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EXPERIENCE will at once suggest that what we call "funds" must be something that will be accepted by others, in exchange, for their goods or services-i. e., something that others will regard as valuable to them in their own business transactions. Those things which will serve as "funds" to one, must have such qualities that they will serve as "funds" to others. By way of illustration let us suppose that a blacksmith in Springfield wishes to enlarge his business. To that end he begins to accumulate a store of horseshoe nails. Each week he lays by twelve pounds of nails, until at last he has a ton of them. This might serve as "funds" in a community where every one desires horseshoe nails, but in Springfield not one in a thousand can make use of them. With this stock in hand he

is not able to buy bricks, lime, and machinery, and pay for labor. Horseshoe nails are not "funds" in Springfield. The blacksmith, however, finds a man who can make use of a ton of nails; he exchanges them for ten double eagles of gold. He has sold his nails for no other purpose than to obtain something that will serve as funds. With $200 in gold he may purchase the materials and equipment desired. He has "funded" his enterprise.

The whole system of finance grows out of the economy of exchange. Where commerce exists as a feature of business enterprise, where the effort of each member of a community goes to produce that for which he is best fitted and relies on exchange of things produced for other things de


sired, it is to the advantage of each to provide himself with "funds" with which purchases and payments may be made. A "fund" is a collection, or store, or amount of something by means of which purchases and payments may be made. The word "funds" signifies any and all things which may be accumulated and which may be currently used in a community in exchange for the goods or properties of others. As has been suggested before, the consent of Definitions- both parties is necessary to an exchange. That which will serve as funds must have such qualities as will induce others to give their consent to part with the things which they own, in exchange. Funds which are collected or stored up to pay living expenses, or for the purchase of comforts and enjoyment, may be called “maintenance funds." They answer the same purpose to the individual as a fund laid by for the "maintenance" of a manufacturing plant. Funds which are collected or provided for business equipment are called "capital funds." The capital of a business concern is made up of funds contributed to it for permanent use. A money or a credit reserve laid by for the payment (sinking) of a debt is called a "sinking fund." When money is stored up for the purpose of hiding it away, and not for use, it is called a “safe deposit or a “hoard.” This, however, does not properly come within the field of finance. To "fund" an enterprise is to provide the means whereby such purchases and payments may be made as are necessary to its success. One whose business it is to provide funds for business enterprise is called a "capitalist"; the manager of funds is a "financier"; he who hoards money is a "miser." A "funded debt" is one for which some definite and adequate provision is made for its payment when due. To illustrate: A borrows $1,000 from B. A thereby procures "funds" for his enterprise; he funds his undertaking; he secures a working capital of $1,000. The instrument employed to this end is a contract for the future delivery of money

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which he sells to B for the funds desired. But before B delivers the $1,000 to A in exchange for the note, he demands that some definite provision be made for its payment. Complying with this demand, A executes a mortgage on his farm as "security" for the payment of the note. The mortgage is a conditional deed to his land, the condition being that in case A fails to pay the note when due, B may sell the farm, and out of the "funds" thereby obtained retain enough to pay the note. In other words, A sets aside property in trust, the sale of which will create a fund sufficient "to pay" his debt.

Two forms of funds.

Funds must be in one of two forms: (1) That which passes in the community as money will serve-in fact, money is a necessary part of a funding system. On the other hand, a funding system is essential to a money economy; the two are interdependent. Enterprise could not be funded without money; money could have no current use unless it could be accumulatedbrought together as a fund. (2) With the development of a system of money exchange and the accumulation of money funds under settled social conditions, another form of funds comes into use, namely, credit. Instead of "money funds" being kept on hand by each member of the business community, a few individuals or institutions hold a large store of money "in reserve," and the business community makes its arrangements with them for forms of credit which will serve their financial needs more readily than would money itself. Under all modern systems of finance, by far the greater part of business enterprise is "funded" by means of credit. The manner in which this is done will appear later.


Two qualities or characteristics are essential to money. In the first place, those things which are used as money within a given community must exist in such quantities as

to allow the various members of the community to collect them into "funds" large enough to make the purchases and Essential payments necessary to their business undertakcharacteris- ings. A people can not use for their money tics of money. that which they do not possess; the thing employed must exist in such quantities that it may be had when needed. In the second place, the money commodity must be so highly valued by all that it will readily be taken in exchange for goods offered for sale. No two persons may place the same estimate of value on it; judgments of value of the thing used as money may differ as widely as its various uses, but value it must have in the judgment of all with whom exchanges are to be made. Otherwise a business man could not get together, or offer, enough of the commodity to cause another to think that he would profit by an exchange for it.


1. A money fund must admit of di

vision into units.

To this end the things accumulated for use as money must admit of being divided with such accuracy as to enable one readily to calculate the amount or portion on which his judgment of value is to be based. If, for example, some one offers a horse for $100, it must be known at once just how much gold is intended before one can form a judgment as to whether he would prefer the gold or the horse. The money offered must admit of division into comparatively uniform units. In a pastoral community sheep may be used as money; a flock of sheep may be divided into units. One hundred sheep or fifty sheep have a very definite meaning. There is uniformity enough about the primitive sheep to satisfy the judgment of the primitive man. Then, instead of judging the comparative values of a goat, an ox, a horse, and a stack of fodder in

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