But in the real world, the constraint the market imposes on you is that you can’t spend more today than the money available to you today. Which, in the most extreme form, means that the income you’ve collected in the past is the hard limit on how much you can spend today. That’s the ultimate form of market discipline and, in that sense, the whole function of finance is to remove that discipline — to allow spending today based on future income that hasn’t yet been received, and may not be received.

In a fundamental sense, the reason we have finance is to allow money-losing enterprises to operate. The money-losing enterprises are the ones whose current activities don’t fully pay for themselves, which is why they need to raise finances in the first place. That’s what it means, in a cash-flow sense, to be carrying out investment: you’re carrying out activities which, in the current period, don’t pay for themselves. You believe, you hope, that they will pay for themselves in the future, but at the moment they don’t.

The purpose of finance is to allow that to happen, to allow people’s beliefs and hopes about the future to take precedence over the actual results that have been achieved in the present. But then, on the other hand, the judgment of finance is supposed to be enforcing market discipline, even on actors who otherwise might not be subject to it — like states, and, potentially, large corporations whose existing profits are already more than they need to maintain themselves and achieve their desired level of growth.