SECURITY COLLATERAL LOAN MARKET 299 
Are Call Loans Legitimate?—OQccasionally financial 
writers attempt to draw a distinction between commercial loans 
and security loans by referring to the former as “legitimate,” 
with the implication that the latter are really not legitimate, 
however convenient and safe they may be. Any such distinc- 
tion is vague and fallacious, for security loans are as legitimate 
in purpose or function as any other form of loan, although not 
perhaps quite so essential as commercial loans made actually to 
transport merchandise from producers to consumers. Security 
loans result as a rule from speculative operations, just as 
practically all commercial loans do also, but speculation is not 
“gambling,” ** nor is it accurate to term either class “gambling 
loans,” either on legal or economic grounds. It is a similar 
confusion of thought that leads occasional persons to declare 
call loans “inflationary.” No doubt inflation in the stock mar- 
ket is sometimes unconsciously facilitated with the aid of call 
loans, just as it is in commodities by commercial loans, or in 
land by mortgage loans. Yet of these three, inflation in the 
stock market is the least dangerous, as the events of the 
1919-21 inflation clearly prove, for the security market is a 
surplus capital market by nature and is much more easily 
deflated than either commodities or land. As a matter of fact, 
were inflation (using that term in its broad sense) absolutely 
prevented in the stock market, it would probably be forced in 
commodities and land; to some extent just this result occurred 
in 1918-21, following the necessary but artificial limitation on 
security loans during the war-time “money-control” period. 
[n Chapter IV upon “The Distribution of Securities,” the 
essential character of the floating supply of securities has been 
pointed out. The carrying of this floating supply of securities, 
or stock market inventory, is done with security loans, just as 
the similar unsold inventories of commodities are carried by 
commercial loans. Without security loans, securities could not 
be distributed, just as without commercial loans commodities 
could not be distributed. Security loans are not only legitimate 
% See Chapter V, p. 126.