STOCK SPECULATION—DANGERS AND BENEFITS 133 
Collateral loans do not materially strain our money market 
because the money which flows into call loans arises from 
surplus banking funds.® This tends, of course, to restrict the 
amount of such loans, as the high call rates for money fre- 
quently indicate. Moreover, collateral loans are in a practical 
way often undesirable to lenders, since they cannot be redis- 
counted at Federal Reserve banks.!®* When, therefore, we get 
a proper and full perspective of security collateral loans in 
their relation to other loans, we cannot help realizing that they 
cannot be held responsible for serious credit shortages. Neither 
are collateral loans an economic waste, but a very necessary 
financial operation in behalf of the indispensable and necessary 
work which the stock speculator performs for business and 
society 1! 
Effect of Speculation upon Prices.—Another charge is 
frequently made against speculation in securities—that it “un- 
settles prices.” ** The fundamental cause for changing prices 
is, of course, changing values. In a market where values never 
changed there would never be any speculation. The more 
speculative character of the stock than the bond market is due 
to the fundamental fact that as a rule the value of bonds is less 
subject to change than the value of stocks. Speculation merely 
‘ntervenes to adjust present prices to future but seemingly 
probable values. In this discounting of future conditions which 
results from speculation in stocks, we have seen that Stock 
Exchange price changes in the past have anticipated future 
changes in values. Naturally, such prophetic price changes are 
affected by human fallibility. Everyone, of course, knows that 
at the climax of a “bull market” prices for a time rise above 
what eventually turn out to be future values, and similarly at 
the end of a decline in the market, prices get below future 
values. Yet such conditions are only temporary, and it is 
® See Chapter X-, p. 301. 
© See Chapter XI, p. 278. 
1 See Chapters 1V, p. 105, and XI, p. 302, 
12 See Appendix Vb.