By D. R. Forgan.*

There is a sense in which all business enterprises are investments. To build a ship or a railroad, to start a store or factory, to pay wages or place an advertisement - to do anything, in short, which involves an outlay of money for the purpose of increasing it - is an investment of capital. That is the sense in which political economists use the word, but in common use it has a more restricted meaning, viz.: the outlay of money in the purchase of property or securities which are expected to yield a sure and regular income without further effort on the part of the investor. This discussion will be limited to what may be included in that definition.

At the outset it may be well to have a clear view as to what funds are available for investment; or to answer the question so often asked as to where all the money comes from to pay for the enormous issues of securities which are constantly being brought out. A recent writer on this subject begins with the statement that the bank deposits of the United States increased in the seven years from 1893-1900 by $4,000,000,000, and that "the effort to place this enormous amount of new capital has disorganized the entire field of investment." This is not correct. If the author had looked deeper, he would have seen that the increase in loans had kept pace with the increase of deposits, and that the banks had no greater percentage of reserves in 1900 than in 1893. In fact about the time this pamphlet appeared the banks in New York were under their legal reserves, and money was bringing good rates all over the country because it was scarce. Only such portion of the increase of deposits as represented the savings of the masses, or the surplus earnings of commercial enterprises, was available for investment. The remainder, which constituted by far the larger part of the deposits, represented only expansion of credit, and was not available for permanent invest-ment.

*From a lecture delivered to the students of the University of Chicago. Mr. Forgan is president of the National City Bank of Chicago.