g railways, they borrow, in effect, these materials, in the
expectation that the railways will open out their resources, enable them
to put more land under the plough and bring more stuff to the seaboard,
to be exchanged for the products of Europe. The new country, New Zealand
or Japan, or whichever it may be, raises a loan in England for the
purpose of building a railway, but it does not take the money raised by
the loan in the form of money, but in the form of goods needed for the
railway, and sometimes in the form of the services of those who plan and
build it. It does not follow that all the stuff and services needed for
the enterprise are necessarily bought in the country that lends the
money; for instance, if Japan borrows money from us for a railway, she
may buy some of the steel rails and locomotives in Belgium, and
instruct us to pay Belgium for her purchases. If so, instead of sending
goods to Japan we shall have to send goods or services to Belgium, or
pay Belgium with the claim on some other country that we have
established by sending goods or services to it. But, however long the
chain may be, the practical fact is that when we lend money we lend
somebody the right to claim goods or services from us, whether they are
taken from us by the borrower, or by somebody to whom the borrower gives
a claim on us.

If, whenever we made a loan, we had to send the money to the borrower in
the form of gold, our gold store would soon be used up, and we should
have to leave off lending. In other words, our financiers would have to
retire from business very quickly if it were not that our manufacturers
and shipowners and all the rest of our industrial army produced the
goods and services to meet the claims on our industry given, or rather
lent, to other countries by the machinery of finance.

This obvious truism is often forgotten by those who look on finance as
an independent influence that can make money power out of nothing; and
those who forget it are very likely to find themselves entangled in a
maze of error. We can make the matter a little clearer if we go back to
the original saver, whose money, or claims on industry, is handled by
the professional financier. Those who save do so by going without
things. Instead of spending their earnings on immediate enjoyment they
spend part of them in providing somebody else with goods that they need,
and taking from that somebody else an annual payment for the use of
these good