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

Usage license:: Get license information via the feedback formular.

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Document type:: Monograph

Structure type:: Chapter

Title:: Chapter VII. Credit transactions in securities

Collection:: Economics Books

CREDIT TRANSACTIONS IN SECURITIES 191 We have seen how Jones bought his Steel stock on a 50- point margin. In obtaining more stock than he paid for, he employed $10,000 which he did not own. Since in effect he obtained value in stock for money he did not own, exchanging it for 100 shares of Steel, he thus sold money short and became long of stock. Also, when Thompson sold 100 shares of American Loco- motive short, he received a credit on his broker’s books for $10,000, in addition to his margin of $3,000, to balance the debit of the 100 shares of stock. Consequently, although per- haps he did not think of it in just this way, he really bought money on margin at the same time that he went short of the stock. Fluctuating Values in Goods and in Money.—Since the value of goods is so invariably expressed in terms of money, it is difficult to realize that the value of money itself, like any commodity, constantly fluctuates.® Because a margin purchase of goods inevitably produces a short sale of money, the margin purchase and the short sale are inseparable operations in any market in which credit trans- actions occur. If it is an evil deed to sell stocks short, then it must be equally wicked to sell money short. And, if we can- not purchase any commodity on margin without selling money short, then all credit transactions must be wicked. Thus the logical outcome of driving the wild asses of mistaken ethics into the field of financial economics, is a return to the Dark Ages, when there were not only no wicked credit transactions hut no business, law, order. or civilization either. Twofold Aspects of Margin Purchases.—The somewhat complicated results arising from this double nature of credit transactions may be summarized by saying that whoever pur- chases stocks on margin has a double chance for profit and a double chance for loss in the transaction. As we have seen in the instance of Jones and his 100 shares of Steel, if the price "% See Appendix VIIb.

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