APPENDIX

543

brokers in another. They gravitate together because that makes a market,
and markets make values certain.

(IId) Conant in his “Wall Street and the Country” (pp. 92-93)
asked the then hypothetical question, “Suppose for a moment that
the stock markets of the world were closed, that it was no longer
possible to learn what railways were paying dividends, what their
stocks were worth, how industrial enterprises were faring—whether
they were loaded up with surplus goods or had orders on hand. Suppose
 that the information afforded by public quotations on the stock
and produce exchanges were wiped from the slate of human knowledge.
How would the average man, how even would a man with the intelligence
 and foresight of a Pierpont Morgan, determine how new capital
should be invested? He would have no guides except the most isolated
facts gathered here and there at great trouble and expense. A greater
misdirection of capital and energy would result than has been possible
since the organization of modern economic machinery.” It is interesting
 to reflect that in large measure, just this situation resulted when
the world’s stock exchanges closed at the outbreak of the war in 1914,
and just the predicted chaos occurred. But in 1914 there was the
further problem that it was not so much a question of knowing how
to invest more, as knowing whether, under the circumstances, one
reallv had anything to invest!
(Ile) “There is a difference in the effect of inflation in one kind
of business from that which obtains in another . . . It is speculation
 in land and speculation in inventories that I fear more than speculation
 on the Stock Exchange. Speculation on the Stock Exchange
may be an evil, but it is an evil which is quickly corrected. In the
event of a sharp decline in securities on the Stock Exchange various
individuals who have been speculating in the hope of a rise, may
lose money, actual money or paper profits; but the loss in the main
is confined to those individuals. When, however, the volume of bank
credit is extended to an excessive extent to those who are engaged
in industry, leading to inflated inventories, you have a collapse of a
large number of industrial concerns and resulting unemployment.
“The situation is even worse if it happens in the case of agricultural
 lands. If agricultural lands reach a price which is not justified
by current income, actual or prospective in the immediate future, the
damage is ten-fold greater than it would be from a decline on the
Stock Exchange, and much greater than in industry, because the
farmer’s home is attached to his occupation, and often he cannot liquidate,
 without breaking up his home, as well as his occupation. Thus
vou have in the case of inflated farm-land values a long and painful