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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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VII. Credit transactions in securities

Collection:: Economics Books

178 THE WORK OF THE STOCK EXCHANGE delivery of goods, long before it was employed in the deferred payment of money. It is consequently apparent that owing someone goods rather than money is not at all a new device of “high finance,” but an inevitable and immemorial practice arising from the fundamental nature of trade.? Purchasing a House on Credit.—Keeping it constantly in mind, then, that every sale is necessarily a two-sided transac- tion, involving goods as well as money, let us examine in more letail a typical purchase on credit. Mr. Jones, with a bank account of $8,000, a salary of $8,000, and an ability to save about $3,000 each year, is attracted by a $15,000 house. Obvi- ously, he has not money enough at present to buy it, nor does he wish to tie up all his savings in it, yet he has every reason to believe that, counting in part of his bank balance, he can comfortably pay the necessary amount in four years. He therefore decides to purchase the house on credit. He puts up $5,000 of the money he has in the bank, and gives his note for $10,000 to the seller. This note is a promise to make a deferred payment of money, and is secured by a mortgage upon the house. If Jones cannot keep up the interest on the note or make the deferred payment on its principal at maturity, the holder of the note can seize the house to recover the $10,000 involved. But subject to these conditions Jones has the house, and can live in it and enjoy it while he is saving the money needed to complete pay- ment for it. Or, if houses become more expensive and some- one offers Jones $18,000 for his house, he can sell it, and after paying off his note have a profit of $3,000 on the transaction. The credit element in Jones’s purchase of his house is involved on the money side of the transaction. Jones obtains the house when he “hasn’t enough money to pay for it” by employing credit to defer the payment of 66% of its price. Credit Sale of a Crop.—Let us now consider a case where credit is used to defer the delivery of goods instead of the pay- 2 See Appendix VIIa.

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