What Is Financial Securities

What Is Financial Securities



What is​ Financial Securities
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.
But in​ actual practice those who save do not pile up a​ large balance at​ their banks .​
They keep what is​ called a​ current account, consisting of​ amounts paid in​ in cash or​ in​ cheques on other banks or​ their own bank, and against this account they draw what is​ needed for their weekly and monthly payments; sometimes, also, they keep a​ certain amount on deposit account, that is​ an​ account on which they can only draw after giving a​ week's notice or​ more.
On their deposit account they receive interest, on their current account they may in​ some parts of​ the country receive interest on the average balance kept.
But the deposit account is​ most often kept by people who have to​ have a​ reserve of​ cash quickly available for business purposes .​
The ordinary private investor, when he has got a​ balance at​ his bank big enough to​ make him feel comfortable about being able to​ meet all probable outgoings, puts any money that he may have to​ spare into some security dealt in​ on the Stock Exchange, and so securities and the Stock Exchange have to​ be described and examined next .​
They are very much to​ the point, because it​ is​ through them that international finance has done most of​ its work.
Securities, then, are the stocks, shares and bonds which are given to​ those who put money into companies, or​ into loans issued by Governments, municipalities and other public bodies .​
Let us take the Governments and public bodies first, because the securities issued by them are in​ some ways simpler than those created by companies.
When a​ Government wants to​ borrow, it​ does so because it​ needs money .​
The purpose for which it​ needs it​ may be to​ build a​ railway or​ canal, or​ make a​ harbour, or​ carry out a​ land improvement or​ irrigation scheme, or​ otherwise work some enterprise by which the power of​ the country to​ grow and make things may be increased .​
Enterprises of​ this kind are usually called reproductive, and in​ many cases the actual return from them in​ cash more than suffices to​ meet the interest on the debt raised to​ carry them out, to​ say nothing of​ the direct benefit to​ the country in​ increasing its output of​ wealth .​
In England the government has practically no debt that is​ represented by reproductive assets .​
Our Government has left the development of​ the country's resources to​ private enterprise, and the only assets from which it​ derives a​ revenue are the Post Office buildings, the Crown lands and some shares in​ the Suez Canal which were bought for a​ political purpose .​
Governments also borrow money because their revenue from taxes is​ less than the sums that they are spending .​
This happens most often and most markedly when they are carrying on war, or​ when nations are engaged in​ a​ competition in​ armaments, building navies or​ raising armies against one another so as​ to​ be ready for war if​ it​ happens .​
This kind of​ debt is​ called dead-weight debt, because there is​ no direct or​ indirect increase, in​ consequence of​ it, in​ the country's power to​ produce things that are wanted.
This kind of​ borrowing is​ generally excused on the ground that provision for the national safety is​ a​ matter which concerns posterity quite as​ much as​ the present generation, and that it​ is, therefore, fair to​ leave posterity to​ pay part of​ the bill.




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