CHAPTER XIV 
SPECULATION AND BROKERS' LOANS 
UNDOUBTEDLY the contagion of the long bull 
market had encouraged unwise speculation. But the 
main trouble was that so much borrowed money was 
used. It might have been entirely proper had the 
speculators used their own money in following a gen- 
erally sound judgment to profit by reasonably 
expected gains in the future. 
Speculation in itself may do either good or harm. 
It does good when it reduces the inequality of prices 
at different times. It does harm when it aggravates 
this inequality. In the first case, which may be called 
the normal one, the interests of the speculator and 
the public are to a large extent identical. When the 
speculator is correct in his prognostications, he will 
make a profit. His object is to make a profit when 
prices are rising, but he can do so only by mitigating 
the rise. Likewise his object is to make a profit 
when prices are falling, but he can do so onlv by 
mitigating the fall. 
His profits are, as it were, a reward paid him by 
the community for mitigating price changes. If he 
makes a mistake in either form of speculation, he suf- 
fers losses, and these losses may be regarded as a 
sort of penalty he suffers for aggravating the inequal- 
218