[Footnote 1: Pages 24, 25.]




CHAPTER II


BANKING MACHINERY

Capital, then, is wealth invested 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.

Let us consider the case of a doctor in a provincial town who is making
an annual income of about £800 a year, living on £600 of it and saving
£200. Instead 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. 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 see how the process works.