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.

Municipalities likewise borrow both for reproductive purposes and for objects from which no direct revenue can be expected.  They may invest money lent them in gas or electric works or water supply or tramways, and get an income from them which will more than pay the interest on the money borrowed.  Or they may put it into public parks and recreation grounds or municipal buildings, or improvements in sanitation, thereby beautifying and cleansing the town.  If they do these things in such a way as to make the town a pleasanter and healthier place to live in, they may indirectly increase their revenue; but if they do them extravagantly and badly, they run the risk of putting a burden on the ratepayers that will make people shy of living within their borders.

Whatever be the object for which the loan is issued, the procedure is the same by which the money is raised.  The Government or municipality invites subscriptions through a bank or through some great financial house, which publishes what is called a prospectus by circular, and in the papers, giving the terms and details of the loan.  People who have money to spare, or are able to borrow money from their bankers, and are attracted by the terms of the loan, sign an application form which is issued with the prospectus, and send a cheque for the sum, usually 5 per cent. of the amount that they apply for, which is payable on application.  If the loan is over-subscribed, the applicants will only receive part of the sums for which they apply.  If it is not fully subscribed, they will get all that they have asked for, and the balance left over will be taken up in most cases by a syndicate formed by the bank or firm that issued the loan, to “underwrite” it.  Underwriting means guaranteeing the success of a loan, and those who do so receive a commission of anything from 1 to 3 per cent.; if the loan is popular and goes well the underwriters take their commission and are quit; if the loan is what the City genially describes as a “frost,” the underwriters may find themselves saddled with the greater part of it, and will have the pleasure of nursing it until such time as the investing public will take it off their hands.  Underwriting is thus a profitable business when times are good, and the public is feeding freely, but it can only be indulged in by folk with plenty of capital or credit, and so able to carry large blocks of stock if they find themselves left with them.