ABSTRACT
The finance industry is not an industry in the generally understood sense. It does not bring together raw materials, labour power, capital, etc. and convert them into a finished product for sale. Instead it deals in one commodity - money. Principally it borrows money in the form of deposits, savings or pensions and insurance contributions, and then lends or invests it again. It gains an M1 - M increment (see Chapter 1) by paying a certain percentage to the owner for the use of the money, or promising to pay back a larger sum at some future date, and then re-using the money in ways which produce a percentage or return in excess of this. One could at once ask why the original owner does not invest the money directly into the activities that produce the higher return. A small minority do, principally by placing their funds at risk in initiating some entrepreneurial activity of their own. But the uncertainties of this course of action make it unattractive to the majority. To minimize the risk expertise is required, and often investment on a scale that very few individuals could contemplate.
