CREDIT TRANSACTIONS IN SECURITIES 105
furthered human progress in the past few centuries, and with-
out which (as even the Bolsheviki in Russia discovered) not
merely the luxuries, conveniences, and comforts, but even the
barest necessities of life cannot be daily afforded to mankind.
[t has furthermore been shown that margin purchases and
short sales are reciprocal and presuppose each other, for if we
cannot sell (or exchange) what we do not possess, we can never
buy more of anything than we are able to pay for.
The question then arises whether the economic results flow-
ing from the employment of these methods of purchasing or
selling on credit, however legitimate they may be as mere
methods. are beneficial or desirable.
Use of Credit for Investment Transactions.—In this con-
nection one fact infrequently recognized is that neither margin
purchases nor short sales of stocks are necessarily undertaken
for speculative purchases. In many cases, where the investor
wishes to purchase stocks outright for cash, the broker, who
of course cannot tell at exactly what price the required shares
can be purchased, may ask him to deposit 50% of their latest
price and pay the balance after they have been purchased. Such
a practice is essentially a purchase on credit, even if it is not
commonly called a “margin purchase” in Wall Street. Simi-
larly, the owner of 100 shares of Steel may desire to sell them
at a time when he is in London or San Francisco, and his
shares are securely locked up in his New York safe deposit box.
Under such circumstances he may instruct his broker to sell
100 shares of Steel short, and cover the short sale on his return
to New York by getting his stock from his box and delivering
it to his broker. Thus margin purchasing and short selling
may be and often are employed as conveniences in what are
essentially outright purchases and sales.
Furthermore, were it impossible to buy and sell stocks on
credit, the odd-lot dealer, whose business consists of purchasing
or selling from 1 to 99 shares of all listed stocks, could not
carry on his useful work.’®* The odd-lot dealer is constantly
13 See Chapter IX. p. 233.
