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