Speculation, moreover, softens the intensity with which great economic forces work by lengthening the time over which their influences extend. The spec ulator is accused of being a non-producer, a parasite. It is true that he does not produce goods. His main function is to bring about necessary adjustments in the business world. He hurries up and smooths out necessary processes. Thus he is really a producer of "time utility." As civilization expands and the means of communication increase, speculation has a tendency to destroy itself, because the field of certainty where business can be performed on an intelligent basis is always being widened. Thus, speculation is not per manent in any one branch of human activity.
15. Survey of restrictions on speculation.—In the Middle Ages, it was the common belief of philosophers that every commodity had a just and equitable price, and for one to charge a price above this mysterious point he incurred the displeasure of God and merited the punishment of man. English history is filled with examples of penalties inflicted upon merchants and tradesmen for attempting to carry out or in actually carrying out their plans to "bull" certain commodities. Men were imprisoned for storing away commodities in the hope that the market price might rise, and proclamations were issued by the sheriff as to the cause of the punishment administered, with an ad monition concerning the future punishment that would be incurred upon a repetition of the act.
Among the earliest attempts to curb speculation, was the enactment of a law in 1707 licensing brokers and making illegal the transactions of unlicensed brokers. A year later, city ordinances were put into effect requiring brokers to give bonds to insure the proper and honest performance of their obligations.
After the South Sea scheme had ended in national dis aster, considerable agitation arose to make impossible another calamity of this kind. The result was Sir John Barnard's "Act to Prevent the Infamous Prac tice of Stock Jobbing," with a preamble reading in this very interesting fashion: Whereas great inconveniences have arisen and do daily arise, by the wicked, pernicious and destructive practice of stock-jobbing, whereby many of his Majesty's good sub jects have been and are diverted from pursuing and exercis ing their lawful trades and vocations to the utter ruin of themselves and their families, to the great discouragement of industry and to the manifest detriment of trade and com merce, etc.
The essence of this piece of legislation was the pro hibition of the practices now known as puts and calls, and what was most important of all, of short selling. However what seemed to be a panacea for existing evils was shattered by judicial decisions. The courts interpreted the law as applying to English public stocks only and this freed from the operation of the statute all foreign 'securities and all domestic securi' ties not included in the category of "public." John Barnard's law remained on the statute books, ineffective as it was, until 1860, when it was formally repealed. Seven years later the Leeman Act was passed with reference to the sale of bank stocks. It specified that the number of such certificates sold must be recorded and made known. Otherwise their sale was prohibited. Later, even this provision was re pealed, and at the present time, no restrictions what ever exist with regard to speculation in the United Kingdom.
16. Experience of Germany.—In an attempt to place a curb upon short selling, the German gov ernment, in 1892, appointed a commission composed of government officials, merchants, bankers, manufac turers, professors of political economy and journalists to investigate the methods of the Berlin Exchange. This commission published in the following year a very conservative report in which it stated that the prohibition of short selling, called for by the popular clamor, would in its opinion, be harmful to German trade and interests. It was willing, however, to recommend the prohibition of speculation in indus trials.
The bill recommended by the Commission was re jected by the Reichstag. This body, in 1896, passed a drastic law. The strong Agrarian party, believ ing that short selling lowered prices of agricultural products, insisted upon the prohibition of contracts for the future delivery of wheat and flour. Popular opinion also demanded an abatement of stock specula tion. The law as passed prohibited all trading in fu tures in wheat and flour and in all industrial and min ing shares. The law provided further that all per sons who wished to speculate must register, and that speculative trades made by unregistered persons would be considered gambling contracts and therefore void. Public registry was required in an endeavor to pre vent small speculators from assuming speculative risks, when they were unable to stand the losses such operations often entail.