The word speculation, by the way, comes from a Latin word speculor , meaning to view, to contemplate. Etymologically, therefore, the speculator may be re garded as society's lookout, standing high above the mass of traders—he is in fact a sort of economic fore caster.
10. Evils of foregoing praise of the speculator will doubtless irritate some readers. They know men who have been ruined by specula tion just as they know other men who have been ruined by drink, and they condemn speculation and alcohol in the same breath.
There can be no question that much of the buying and selling on the exchanges of any country is pure gambling, or that the exchanges are sometimes made use of for the accomplishment of evil purposes. The governing bodies of exchanges are all perfectly well aware of the evils connected with speculation and, as a rule, are doing their best to abolish them. But some of them have their origin in certain weaknesses of human nature and can never be abolished.
The exchanges undoubtedly possess great charm to men with a taste for gambling, but in the long run the mere gambler on an exchange, the man who takes chances and relies on tips or so-called intuition and does not make the most thoro study possible of' the conditions governing demand and supply, faces cer tain ruin, for the chances are against him. He may bet, for example, that the price of wheat will advance and buy wheat on a margin, borrowing from 80 to 90 per cent of the purchase price. There are three things which the price of wheat may do: It may remain stationary or it may decline, in either of which events he loses; or third, it may rise, in which case he may sell at a profit. An amateur trader on a stock or produce exchange cannot compete with the professionals. They need not seek to rob or ruin him, he will do the trick himself ; he might as well hand them his money at the start and save himself a lot of worry.
Certain members of an exchange, often in alliance with outsiders, sometimes attempt to "corner" a com modity by buying up all the available supply, hoping to be able to dictate a high price to the consumer. This is an evil practice and is prohibited by law in the United States and some other countries. Alen seeking to corner a conunodity are evidently aiming at the advantages of monopoly and are planning to sell a commodity at an abnormal price.
Sometimes the same man or set of men create an artificial market for a commodity or stock in which they are interested by buying thru certain brokers and selling thru others. These are known as "wash sales" and are contrary to the rules of most exchanges, for their evident purpose is to deceive the investor or to promote the sale of the stock of a corpora tion at a price not justified by its condition and pros pects.
These and other evils connected with speculation are treated in "The Exchanges and Speculation," Vol ume 20 of the Modem Business Texts, and need not be considered at length here. It is enough now to
have the reader understand that there is a clear dis tinction between Nvhat might be called true and false speculation, between the scientific speculator and the mere gambler. The rewards of successful specula tion are great because the risks are great ; and it is not strange that these great rewards, which seem to the outsider to be earned so easily, tempt all sorts of foolish people to try their hand at the game. The presence of these people in the market, these lambs, as they are called, offers shrewd and unscrupulous men a chance to make money thru deception and various sharp practices. We cannot on this account condemn speculation or the exchanges. Men have been known to use the church for evil purposes, to start a store for the purpose of collecting fire insurance, to join fra ternal organizations for purely commercial purposes, to don the uniform of the Salvation Army in order to get money from the charitable.- The greater the influence and reputation of any institution, the greater the risk that evil men will seek to use it for their pur poses.
11. General rise of values we pass on to the consideration of other subjects it is per haps well that the reader should be warned against the common but fallacious notion that under certain circumstances there may be a general rise or decline of values. The absurdity of this idea will be evident to the reader when he considers the fact that value is an exchange relation. A rise in- the value of any good implies necessarily a corresponding decline in the value of other articles.
Objects possessing value may, of course, increase in number, so that it might be right to say that the total value embodied in material ob jects at one time is greAter than at another. This is only another way of saying that the amount of wealth has increased.
In the same way it is possible for the quantity of utilities or objects possessing utility to increase. As man becomes more civilized, his wants becoming finer and more numerous, the total sum of utilities available for his enjoyment increases.
-When people speak of a general rise of value they usually have in mind a general rise of prices. That is something quite possible. As money grows cheaper because of an increase in its supply or because of a lessened demand for it, the prices of goods in general tend to rise. This rise of prices is in fact the visible evidence of the cheapening of money. To say that money is getting cheaper is the same thing as saying that prices in general are rising. This important subject of money and prices will be considered in the next few chapters.