The work of the Stock Exchange

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Monograph

Identifikator:: 83457490X

URN:: urn:nbn:de:zbw-retromon-77841

Document type:: Monograph

Author:: Dühring, Eugen http://d-nb.info/gnd/118527797

Title:: Kritische Geschichte der Nationalökonomie und des Socialismus

Edition:: 2., theilw. umgearb. Aufl.

Place of publication:: Berlin

Publisher:: Grieben

Year of publication:: 1875

Scope:: 1 Online-Ressource (XII, [1] Bl., 595 S.)

Collection:: Economics Books

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116 THE WORK OF THE STOCK EXCHANGE The Reciprocal Flow of Money into Industry.— With respect to the whole process of distributing securities above outlined, the reader, of course, realizes that each time anyone disposes of stock he obtains money in exchange for it. The wider significance of this apparent platitude, however, deserves a further word of comment. The chart shown in Figure 7 lustrates the course of security distribution, beginning from the issuing corporation and ending with the permanent investor. But we must not forget the reciprocal flow of funds which this process of security distribution sets in motion, in precisely the opposite direction. The manufacturer gets his funds from the underwriting house, and frequently neither knows, under- stands, nor cares about the further stages of the process. The underwriters in turn sell the purchased security, perhaps at a profit and perhaps not, and obtain funds from the members of the subsyndicates and from speculative and investing buyers on the public offering, and perhaps on the Curb. The speculators to whom most of the security has been sold in turn shift it about among themselves, either for a profit or a loss, but, as we have seen, gradually sell out the floating supply, which they hold, to investors on the Stock Exchange and thus get their money back. Disregarding minor exceptions, therefore, it can be said in general that underwriters cover their advances to the issuing corporation by cash receipts from speculators and investors, and that speculators as a whole cover their cash advances to the underwriters by cash receipts from investors on the Stock Exchange. In this process by which funds flow into industry, then, the Stock Exchange is an indirect but vital link. For the syndicate would not advance money to the corporation unless it thought it could get its money back, if not from investors then from speculators, and speculators in turn would be less willing to buy did they not think that they could sell out to investors in the long run. It is, of course, the Stock Exchange which enables investors over a period of years gradually to purchase

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