?"both in cash, notes, and cheques?"into a bank. While in the bank, his money primarily supports domestic investments or loans. However, some funds finance bills of exchange drawn on London by merchants and financiers globally. This means that even when depositing money, the doctor becomes part of the international finance machinery.
A bill of exchange is essentially an order to pay. For example, if a merchant in Argentina sells wheat to an English buyer, he can draw a bill on the buyer or a bank in England. This bill allows him to receive payment immediately, even though the payment is due months later. Accepted bills, endorsed by reputable firms, are considered investments by English banks. These bills often finance international trade and borrowing.
Bills of exchange are widely accepted because global trade often involves transactions with England. England's bills of exchange have long been the currency of international commerce.
However, the English bill's dominant position faces challenges. The rise of American wealth and efforts by other nations to reduce reliance on English credit present real risks. Yet, by working hard and conserving resources, England can maintain its prestige in global markets.
Finance, although influential, is merely a tool that supports and thrives on production. The true drivers are those who create and transport goods to meet global demands. Without them, finance would be rendered obsolete.
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