Financial speculation

“ It may revive more rapidly even than legitimate business does; and as it grows to greater dimensions, it will draw away from legitimate business and press into the service of speculation as large an amount of currency as it can lay hold of. The expansion of speculation, therefore, is likely, nay, it is certain, to reduce the present abundance of money in the loan market, and again to bring forth here and there a feeling of scarcity. ”

“ The example of one stimulates another; speculation rises on speculation; bubble rises on bubble; every one helps with his breath to swell the windy superstructure, and admires and wonders at the magnitude of the inflation he has contributed to produce.
Speculation is the romance of trade, and casts contempt upon all its sober realities. It renders the stock-jobber a magician, and the exchange a region of enchantment. It elevates the merchant into a kind of knight-errant, or rather a commercial Quixote. ”

“ Wild speculation by all classes of the community, particularly in land, mining shares, and Stock Exchange securities, but not as a rule in produce, the wealthiest capitalists in the country entering into stock speculation in the late summer, and using most unscrupulously their power over company finance to help along their purposes ”

“ A great deal of nonsense is also heard about speculation. Now, speculation, like many other good things, may be carried to excess, and is then injurious and open to the severest criticism. But speculation within reasonable limits is most beneficial. It is one of the main incentives to enterprise. Crush this disposition to venture, or the willingness to accept a risk, and enterprise would languish, trade and industry would decline, and we should gradually settle down to certain industrial and commercial decay. ”

“ The sum they have reported to be assumed is twenty-one million dollars. This is most indubitably to cover the speculations that have been made in the State debts. The assumption will immediately raise the value of State securities and enable those people who have plunged themselves over head and ears in those speculations to emerge from impending ruin and secure them the wages of speculation. ”

“ Now that we have reached a point in our discussion that brings us face to face with the so-called “evils” of speculation on the Stock Exchange, let us pause and consider the difference between speculation, which is held by many to be abhorrent, and investment, which is generally thought right and proper. The first thing we encounter is the shadowy and indistinct boundary line that separates the one from the other. ”

“ Men of Wall Street, it is impossible to prevent the repetition of those acts by which in five years I have accumulated a billion dollars, impossible so long as a short sale or a repurchase and resale, is allowed. When short sales, and repurchases and resales, are made impossible, stock speculation will be dead. ”

“ Credit is a chain of many links running between the producer and the consumer. When that chain is strained beyond a certain point it snaps. Then the true nature of the fictitious values created by the employment of capital beyond the limits of present demand becomes suddenly apparent; confidence is lost; distrust becomes general; speculation breaks down; and the crisis is there. ”

“ Since most of the country’s wealth and commerce is controlled by corporations whose securities are listed on the various stock exchanges, the price fluctuations, which often reach the daily aggregate of hundreds of millions of dollars, either in loss or enhancement of value, are necessarily a matter of general concern. ”

“ Let but a doubt enter, and the "season of unexampled prosperity" is at end. The coinage of words is suddenly curtailed; the promissory capital begins to vanish into smoke; a panic succeeds, and the whole superstructure, built upon credit and reared by speculation, crumbles to the ground, leaving scarce a wreck behind:
"It is such stuff as dreams are made of."
When a man of business, therefore, hears on every side rumors of fortunes suddenly acquired; when he finds banks liberal, and brokers busy; when he sees adventurers flush of paper capital, and full of scheme and enterprise ”

“ The long upward trend of fundamental progress, however, gave rise to over-optimism as to profits, which translated itself into a wave of uncontrolled speculation in securities, resulting in the diversion of capital from business to the stock market and the inevitable crash. ”

“ When A and B find their £1000 bill about to fall due, and the expected proceeds of their speculation not forthcoming—when they find, as they often do, either that the investment has resulted in a loss instead of a gain; or that the time for realizing their hoped-for profits, has not yet come; or that the profits, if there are any, do not cover the extravagances of living which, in the meantime, they have sanguinely indulged in—when, in short, they find that the bill cannot be taken up; they resort to the expedient of manufacturing other bills with which to liquidate the first. ”

“ It will be proper, however, in this connection to define exactly the limits of speculation, and to point out more specifically how the Value Principle creates it, and how the Cost Principle extinguishes it.
By speculation is meant, in the ordinary language of [Pg 72] trade, risky and unusual enterprises entered upon for the sake of more than ordinary profits, and in that sense there is attached to it, among merchants, a slight shade of imputation of dishonesty or disreputable conduct. ”

“ A speculative movement need not spread forthwith throughout the industrial system. The great episodes of speculation and collapse that occurred during earlier modern times were not of the nature of speculative inflation affecting the entire business community occupied with industry. ”

“ Under present conditions the abuses of speculation are more in evidence than the economic advantages. How to confine speculation to the small group of risk-takers who have special training and aptitude for it, and to prevent gambling on the stock and produce exchanges is one of the economic problems of the day. ”

“ The wisdom of man, in my humble opinion, cannot at this time devise a plan, by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein then is the farmer, the planter, the artisan benefited? An evil equally great is the door it immediately opens for speculation, by which the least designing, and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators. ”

“ You can and you will reanimate that spirit of reckless speculation, and set up again some of those windy enterprises which have drawn away so much of the capital of the country from productive business, and wasted it. You can and will make our banks and institutions of credit once more the mere tenders of wild speculation and dealers in fictitious values. You can and will seduce our merchants and manufacturers once more to spread their capital and their credit all over creation. You can and will make trade lively for a while by driving up prices to an unnatural height. ”

“ It may with tolerable certainty be argued that new stock brokers and new jobbers in the early part of their career depend very much upon speculative commission business, and the above figures, therefore, afford ample evidence of the increase of speculation in these markets. ”

“ One of the resources presenting itself most naturally to men in a position to profit by it was speculating with other people's money, and very naturally the result of such speculation was disastrous in the highest degree. ”

“ Such so-called investments are in reality highly speculative. They involve risks which are unknown and altogether to be avoided. Now no one speculates in his own legitimate business, for there he is acquainted with the hazards which, he has learned, require the best of knowledge and the greatest of prudence. It is the allurement of the unknown that tempts him to seek unearned profits through speculation in outside regions where, in the nature of the case, the chances must be against him. ”

“ This is the practice of specie payments, and a most mischievous one it is, too; it is the sole idea that leads to great inflations, and consequently to great collapses in finances and values. Under this system there never was nor never can be a reliable mercantile value to anything. Fluctuation is its direct result, while speculation, without this, would cease, and the vast horde of mere speculators who spend their whole time in it, would of necessity be compelled to become producers of some kind. ”

“ Intention is shifting and uncertain. There is chance in every industrial, commercial, and agricultural operation. But for the point at hand, the test is simple: do more exchanges take place than are necessary, under the existing division of labor, to advance the materials of industry through the stages of production, and get things finally to the consumer? If so, the excess of exchanges is speculative. Trading between men in the same stage of production is speculation. ”

“ But I mean the disappointed speculators, who, instead of following the path of frugal and steady industry, tried quickly to get rich on their wits, by getting up large financial operations on a small capital of their own or on borrowed money, and who finding themselves baffled by an unfavorable turn of things, and involved in heavy liabilities, now want “the people's money” to help them out of the lurch and to pay their bills. ”

“ They set forth an exhaustive array of statistics, instructions and warnings; they furnish elaborately charted plans indicating many of the pitfalls of speculation; they tell how to avoid these, how to buy, what to buy, when to buy and how to make money; but while the theories advanced are oftentimes sound and easily comprehended, very few people profit by them, because when once caught in the maelstrom of stock speculation the average man becomes more or less mesmerized, and at critical moments his conservatism, his resolutions and his theories all take flight. ”

“ The undue inflation or depression of prices will be counteracted by speculative operations such as we have referred to, and in that sense, speculation is directly of immense benefit, as it is one limb of a body of law which administers justice silently but surely to any one who has left one weak point in his armour when attempting by violent or fraudulent means to snatch a profit by unjustifiably raising or depressing prices. ”

“ All, to be sure, as yet exists in promise; but the believer in promises calculates the aggregate as solid capital, and falls back in amazement at the amount of public wealth, the "unexampled state of public prosperity."
Now is the time for speculative and dreaming or designing men. They relate their dreams and projects to the ignorant and credulous, dazzle them with golden visions, and set them madding after shadows. The example of one stimulates another; speculation rises on speculation; bubble rises on bubble ”

“ It was caused by a crisis, a collapse of speculation, grown up under the auspices of that same paper-money system which you now strive to confirm and strengthen in all its iniquitous influences, to bring on other crashes and collapses; and who will be the man to be ground to powder by them? The poor man, not the rich. ”

“ The fact of speculation having come to be practised by established companies, where before it was a kind of business that it was considered necessary to pursue as secretly as possible, proves how strong is the tendency of the age in which we live to make royal roads to wealth. ”

“ Even in our finances, which are confessedly our weakest point, we doubt if the experience of any other nation will enable us to form a true conception of our future. We shall have, beyond question, the ordinary collapse of speculation that follows a sudden expansion of paper currency. ”

“ The consensus of opinion among those who have studied the course of speculation on exchanges seems, however, to be that if manipulation of prices and monopoly can be kept out of the market, and if the laws of supply and demand are allowed to operate freely, the effect of speculation, particularly of dealing in futures, has a healthful balancing effect on the market. ”

“ Inordinate speculation would not have been stimulated by a reckless system of credit, and business would have been conducted in a moderate and judicious manner, instead of rushing on at a high pressure that rendered a crash inevitable. ”

“ Fluctuations in employment are tied to all other wasteful fluctuations in our mechanism of production and distribution. One of these wastes is speculation. In securities or commodities, the larger the volume of speculation, the wider become the upward and downward swings and the more certain the result that in the long run there will be more losses than gains in the underlying wealth of the community. ”

“ Anyone who stops to consider knows that the market prices of the company’s securities are of far less concern to the officials than the matter of conducting their business operations at a profit. If the company’s earnings are good, it is clear that this fact will soon enough manifest itself in the demand for the securities, without any abortive or clandestine efforts; and if the earnings are poor, it would obviously be beneath the dignity of the officials to deceive the public through pool operations or pool affiliations. ”

“ There is considerable fluctuation in the values, and it is no doubt possible to make a living by speculation alone, and many people do so. In the banks are, therefore, crowds, both of speculators and of people who have just crossed the frontier and must get their money changed. ”

“ There are as many theories of speculation as there are speculators. Everyone agrees that there's manipulation--flagrant manipulation--though of course this is indignantly denied by everybody connected with the Exchange. But how this manipulation is managed, no two men agree. I've heard what you hint at, that the future course of stocks is determined by their artificial strength or weakness at certain hours of the day; two o'clock, some people think is the significant time. ”