STOCK SPECULATION—DANGERS AND BENEFITS 131
Yet stock market profits usually are kept in the market rather
than realized and employed for purchasing elsewhere. Also,
financing before a stock market boom is apt to have been so
extensive as to provide most of the capital which industry will
require for some time, and in any case after a major liquidation
of the stock market, funds soon become both cheap and abun-
dant. Finally, the gloomy attitude sometimes engendered
among business men by stock market crises, is frequently exag-
gerated and will depart as speedily as it has arisen; in any case,
the stock market, as far as it does influence business through
psychology, is ordinarily a stimulating rather than a depressing
factor.
Actually, the serious depressions which have befallen Amer-
ican business have arisen from over-production and usually
over-high commodity prices, and large commercial inventories.
The mercantile markets are not as highly organized as the
Stock Exchange, nor can they as readily or quickly adjust
themselves to over-production. Speculation in most raw or
manufactured products or in real estate is much more danger-
ous than speculation in securities, both because readjustment
takes so long to effect, and also because the public standards
of living are directly affected by it.
In many trade depressions, after the preliminary crash
caused in the stock market, there has occurred a second Stock
Exchange crisis when the illiquidity and depressed prices of
other forms of property have driven business men to liquidate
securities. Here the Stock Exchange, by functioning as a
shock absorber to the national credit structure,’ unquestionably
performs a national service in counteracting the effects of com-
mercial and industrial distress.
Absorption of Credit.—The charge is also frequently made
that speculation on the Stock Exchange absorbs undue amounts
of credit, and that money needed for the production of goods
is, on account of speculative activities on the Exchange,
8 See Chapter II, p. SS.
