The work of the Stock Exchange

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Monograph

Identifikator:: 1831284952

URN:: urn:nbn:de:zbw-retromon-225876

Document type:: Monograph

Author:: Meeker, James Edward http://d-nb.info/gnd/126597340

Title:: The work of the Stock Exchange

Edition:: Revised edition

Place of publication:: New York

Publisher:: The Ronald Press Company

Year of publication:: [1930]

Scope:: XVI, 720 Seiten; Illustrationen, Diagramme

Digitisation:: 2022

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter V. The dangers and benefits of stock speculation

Collection:: Economics Books

[32 THE WORK OF THE STOCK EXCHANGE diverted into collateral loans made for speculative purposes, which serve no useful economic purpose. Naturally, in an active period on the Exchange, when spec- ulation is comparatively heavy and prices are high, more money 's borrowed on collateral loans than in a dull period when specu- lation is comparatively light and prices are low. But usually the same thing may be said of practically all other commodities. In the old-fashioned economic cycle which resulted in a money stringency, heavy speculation on the Stock Exchange has usu- ally been only the first wave of a vast tide of speculation which sweeps through all markets, and which soon produces rising prices and extensive one-sided speculation in the unorganized markets. Such great speculative impulses are imparted to busi- ness by profound economic world forces which the Stock Ex- change could not possibly either evoke or terminate. But at the first suggestion of an actual impending shortage of money, the securities market at once begins almost automatically to put its house in order to meet it. Prices on the Stock Exchange decline and collateral loans invariably experience a marked decrease, long before the crisis arrives.” Meanwhile, however, the speculative “boom” in the unorganized markets continues. Greater and greater sums of bank credit become tied up in loans on farm land, real estate, illiquid raw materials, and general merchandise. At a time when Stock Exchange loans are dwindling in number and total amounts, loans for the specula- tive carrying of commodities for which no organized markets exist, increase rapidly—and then the crash comes. This was plainly the case in the crisis of 1919—20. The crisis of 1929 was comparatively unique in that it was not attended by any actual and necessary shortage of credit. But the ensuing crash in commodity prices proved very dis- llusioning to those who had thought that these had been mys- teriously stabilized by credit control and the new technique of low commercial inventories.® 7 See Appendix XI. 8 See Chapter III, p. 75.

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